My wife and I have been seriously paying attention to our finances since earlier this year when we took Dave Ramsey's Financial Peace University. We've never been in bad financial shape, but we'd never really been getting ahead either. That all started to change when we realized that in order to get ahead, we had to make a plan.
One of the first things we did was to sit down, and figure out an entire cash flow plan. We wrote down what money was coming in, what expenses we had, and then what we had left over. Next we found ways to reduce expenses in certain areas and then set up a complete zero-based budget where every dollar was allocated before it hit the account. Next we set up an envelope spending plan where some of our problem categories were paid only in cash, out of an envelope. When the money was gone from the envelope, the spending on that category stopped.
All of these steps were great steps towards getting us up and running towards better financial health, but there was still one thing that was missing. We needed to set goals,and have something that motivated us as we worked towards those goals.
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Setting Goals To Work Towards
The class that we were taking, Financial Peace University, has a built in set of goals that you are working towards. Among those goals were these 3 goals:
- Build a $1000 emergency fund.
- Pay off debt.
- Save 3-6 months of expenses.
We quickly built up our $1000 emergency fund, and since we felt a little more secure with a bit more – we raised it to $2000. Since we had already paid off all of our debt (except the mortgage) we then moved on to the next goal, to save 3-6 months of expenses. We were almost all the way to those 6 months of expenses when my car started having problems. After getting it checked by our local mechanic, we realized that the car was on its last legs. We took about half of the 5 months of expenses that we had saved, and paid cash for a used car with lower miles.
Now that our 6 months of expenses had been reduced to more like 2-3, our goal is once again to build up that account. But sometimes having a goal often isn't enough. Sometimes you need some further motivation in order to push you towards that goal.
My wife and I are movie buffs, one of our favorite things to do is just get a couple of good movies, curl up on the couch and watch movies all day. Because we spend so much time watching movies we decided that we wanted to get a large screen TV in our basement. We knew that our other goals would come first, but as a way to motivate ourselves we decided that we would reward ourselves for saving our 6 months of expenses by purchasing a new 50″ Plasma TV once we reached our goal.
I can't tell you how motivating it is to have a goal like that. It really makes you want to work that much harder knowing that you've got some sort of reward waiting for you on the other side.
Rewards For Meeting Goals Can Be Very Motivating
So here are some of the rewards my wife and I have talked about getting once we've reached certain goals.
|50″ Plasma TV: We've wanted to get this TV for a while, but we know our savings goals take precedence. once we've reached those goals, however, we know that we'll be able to enjoy those movies on the big screen. I've been working that much harder because I know this awesome viewing experience waits for me.|
|Nintendo Wii Gaming Console: We've heard a lot of things about the Wii, and have enjoyedplaying the console at our friend's houses. We can't justify getting one right now, but wemay use it as a motivating reward down the line sometime.|
|Blu-Ray DVD Player: We've waited to jump on the HD movie bandwagon until now, and we can probably wait a little longer. we'll eventually get one of these Blu-Ray players as a reward,but in the meantime regular ‘ol DVDs do just fine. By the time we get one they'll be a lotcheaper!|
|Another Trip to Europe: We were blessed to have been able to go on a MediterraneanCruise with my wife's parents this past September. We've already talked about using anothertrip as a motivating reward a few years down the line.|
What Goals Do You Have? What Rewards?
So what financial goals have you set for yourself? are you finding that you're able to reach those goals? Have you thought about using rewards to help you reach those goals, or are you doing that already? Leave us a comment telling us about it!