Money is SymbolicFull Article
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What gets you more motivated—the reward or the process?
That’s the question that divides intrinsic motivation from extrinsic motivation. And learning the difference could salvage your career from disaster.
Why? Because different motivation types are useful in different circumstances.
Intrinsic motivation is process focused. It comes from the sense of satisfaction from a job well done. It’s why you keep coming back to hobbies you love, or why you’re compelled to work on that project even when it’s not required. You do it for the love of the game.
Extrinsic motivation is reward focused. It comes from the anticipation or acquisition of something tangible, like a trophy, a raise, praise, or a bonus. It’s the reason you put up with a high paying job you hate, or why you grind out those extra reps at the gym. You do it for the payoff.
Intrinsic motivation is internal, while extrinsic motivation is external.
Here’s the strategic difference—intrinsic motivation is powerful long-term, extrinsic motivation is powerful short-term.
Think about it. How long can you really tolerate that awful job? Eventually, it’ll wear you down, no matter the pay. It will tax your mental health, your relationships, and your quality of life. Trying to leverage reward motivation over the long-term is a recipe for burnout.
That being said, it’s excellent if you need a burst of energy. “Just a few more months, and then I’ll be debt free. I can make it.” Extrinsic motivation is often what we rely on to push through short-term challenges.
By contrast, intrinsic motivation can provide powerful groundwork for planning long-term goals. What are the hobbies and activities you find inherently rewarding? Are they career oriented? Family focused? That’s where you should focus your long-term energy.
Setting financial goals is like hanging a map on your wall to inspire and motivate you to accomplish your travel bucket list.
Your map might have your future adventures outlined with tacks and twine. It may be patched with pictures snipped from travel magazines. You would know every twist and turn by heart. But to get where you want to go, you still have to make a few real-life moves toward your destination.
Here are 5 tips for making money goals that may help you get closer to your financial goals:
1. Figure out what’s motivating your financial decisions. Deciding on your “why” is a great way to start moving in the right direction. Goals like saving for an early retirement, paying off your house or car, or even taking a second honeymoon in Hawaii may leap to mind. Take some time to evaluate your priorities and how they relate to each other. This may help you focus on your financial destination.
2. Control Your Money. This doesn’t mean you need to get an MBA in finance. Controlling your money may be as simple as dividing your money into designated accounts, and organizing the documents and details related to your money. Account statements, insurance policies, tax returns, wills – important papers like these need to be as well-managed as your incoming paycheck. A large part of working towards your financial destination is knowing where to find a document when you need it.
3. Track Your Money. After your money comes in, where does it go out? Track your spending habits for a month and the answer may surprise you. There are a plethora of apps to link to your bank account to see where things are actually going. Some questions to ask yourself: Are you a stress buyer, usually good with your money until it’s the only thing within your control? Or do you spend, spend, spend as soon as your paycheck hits, then transform into the most frugal individual on the planet… until the next direct deposit? Monitor your spending for a few weeks, and you may find a pattern that will be good to keep in mind (or avoid) as you trek toward your financial destination.
4. Keep an Eye on Your Credit. Building a strong credit report may assist in reaching some of your future financial goals. You can help build your good credit rating by making loan payments on time and reducing debt. If you neglect either of those, you could be denied mortgages or loans, endure higher interest rates, and potentially difficulty getting approved for things like cell phone contracts or rental agreements which all hold you back from your financial destination. There are multiple programs that can let you know where you stand and help to keep track of your credit score.
5. Know Your Number. This is the ultimate financial destination – the amount of money you are trying to save. Retiring at age 65 is a great goal. But without an actual number to work towards, you might hit 65 and find you need to stay in the workforce to cover bills, mortgage payments, or provide help supporting your family. Paying off your car or your student loans has to happen, but if you’d like to do it on time – or maybe even pay them off sooner – you need to know a specific amount to set aside each month. And that second honeymoon to Hawaii? Even this one needs a number attached to it!
