I recently discussed the five fundamentals of financial success which bases your financial foundation on preparation, planning and the relationship that money has with other aspects of your life.
It’s a great concept in theory, but let’s put it into action to see if it really works. Here is how we built our finances around the fundamentals.
Applying the Five Financial Fundamentals
Set financial goals. We created our dollar plan which contains our goals for financial freedom. It’s a 14 year plan with 9 years to go. I calculated how much we need to save each year and added interim goals each year.
Communicate. When my husband and I first met we couldn’t have been further apart in financial habits. I was a saver, he was a spender. However, we found a happy medium – he keeps me from saving every single dollar and I keep him from spending too much. We work together to plan our big purchases and discuss our goals frequently.
Commitment and motivation. Most of our need for financial freedom revolves around our kids. We want to be there when they get home from school. We want to travel and enjoy sports. Our financial goals align with those wants. Because they are personal we are more committed to them. For motivation, I update spreadsheets yearly to show him how much progress we’ve made. With My Dollar Plan, the updates are now monthly so we can see how much further we have to go.
Plan for the unexpected. When we started the plan, we knew we wanted to have kids, work part-time, and build a new house. We were sure that we would be surprised along the way, but we didn’t know how or when. Recently we were hit with the cost of preschool which was unexpected, but able to be absorbed into our plan.
Don’t delay happiness. Even though we have our goals and action plan in place, we’ve chosen to do things that set the plan back. We worked part-time and took lots of time off to be with our kids. I didn’t want to look back in 9 years and wish that I would have spent less time earning money and more time with my kids.
What are you doing to put the fundamentals into action?
Article Featured in: Carnival of Money Stories
Working together is really clutch for married folks. You can’t have people going in completely opposite directions for very long.
It’s also hard to plan for the unexpected… that’s why it’s the unexpected! You can have an emergency fund, then it gets wiped out, then another emergency comes.
As they say, roll with the punches.
Great fundamentals Madison, I’m so glad me and my husband are in tandem with our finances. We both have the same goals and the same commitment to those goals. It really does make life easier.
The Five Fundamentals appear to serve financial goals pretty well, but, I think it’s important to know what the fundamental goal(s) of your life and your family life is. As a society, it feels like we are selling so many parts of our lives to reach “happiness”. And, I’m as guilty as the next.
“Plan for the unexpected” is huge. We were just surprised with some upcoming orthodontics work for one of our kids. Great, there goes the emergency fund! No, we should have a little time to plan and put some back.
@ No Debt Plan & No More Spending: I agree, it would be really hard if my husband and I weren’t on the same page.
@ Todd: You really got me thinking. What are my life goals? And even beyond that… do my financial goals align with my life goals? I’m going to have to go back to the drawing board to do some thinking on this one! It’s a good challenge.
@ Frugal Dad: I hope you have a dental policy that covers 50% at least.
I agree with Todd. The most important one to me is setting goals based on your priorities. Once you have that down, your choices in life are clearer. I’m lucky in that my husband and I have the same priorities and goals so we work together to get to the same destination.