In my previous article, I talked about defining and setting goals when undertaking your Money Marathon. Another key aspect of preparing for your Money Marathon involves understanding your starting point.

When getting ready to train for a marathon it is wise advice to visit your doctor for a checkup and receive an assessment from a physical trainer to get a clear picture of your current state. You do not want to set yourself up for failure by signing up for a long and exhausting marathon when you are only in shape for a 5,000-meter run, or just a long walk. The same idea applies to your Money Marathon.

Before you set off racing to make millions, it is wise to find out your current financial health and fitness level. This will insure that you do not overwhelm yourself and totally quit on your goals. You do not want to be too overly optimistic, so it’s best to start off with conservative goals, and if they prove too easy you can increase them incrementally.

Money is a very tricky matter, and most people are not good at judging their spending and management accurately. That is why it is best to track your spending, saving, investing and other money decisions and habits in a written format or electronically, and not in your head.

Here is what you should track and review on a regular basis:

1. Personal Financial Statements – This includes your income/expenses and assets/liabilities worksheets. To start, you should download this personal financial statement (Excel work sheet) from SCORE. Just like you would constantly monitor your physical training times and activities, you should do the same with your financials and update them on a regular basis. Monthly is best.

2. Expense Tracking – Do you know where you are spending your money? Are you getting the best return on your investment? The only way to know for sure is to keep track of where your money goes and then look at what you can cut and where you can save. A service that can help you do this automatically is Mint.com.

Set small goals. If you cut your monthly bills by $150 and automatically put that money into a savings account or lend it out in p2p loan portfolios on Lending Club, you can go out and celebrate with a nice dinner. This will help you reinforce this type of behavior within yourself.

Listening to the radio and watching TV reports on the stock market, we often hear market and business reports. This news has become more of an entertainment than actual meaningful information. It can be mind-boggling to listen to everything that is going on in the financial world. Sometimes this overwhelming feeling sets in because of information overload and a lack of directed action.

When I was researching long distance training, I came across many different training strategies, running methodologies, eating plans, schedules and other information. I was lost and kept thinking that I might be doing something wrong. Then I talked to an experienced trainer and he told me, first, to pick a goal, such a half-marathon race, and then to look at all of the options that will support the goal. And third, which is the most important tip, stick with the plan until you feel like you have mastered it, and only
then work on tweaking it or changing the plan.

This same advice applies to financial training.

The first step to winning the Money Marathon is finding out what marathons are available and signing up for one. In money terms, this is a goal that you set and put a date on. As in running marathons, it doesn’t make sense to sign up for a 100-mile ultra marathon if you are only just starting out as a runner. And it doesn’t make sense to set a goal of making a million next year if you only made $50,000 this year.

Once you have a goal set, pick one strategy that you will work with to win your Money Marathon. For example, if you want to save $200 per month, open a p2p lending account on Lending Club and start investing your money at a higher rate than you can earn at the bank.

When you have defined your Money Marathon goal and an action plan, stick with it until you achieve your goal. Switching to different goals and plans will only frustrate you and keep you from achieving any consistent results that would lead you to set bigger Money Marathon goals going forward.

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.

In a very recent article, I talked about the difference between being cheap vs. being frugal. I defined the difference between the two as follows.

• Being cheap - You are unwilling to spend money on anything. Even stuff you need. You go out of your way to save money, even when it might not be a great idea.

• Being frugal - You don't waste money. You spend it on things you need, and save it on things you don't.

Well, Trent over at The Simple Dollar wrote a great article about the major differences. He takes the same standpoint that I did--being cheap is inherently bad, while being frugal is not. He writes:

"In a nutshell, a frugal person seeks to find the best deal on an item that meets the desired level of quality... On the other hand, a cheap person will always take the route of least financial cost in the here and now."

But, as I said before, being cheap is often more expensive that being frugal. Trent agrees. If you are cheap, you buy lower quality items much of the time. When they break, the cheapskate has to spend extra money fixing or replacing them. Fortunately if this happens to you, you can get a good P2P loan on Lending Club for all of your household needs.

Are you cheap or frugal? At Lending Club, we want to make sure you aren't wasting the money you worked hard to earn.

In my last article, I wrote about the difference between being cheap and being frugal. Here is how I defined the two.

• Being cheap - You are unwilling to spend money on anything. Even stuff you need. You go out of your way to save money, even when it might not be a great idea.

• Being frugal - You don't waste money. You spend it on things you need, and save it on things you don't.

The difference is mainly that being cheap actually hurts you, while being frugal is typically beneficial and will save you money in the long run.

So how can you determine if an action is cheap or frugal? Ask yourself these questions:

1. How much money are you really saving by not spending some money?

For example, my mom loves to fill empty shampoo bottles with water to make them last longer, rather than just buying a new bottle. How much money is she saving? Maybe a few pennies, because it only saves us the cost of one or two showers.

If you are going to buy a cheaper item, how much is the price difference between the more expensive and the less expensive items? Is the difference very small?

2. What is the difference, qualitatively, by spending less money?

If you were planning on buying a book, and decided to save money by buying a cheaper book, what is the difference in the quality? If you are buying a piece of clothing, is the more expensive one significantly better in quality or aesthetics? For example, I had to buy a wallet, and I paid $10 extra to get one that was inlaid with a sweet red cloth. Although it was $10 extra, I smile every single time I pull out the wallet---I consider it $10 well spent.

3. What are the long-term negatives of saving that money?

Buying books is a great example of this---if you save $20 on a book that could have potentially given you a great idea, did you actually save money? Sometimes, spending money is an investment. A book can give you an idea, an investment can get you a monetary return, and money spent can become money earned.

We at Lending Club want you to save money as part of your overall financial plan. Put some money into different types of saving and investment vehicles including P2P loans on Lending Club. If you want to spend a few extra dollars to get a nice pair of shoes, that's okay. Just make sure you aren't spending enough to ruin your finances.