What plans do you already have for your journey to your financial destination? Do you know how much you can set aside for retirement and still have something left over for that Hawaii trip? And do you have any ideas about how to raise that credit score? Looking at where you are and figuring out what you need to do to get where you want to go can be easier with help. Plus, what’s a road trip without a buddy? Call me anytime!
… All right, all right you can pick the travel tunes first.
You can’t afford to live in a world of denial.
If you want to maintain your budget and save money, then you need a plan. The first step is understanding the basics—what is a budget? How does it work? What are the benefits of having one?
To effectively manage your monthly budget, you must take certain steps from day one. This article will provide some helpful tips and tricks on how to get started and keep going strong until payday rolls around!
What is a budget?
A budget is a plan. It helps you set limits for your spending, so that you can track your income and expenses. Having a budget is important because it keeps you aware of when you are spending too much or if there are ways your money could be saved.
It can also help you understand your spending habits as well as identify problem areas, such as overspending on credit cards or buying expensive lattes every day. With a clear understanding of how you spend money every month, you can reduce expenses and even start saving for luxuries or emergencies. You can’t have a goal of saving for your next vacation if you don’t know how much money you’re spending every month.
How to create your budget
The first step is to set goals for yourself for income and spending. When it comes to income, you need to consider all the ways you get paid. Do you have a job? Is your employer cutting back your hours? Do you have another source of income such as side jobs or freelance work?
Be completely honest with yourself about how much money you have coming in. Once this figure is known, you can assess your spending and determine how much of your income goes towards them every month.
Next, make a list of all fixed monthly bills, such as rent or loan repayments. Make a list of variable expenses, such as groceries or gas. Lastly, make a list of all your monthly discretionary spending, or ‘fun money’.
If you struggle with this last step, look at your bank statements. It’s the easiest way to find a complete record of your spending. This will help you pinpoint the areas that you could cut down on or even eliminate.
Leverage your budget
Now that you have your budget, you can take action. You can save money by leveraging your budget to meet your monthly goals.
The first way is to leverage your income. If you have a job, talk to your employer about working extra hours, or ask for a raise. This will give you more money without having to spend any more than you already are through increased expenses.
Beyond the extra income from a job, there are many other ways to add to your budget.
You can start small and pick up some side work—babysitting, another job or delivering pizzas etc. If you can turn your free time into money, go for it! This all depends on your financial situation and what you feel comfortable with, so take the time to plan accordingly.
You can also think about reducing your expenses. Cutting back on luxury items can save money every month without having to work an extra job. Just think of all the things you could do with the money that’s currently going towards cable TV or eating out at expensive restaurants!
Don’t forget to have some fun every once in a while. Just find creative ways to have it on a budget. Plan more outings with friends, rather than going out every evening, or go to free local events.
A budget is a way for you to track your expenses and income each month. You can leverage your budget in a number of ways, by increasing income or decreasing expenses. With this knowledge, you’ll be able to save more and plan for the future.
Need an income boost, but not sure where to start? Then you need to encounter the Cash Flow Quadrant.
It’s a concept pioneered by Robert Kiyosaki of Rich Dad Poor Dad fame. And it’s one of the best explanations of creating income around.
Here’s what it looks like…
The employee and freelancer trade their time for money.
The entrepreneur and investor create or purchase income generating assets.
Think about what an employee does. They show up, punch in, and work for a set number of hours. In exchange, they either get paid by the hour or a set annual salary.
If they’re extra conscientious, they may get a raise or bonus as a reward. But their income is entirely dependent on the good graces and success of their boss. They never directly enjoy the fruits of their labor.
The same is true for the freelancer. Sure, they enjoy greater independence than an employee, but they’re still trading their time for money. Think of them as a mercenary rather than a soldier.
Compare that with the entrepreneur. The entrepreneur creates a system for delivering a service that’s duplicatable.
Let’s say you start a lemonade stand. You put up a few bucks to buy some lemons, sugar, cups, a cooler, and stand. It’s a risk—there’s no guarantee that’ll find any customers.
