Besides the internet and sliced bread, I believe the greatest invention today is the GPS. When I was growing up, if my family wanted to go somewhere new, we had to use a paper map. It was more like a book. We had to flip through the book and find the zip code of this new location. We would then narrow it down to main cross streets and eventually find the place. We also had to follow the map while we were driving in case we made the wrong turn and got lost. When internet maps, like Mapquest, came along we still had to memorize directions. If we missed our turn, we’d pull out the map book.
Today I effortlessly drive in and out of cities and neighbors thanks to the modern-day GPS that I can download for free on my smartphone. Now, I can easily find my way to a bar and my Lyft driver could just as easily find a way back to my home.
What the heck does this have to do with finance you ask? Well the GPS gave me:
- Time back
- Confidence in where I’m going
- The duration it took me to get to my destination
- A new route if I missed the turn
- Traffic/road updates
If done correctly, a financial GPS can give you the same benefits.
A financial GPS will require some time to build. It requires gathering information and laying it out so you can easily see where you are financially. However, all the work is done upfront. Once you have a pretty good draft, you are set. You will have to make tweaks here and there, but you don’t have to build it from the ground up every week/month/year or when you realize you’re running out of cash. You’ve already done the work in the beginning.
With a financial GPS, you will have confidence in spending money. Throughout the building process, you will quickly find what matters to you financially. You can choose to use your money towards shopping, vacations, paying off student loans, a wedding, a house, savings etc. There is an infinite amount of things you can do with your money, but you are limited to the money you earn. Once you’ve decided how to allocate your money on a monthly basis, you can quickly make spending decisions down the road. You already know how much you intend to spend on food, gas, vacations, etc.
You can also find out long it takes to meet certain financial obligations or save up for major purchases. If you could, wouldn’t you want to know how long it would take to pay off your debt, while simultaneously saving up for a car or a house? Wouldn’t you want to know when you could be financially independent? Creating a financial GPS will give you an educated estimate of when you can achieve your financial goals.
When creating a financial GPS, you can only input the expenses that you know of. Of course, we recommend having an emergency fund. You just won’t know when you’ll actually need it. Still, when these emergencies occur, you can update your GPS and make adjustments to get back to your financial goals.
Similarly, you can to adjust your GPS as life happens. Maybe rent increased and it would take longer to pay off your debt. Maybe you got a raise or a higher paying job and you’d be able to pay off your debt quicker. Maybe you started your own business so you would create a separate GPS for that. No matter what the case may be, you will have complete control and visibility of your finances. You are in better shape than you would if you didn’t have a financial GPS.
What’s the difference between a budget and a financial GPS?
A budget is static. You set your financial targets on a monthly/annual basis and you roll over anything you didn’t spend. It’s focused on a short period of time. A financial GPS gives you a bird’s-eye view of your finances and approximates where you are financially a year from now, 2 years from now, 5 years from now… Of course the farther you estimate, the less reliable the numbers can be. Still, you wouldn’t be able to get that level of detail by looking at a static monthly budget.
I am honestly bewildered when someone calls me asking me for direction nowadays. The only excuse is that you lost internet connection while driving up a remote location, but then how did you get hold of me a in the first place… The point is you don’t need a GPS to get around. It just makes your drive easier and less stressful. So why not do the same with your finances? Make life easier and less stressful by mapping out your finances. Besides, wouldn’t you want to know where you’re going financially?
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