I admit I don't enjoy managing money.
I get no thrill from scrutinizing my investments, analyzing the stock market, and pondering ways to make my money work for me. I definitely don't enjoy paying bills, creating spreadsheets, and tracking expenses.
Money has always felt abstract to me. The majority of it sits somewhere in a bank, and the numbers go up and down based on computerized transactions I don't see. Cash in hand is a different matter, but I don't keep gobs of it hanging around.
Knowing my own limitations and how I wish to spend my time, I've hired someone to help me with this — one of the best decisions I've ever made.
When I was in my twenties and got my first credit card, I remember how dangerous that little sucker was for me. All I had to do was present it when I wanted something, and magically that something was in my possession. I had a painful awakening when the bill arrived. The thrill of spending was quickly overshadowed by the angst of mounting debt and interest.
I learned my lesson (mostly) and tried to keep credit card spending at a minimum. However, there were plenty of times early in married life when we tried to keep up with the Joneses, lived beyond our means, and paid only the minimum amounts on our cards in order to buy things we didn't need or pay off other bills.
Although I didn't come from wealth, I had a strange sense of financial entitlement back in the day. Perhaps it related to the culture of the 1980's and early '90s with the focus on accumulation and the appearance of having it all. We prioritized having nice things and a big house over experiences and saving. And we also thought our children needed every expensive lesson and extracurricular under the sun.
I believed, as most of my peers did at the time, that happiness in life was tied to accumulation and the appearance of wealth. It took a while to learn you can't sustain the immediate thrill of spending, and that the pain of debt tends to hang around for a very long time. As long as it takes to pay it off.
Nowadays, my definition of financial freedom has shifted. I want to shed material things so I don't have to maintain or care for them. I want a smaller house that doesn't require as much upkeep and expense. My spending priorities relate to building my business and saving for travel, an important experiential goal for me. And although I don't like managing money, I want it managed well so it can grow for my eventual retirement.
At midlife, I've finally found financial freedom and became CFO of my own life.
I've learned to manage my finances in my personal life as though I were running my business. Being an entrepreneur, I find the two are inextricably linked anyway. And more importantly, I have a purpose for my financial goals related to making an impact on the world by helping others, experiencing and exploring as much of this beautiful planet as I possibly can, and continuing to learn and grow for the rest of my life.
J.D. Roth, founder of the award-winning personal finance blog Get Rich Slowly, and creator of the personal finance course by the same name, advises having a purpose is a powerful foundation for your financial freedom.
“Most personal ﬁnance advice skips this important step. The financial gurus will tell you how to scrimp and save, but they somehow forget to mention the why. When you have a why, you can bear with almost any how because you understand that when you opt to save for the future instead of spending on today, you’re not making a sacrifice. You’re choosing to buy your future freedom,” says J.D.
Financial freedom begins with defining your “why” — the reasons you want to handle your money wisely and proactively. But once you define that why, then what?
According to J.D. Roth, becoming the CFO of your own life requires a particular state of mind. He reminds, “Instead of assuming you’re a victim of circumstance, I assume that you are the master of your own fate. Sure, you’re a part of the overall economy and subject to both lucky and unlucky breaks, but ultimately you’re in charge. Your circumstances may not be your fault, but they’re your responsibility. You are the Chief Financial Ofﬁcer of your own life.”
If the idea of taking personal responsibility for your financial freedom and becoming your own CFO appeals to you, here are the first three steps J.D. suggests you follow in order to get started:
Step 1: Create a personal mission statement.
A mission statement helps you define that purpose we talked about earlier. This mission statement will keep you motivated when times get tough as you work on paying off debt, managing your money, and saving. It also keeps you on track with the specific plans you create to reach your goals.
Every business has a mission outside of simply making money. According to Jerry Porras and Jim Collins, authors of the book Built To Last, “Visionary companies pursue a cluster of objectives of which making money is only one—and not necessarily the primary one.Yes, they seek profits, but they’re equally guided by a core ideology—core values and sense of purpose beyond just making money.”
As you develop your personal mission statement, be sure to keep it simple. Begin with a narrow focus, and then broaden it later as you gain more clarity. Your statement should be no more than a single paragraph — or shorter.
As you write it, be completely honest with yourself. Your statement should be unique to you, your values and your experience. Don’t try to imitate somebody else. Don’t think about what you’re “supposed” to do, but what you want to do. Make your mission a reflection of who you are and what you want to achieve in life.
Step 2: Set clear goals.
Your mission statement defines your purpose, and your goals reinforce that purpose by keeping you focused on what’s important.They organize your actions and give them meaning.
Once you clarify your mission, the next step is to outline specific, attainable goals that serve as milestones along the path to financial freedom. You'll want to set short-term, intermediate, long-term, and on-going goals related to your lifestyle, family, and business.
Many of these goals should be SMART goals (specific, measurable, achievable, relevant, and timed), although they all don't have to fit this criteria. As long as they are motivating and important to you and your purpose, they are worth including in your plans.
Keep your mission statement in front of you as you outline your goals. Create a category for short-term, long-term, etc., and begin writing down all of the goals that come to mind. Again, you can refine these over time as you work toward them.
Step 3: Develop an action plan.
You personal financial action plan should be viewed as the business plan for your life. It provides the specific roadmap and schedule for achieving your goals and actualizing your purpose.
One of the best ways to begin with your action plan is by looking at each goal and setting a completion date. Put those dates firmly on your calendar, and then begin working backward. What do you need to do in order to meet those deadlines? What actions do you need to take and when do those actions need to be handled?
Write down all of these steps and plot them on your calendar. You might also keep a master “to do” list of all of the actions you must take in a given month or quarter. This allows you to re-prioritize when necessary and have a birds-eye view of everything on your plate.
Your definition of financial freedom may be different from mine, but whatever it is, it does require personal responsibility, a purpose, and a plan. Begin to view your life with the same serious intention as you would your business. Become your own CFO and recreate your financial future.