Creating a Budget in 3 Easy Steps | Step Two: Define Your Dreams

Dollars & Sense on 11.17.11
Contributor bio | twitter

Photo: lululemon athletica

So you've started tracking your spending -- and I mean, every penny that goes in and out of your wallet, bank account, credit card, or ATM. Everything. I love the simplicity of paper, but whether you do it digitally or manually is unimportant. Just do it, because tracking spending is the first key to getting control of your finances.

Now for the next part: dreaming. Yes, the second essential step to creating a household budget is figuring out your goals, your dreams, your needs and wants.

Why? Because if we don't hold on tight to our money, it will just scatter like sand in a windstorm. Holding tight means having focus. If we don't have a vision for our money, someone else will, says self-made millionaire and mom of five, Dani Johnson, in her book First Steps to Wealth. And the next thing we know our money is gone in designer bags, gadgets, and dinners out.

Here's how to do it.

Float the Idea

If you've been tracking your spending, then maybe it's already become clear that your money needs some direction. Now it's time to have a little talk with yourself, or your partner, and say something like, Let's not let life pass us by without getting what we want. We have lots of goals and dreams -- [insert a few here] -- and if we don't focus, we might not get there. Let's sit down and figure out what we want out of life so we make sure it happens.

Make a Date

To make it fun, treat yourself to a coffee shop scone and a new notebook.  Or organize a date night or family meeting to get everyone on the same page. 

Start listing all the things you want to happen in your life. Does you have a dream career you want to try? Do you want to renovate your house? Do you want to send your kids to college or a special camp? If more than one of you is at the meeting, make sure each person gets a chance to state his or her goals and why they are important.

Most people want a comfortable old age, or a savings cushion to weather life's storms with ease. These unsexy and intangible goals should also figure into your planning.

Shine a Light

Hang up your list of goals in a prominent place. (Make them look pretty if you want with my Life Goals worksheet). Post them on your computer, your fridge, your car, your desk -- or better yet -- all of the above.

You'll be amazed at how these visions will energize you and how the steps to reach them will start making themselves clear. When you set a concrete goal, you are creating a milestone like a lighthouse. Instead of just letting the sea toss you around, you will now be sailing toward a destination. You'll always know which direction to go, how far away it is, and when you've arrived.

In Step 3, we'll figure out concrete actions to help you reach your goal. I'll show you strategies that will help you line up your spending (which you are learning about in Step 1) with your dreams (what you are defining now in Step 2).

And then you'll really be ready to put the pedal to the metal. Whatever it is you want to do, you can do it. But first you need a vision.

Top Articles in Getting What We Want
Creating a Budget in 3 Easy Steps |  Step Three: Live with Purpose
Goal! Why Setting Goals Improves Your Daily Life
How to Save More Money Than You Thought Possible