Fortunately, it’s a hit—the neighbors line up to enjoy your refreshing beverage!
After a few days, you’re swimming in cash. In fact, you earn enough to open another lemonade stand. So you buy the same supplies, and hire a friend to run the new location. Just like that, you’ve scaled your lemonade business.
Eventually, you have so many lemonade stands that you don’t have to manage one yourself. Instead, through initiative and upfront commitment, you’ve created an income stream. That’s how entrepreneurship works.
But now suppose that a friend comes along. She’s been eyeing your success and wants in. She’ll put up the cash to open another ten lemonade stands across the neighborhood (it’s a BIG neighborhood).
In exchange, she gets a slice of the profits from all the stands. She takes on some risk by giving you money in exchange for some income. In other words, she’s an investor. She’s using her money to earn more money.
There are two critical points to notice about the entrepreneur and the investor.
They take risks. Starting a business is a risk. Giving money to an entrepreneur is a risk. Being an employee is consistent—you give X amount of time, you get X amount of money. Entrepreneurs and investors commit resources to projects with no guarantee of success.
They have far greater potential. There are only so many hours you can trade for money. When successful, entrepreneurs and investors have far more resources at their disposal to trade for money.
Simply put, entrepreneurs and investors face greater risks, and greater potential rewards.
Which quadrant generates most of your income? Is there a quadrant you would like to explore further?
You walk out of the office like a brand new person.
That’s because you’ve done it—you’re going to be earning a lot more money with that raise. The first thing that pops in your head? All the fancy new things you can afford.
Dates. Your apartment. Vacation. They’re all going to be better now that you’ve got that extra money coming in.
And to be fair, all of those things CAN get substantially fancier after your income increases.
But one thing may not change—you still might end up living paycheck to paycheck.
Why? Because your lifestyle became more extravagant as your income increased. Instead of using the boost in cash flow to build wealth, it all went to new toys.
This phenomenon is called “lifestyle inflation”. It’s why you might know people who earn plenty of money and have nice houses, but still seem to struggle with their finances. The greater the income, the higher the stress. As Biggie put it, “Mo’ Money, Mo’ Problems.”
The takeaway? The next time you get a raise, do nothing. Act like nothing has changed. Go celebrate at your favorite restaurant. Keep saving for your new treat. But you’ll thank yourself if you devote the lion’s share of your new income to either reducing debt or building wealth.
Rest assured, there will be plenty of time to enjoy the fruits of your labor in the future. But for now, keep your eyes on the most important prize—building wealth for you and your family’s future.
So you’ve set some financial goals. Good for you!
But not all goals are created equal. Planning to win the lottery is a foolish objective that won’t help you fulfill your dreams. Spending hours clipping coupons worth a few dollars is probably a waste of time.
Fortunately, establishing proper goals is actually incredibly straightforward. You want to pursue objectives that are SMART—specific, measurable, achievable, realistic, and timely. Formulating these types of goals can radically focus your energy and increase your ability to get things done. Let’s start with the first criteria!
Specific. The more specific your goal, the more clearly you’ll understand exactly what you need to do to achieve it. It’s the difference between a vague daydream and a solid plan.
When writing out your financial goals, be crystal clear on exactly what you want to accomplish and why. Outline the steps and people needed to bring about your vision. Something like “I want to make more money” becomes “I want to earn a raise at work by taking on more responsibility.”
Measurable. How will you know if you’ve accomplished, exceeded, or failed your goal? Including a clear metric gives you insight into how close or far you are from completing your objective.
Decide on a clear numeric goal you can shoot for. Take a vague notion like “I want to save more money” and transform it into “I want to save 15% of my income this year for retirement.” You’ll have a clearer idea of what steps you need to take to meet that benchmark and feel a deep sense of reward once you hit the target.
