“We can easily forgive a child who is afraid of the dark; the real tragedy of life is when men are afraid of the light.” —Plato
Most everyone can remember what being afraid of the dark was like as a child. The lights went out in your bedroom and your mind would begin to populate the darkness with monsters, snakes, and god knows what else. All the things that absolutely terrified you. But when you got up the courage to face the darkness, you discovered that if you shined some light on the situation, there were never any “real” monsters there.
You may not be afraid of the literal dark as an adult (I hope not if you're a firefighter reading this), although, the unknowns we face in our lives can mimic the darkness you used to dread. How to best handle your money can feel like an unknown. This can cause anxiety and fear. Thus leading to inaction. And, quite often, you are scared to illuminate your money and your money habits because of what you believe is lurking in the unknown. Facing your financial monsters head-on is essential to building a foundation for financial success.
The first step to defeating debt, investing for the future, and building wealth is to assess your current financial situation. So shine some light on the situation and take responsibility for your financial future. You can begin by calculating your net worth—this template can help.
Do you know what you're really worth? Probably not, but it is okay. It's a simple process so don't make any excuses. Make a list of all the assets that you own and their values —be as accurate as possible. Add the values together. Then, list all of your debts and the amounts you owe. Add those up. Subtract the debts from the assets and that is what you are worth financially speaking. You might be pleasantly surprised at your position but if not, be prepared to reveal and battle the monsters lurking in your financial shadows.
The fiercest financial monster you are likely to face is your credit card debt. It may be painful to see how irresponsible you have been, but keeping the monster under the bed doesn’t make the monster go away — he just grows bigger for another day. You should have already listed out all of your debts in the process of creating your net worth. You should order these from smallest balance to largest balance. This is the order you will pay them off. One by one you will overcome and conquer your debts. Now that you know what kind of beast you are dealing with, use the best tool there is to defeat it: a budget.
After you have looked the monster in the eyes, its time to create a plan to beat it. Access your bank account and study the last few months of data. Determine how much money you bring home every month. Then, using a budgeting tool (Here’s mine if you want it), develop a plan to give every dollar a job and overcome the debt beast you created. Winning this battle will take focused, disciplined effort applied consistently over time. Once you’ve prevailed though, you will be moving right along in the wealth building journey.
You have courageously defeated the debt monsters that have been hiding out, what do you do next? You should use your excess cash-flow to shield yourself from future troubles. Build a solid emergency fund (3-6 months of expenses), stay away from high-interest debt (or any debt for that matter), and start saving and investing for your future.
And as always, if you’d like a partner to help you along on your wealth journey, Forward Focus Financial Planning is here for you.
Disclaimer: All written content on this site is for information purposes only. Opinions expressed herein are solely those of Forward Focus Financial Planning, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.