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Why Working Backwards Moves Your Money Forward

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“I want to pay off my debt and live without that hanging over my head.”

“I want to buy a home.”

“I want to afford my kids’ education.”

“I want to retire without having to worry.”

All these statements are worthy financial goals—seated deeply in personal values that provide a sense of comfort, safety, satisfaction and success. Meanwhile, daily life absorbs so much time and energy that focusing on the big-ticket items might seem impossible. 

Reaching big life goals requires some basic skills and a committed mindset. You want to start with your why—why is this vital to you and your family?

Ask yourself:

How does this make my life better?

What am I willing to do to make it happen?

Is there a deadline I need to pay attention to?

Once you’re clear, you can dig into the numbers. The easy part is (usually) how much you earn. The tougher? Making the decisions about where you spend your money. Spending choices are a lot more challenging when you exist in a society of conspicuous consumers. Everything you spend can become a measure of your success relative to the other people in your circle.

Sonia and Peter looked at their list of expenses and the small number at the bottom that represented their yearly surplus. It shocked them and left them feeling miserable. All that hard work and there just wasn’t a lot left over—they had managed to spend just about everything they made. With the exception of their company 401(k) contributions, they were not building their net worth at anywhere near the pace they needed or wanted.

Review your annual spending and determine whether you are at a surplus or living at a deficit (which means you needed to go into savings or credit cards to meet your outflow). Looking back, without self blame or shame: are you satisfied with the decisions you made? What could you have done better or differently?

If you can spot areas where you might have made different decisions, think about how you can apply that thinking right now and in your future. You can change your money mindset—let’s say to become a more focused and deliberate saver/spender—if you have your more important goals in the forefront of your thinking.

Try this exercise:

Write down your net surplus from last year and start adding back those expenses you did not value highly or would have changed if you could go back in time and make a different decision. Working backwards, you can now establish a more realistic target for your goals.

Sonia and Peter completed that exercise—and found a shocking amount of wasted or low-value spending. They discussed what had triggered their decisions and realized that their impulsiveness detracted from their larger, more complex goals. They shifted their focus to how they could help each other make better choices going forward. It was the “a-ha” that would begin to change their thinking and their actions.

Begin at the end and work backwards. Discover your surplus or deficit, and add back those expenses that prevented you from attending to the big things that matter most to you.

You might just see a clearer path to the future.

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