Posted by Maneesh Sethi :: October 17, 2008 @ 6:54 am

In a recent post, I wrote about the importance of goal setting if you want to change your financial situation. Without setting goals, how can you ever achieve them? Well, once you have your goals, you aren't finished – you still need to work towards them! In other words, you need a plan.

With your goals in hand, the next step is mapping out a plan to achieve those goals. With a plan and a goal, all you need to do is follow the plan until you succeed. Wash, rinse, repeat. So how do you turn your goals into reality? How do you make a plan?

What's your problem?

First, you need to look at your specific situation. What is the problem? Do you have too much debt, or do you simply spend too much money each month? If you have debt, is it credit card debt, or is it student loan debt? What, specifically, got you into financial trouble?

What is the biggest problem in front of you?

Now, take a look at the problems you listed in step one. What's the biggest problem? If you have a lot of credit card debt, what's the credit card with the highest balance or highest interest rate? Take note of your biggest problem, the one that you wish the most would disappear. This is what you want to focus on.

Often, the problem is simply a matter of overspending; if this is true, your first step must be to stop spending so much! Consider locking up some of your credit cards in a safe deposit box (if you cancel them, this will affect your credit score, so be careful here). Figure out how to make sure you stop overspending. If you continue down the same path, you will never solve your financial worries.

Map out a plan

So now you know what your problems are, and some steps you can take to solve them. You also have attainable, realistic goals with a time frame. Using that time frame, figure out exactly what you need to achieve to succeed in meeting your goals. If you want to pay off $50,000 in a year, this means paying off $25,000 in six months---so make that a sub-goal! Plot out what you need to do in small, manageable chunks to meet your final goal.

What's the first step you can take?

Now that you know what your big problems are, you can focus on solving them. What is the first step you can take? Can you stop using credit cards, stop spending, eat out less, or anything else? You need to do two things to meet your goal:

1. Pay off more each month
2. Spend less each month

(Doesn't that sound a lot like exercise? You need to eat fewer and burn more calories, just like you need to spend less and pay more.)

Find out the best first step for you to spend less. What can you cut out? Get rid of some magazine subscriptions, maybe your cable, or your home phone if you have a cell phone. What isn't absolutely critical?

Next, find out how you can pay more of your debt down. Is there a way you can make a little bit of extra money for a short time? Every extra dollar is extremely important for getting rid of your debt. Maybe you can sell some books or CDs on Amazon or Half.com.

With your plan and your sub-goals designed, take these first steps. Start paying off a little extra each month. Cut out your unnecessary spending. You will find, in no time, that you are doing better than you ever imagined.