In my last post, I wrote a little about your money mentality. I really can’t stress this enough. At this time of year when everyone is buying presents and giving and getting gifts, and the Christmas Carol is on every channel (or so I remember from when I had cable), money and emotion is at an all time high. Having a good mental outlook for life in general is key in increasing your riches of all kinds.
I want to create (am creating) a personal finance application. I’m doing this for two reasons. First, I hate all of the other options and want something that I’ll use. Second, everyone else just gets it wrong and that’s bad for more than me. The main part they get wrong, though, is the mentality of the application. This is the center and core of what you use and how you use it. This is embodied in the user interface and the functions you use. This is why they’re so bad.
Still, these applications help you with what you need better than all other options. It’s like using a rock to hammer a nail when all you have is a rock and a nail. Gets the job done, but not like a hammer does. These applications get the job done, and they focus on what’s been working. Not always a bad formula, but times are always a changin, and what wasn’t broke yesterday is today.
Where does the mentality go bad? The basic mentality is summed up in the practice of budgeting. Control what you spend and earn. Map it out in boring detail. Then, if you like, we’ll throw in some really crappy planning options. The whole picture is backwards. You don’t start running a race by timing how long it takes to run from checkpoint A to B and then B to C. You eventually do that, but first you need to know where A, B, and C are and how you want to get there. You plan first, then track your progress. This is what current applications and “best” financial practices like budgeting get wrong.
“But, Matt, I plan how much I want or should be spending each month before I track what I’m spending. How is that not planning before tracking?” Months at a time is not planning. This is like trying to drive across country in a fog that only lets you see 5 feet ahead. Plan for the long haul and get your mind off of the money. Month to month planning keeps your eye on the money, and not the real value. Life is full of real value, and money is not it, even though money represents value. If you continually collect flowers in a field because you want a rose garden, you’ll end up with a bunch of flowers and few, if any, roses.
If you don’t have the right mental picture before you start tracking, then it won’t work. Figure out your life first. What matters to you? Where do you want to be? What do you want to do? What do you need to get there and do that? You don’t have to have a 50 page plan. You might even only have a 3 sentence paragraph, but understanding yourself and your happiness is the first and ultimate tool in financial stability. Get this right, and your financial choices should be simple and easy. Get this right, and you won’t have to micromanage your life through your spending habits. A good look forward counts enormously.