Recently I was planning my training schedule for a big race that is coming up in six months, and it occurred to me that personal finance is similar to a marathon race. We at Lending Club believe that there are many money lessons that can be learned from a marathon. I have put together some ideas that I have on this subject, and in the following days you can read the following posts:
1. Defining and Goal Setting – Many times we hear so much about money, stock market and personal finance that most of it doesn’t get through to us. Defining what personal finance success means to you and setting goals is the first step.
2. Where Am I At Now? – Before determining how much there is to do, you have to determine where you are starting from, and what shape you are in now. Sometimes an assessment of your current financial state turns out to be better than you thought.
3. Where Do I Want To Be? – Once you have figured out where you are now and what you have to work with, the next step is to find out where you want to be. In a race this is usually done for you, but with money, you’ll have to set the goal yourself.
4. Short-Term Focus – In order to win with long-term goals you have to focus on what you can do to achieve those goals on a daily basis. Reverse planning should be used – start with the goal and a date and work backwards.
5. Zero-based thinking – “Knowing what I now know, would I get into this investment, business, partnership or deal again?” If the answer is no, your next steps should be to figure out how to get out of it and how fast.
6. Have a Fun Fund – When the going gets really tough and the motivation drops, you should just drop and do nothing. Finances should not just be all about sacrifices and hard work. Set aside a fund that is dedicated to nothing but fun things to do.
7. Make It Automatic – Training for a marathon should be put on autopilot. You don’t want to be thinking about your workout clothes or where your shoes are. You want the least friction possible. Same principle applies to your finances; make it automatic whenever you can. You can contribute 10% of each paycheck to your P2P loan portfolio on Lending Club, for example.
8. Compete Against Yourself Only – Competing against others will only get you frustrated and demotivated in record time. There will always be somebody that comes along that is better or can do better. The best thing is to make sure that you are only competing with your previous numbers.
9. Support Will Carry You Through – Training for hours can be tough and it’s often easy to talk yourself out of doing it. If you train with a friend, he can carry you through your rough times, and you can carry your friend through his rough times.
10. Win – Set up small wins and big wins for yourself after small intervals, before you achieve your ultimate goal. This will help you to keep focused and will reinforce your behavior and help it become a habit that you automatically default to.