Achievable. Trying to attain an ill-defined, pie-in-the-sky goal will only lead to crazy behavior, incredible discouragement, or both. If you’re aiming for something huge (which is admirable), break it down into mini goals and focus on one at a time. Achieving a goal like “I want to start a multi-million dollar business” takes careful planning, a lot of research, and loads of help, but there are many, many people in the world who have done just that. How do you eat an elephant? (One bite at a time!)
Relevant. Are your goals appropriate? That seems like an obvious question, but it’s a critical one to ask when establishing objectives. For instance, saving up $1,000 so you can buy your new niece a Swarovski crystal, gold-plated baby rattle (yes, that’s a real thing) might be really memorable, but do you have an emergency fund in place? Make sure you’re meeting those practical, basic financial goals before you start aiming for the non-essential ones.
Time-sensitive. Knowing that the clock is ticking is one of the most powerful motivators on the planet. You’ll want to establish a realistic time-frame, but deciding that you want to buy a house in two years or be debt free in six months can increase your intensity, narrow your focus, and inspire you to start working on your goals as soon as possible!
Do your financial goals meet these criteria? If not, don’t sweat it! Spend 15 minutes reviewing your objectives and work in specific details or break down some of your more ambitious targets. Remember, I’m here to help if you hit a financial goal roadblock and need some professional insight and clarity!
It’s no secret that life is full of surprises. Surprises that can cost money.
Sometimes, a lot of money. They have the potential to throw a monkey wrench into your savings strategy, especially if you have to resort to using credit to get through an emergency. In many households, a budget covers everyday spending, including clothes, eating out, groceries, utilities, electronics, online games, and a myriad of odds and ends we need.
Sometimes, though, there may be something on the horizon that you want to purchase (like that all-inclusive trip to Cancun for your second honeymoon), or something you may need to purchase (like that 10-years-overdue bathroom remodel).
How do you get there if you have a budget for the everyday things you need, you’re setting aside money in your emergency fund, and you’re saving for retirement?
Make a goal. The way to get there is to make a plan. Let’s say you’ve got a teenager who’s going to be driving soon. Maybe you’d like to purchase a new (to him) car for his 16th birthday. You’ve done the math and decided you can put $3,000 towards the best vehicle you can find for the price (at least it will get him to his job and around town, right?). You have 1 year to save but the planning starts now.
There are 52 weeks in a year, which makes the math simple. As an estimate, you’ll need to put aside about $60 per week. (The actual number is $57.69 – $3,000 divided by 52). If you get paid weekly, put this amount aside before you buy that $6 latte or spend the $10 for extra lives in that new phone game. The last thing you want to do is create debt with small things piling up, while you’re trying to save for something bigger.
Make your savings goal realistic. You might surprise yourself by how much you can save when you have a goal in mind. Saving isn’t a magic trick, however, it’s based on discipline and math. There may be goals that seem out of reach – at least in the short-term – so you may have to adjust your goal. Let’s say you decide you want to spend a little more on the car, maybe $4,000, since your son has been working hard and making good grades. You’ve crunched the numbers but all you can really spare is the original $60 per week. You’d need to find only another $17 per week to make the more expensive car happen. If you don’t want to add to your debt, you might need to put that purchase off unless you can find a way to raise more money, like having a garage sale or picking up some overtime hours.
Hide the money from yourself. It might sound silly but it works. Money “saved” in your regular savings or checking account may be in harm’s way. Unless you’re extremely careful, it’s almost guaranteed to disappear – but not like what happens in a magic show, where the magician can always bring the volunteer back. Instead, find a safe place for your savings – a place where it can’t be spent “accidentally”, whether it’s a cookie jar or a special savings account you open specifically to fund your goal.
Pay yourself first. When you get paid, fund your savings account set up for your goal purchase first. After you’ve put this money aside, go ahead and pay some bills and buy yourself that latte if you really want to, although you may have to get by with a small rather than an extra large.
Saving up instead of piling on more credit card debt may be a much less costly way (by avoiding credit card interest) to enjoy the things you want, even if it means you’ll have to wait a bit.