How do you end up in financial distress? There are many reasons, and, when it comes to facing a potential bankruptcy, very often the biggest triggering event is a medical crisis or a divorce. But there are smaller factors that can add up to your finding yourself in a big crisis. Today’s post begins a series on what one bankruptcy attorney identifies as the “Top Ten Personal Financial Mistakes” people make. His list is useful for all of us to review and consider, and his posts link to helpful resources available on the web. Be sure to click on the link below to his post and check out the resources he provides, too.
Here’s an excerpt from the series by Eugene S. Melchionne, Connecticut Bankruptcy Attorney at www.bankruptcylawnetwork.com. My comments will follow.
Rule #1, Have a personal financial goal and a plan to achieve it. The pressures of bills and getting the income to pay them typically cause you to lose sight of your personal financial goals.
The second thing I ask a new client is, “If I could wave a magic wand to make it happen, where do you want to be in five years?” Or sometimes, “What do you want to be when you grow up?” I ask clients this no matter what their age, especially if I sense that they are living without direction. In order to get direction, you have to set a goal and then the path to that goal becomes clearer. It may be too hard to set a lifetime goal, but a five year plan is always achievable. Once you have a five year plan, you can break it down into smaller parts with the short terms goals being something you can achieve in one year or less. Every journey starts with the first step.
Many people (most?) are so caught up in meeting the demands of their day to day life that they don’t question what they are doing and they don’t consider the consequences of what they are doing. This means they may have bad habits, including bad financial habits that greatly increase the odds of something catastrophic happening — think smoking and lung cancer, and carrying credit card debt while paying only the minimum and astronomical final debt. It also means they are not living with good habits that greatly increase the odds of avoiding something catastrophic, like not smoking, and good habits that greatly increase the odds of gaining something great, like having energy and feeling good longer into old age because of a habit of exercise.
We can set and keep goals that decrease the odds of financial crisis and that increase the odds of greater financial security when we are in less fortunate situations. Gene’s article reminds us of that and gives a great resource in its link to Professor Westbrook’s Setting and Achieving Financial Goals.