We’re in week three of talking about using systems to solve your financial problems, and before we dive into this week’s step, I want to step back and take stock of what is we’re actually doing. “How to create a system” seems awfully vague, doesn’t it? Can this possibly be useful?
Of course, the answer is “yes”, but it’s important to understand why. Think about your financial situation for a moment. How did you get here? (Insert obligatory Talking Heads reference.) If you’re like most people, the answer isn’t that all your money fell on you out of the sky, nor is it that it was all taken away in a single day. No, most people are where they are as a result of many choices: from larger ones, like going to Vanderbilt, getting a job as a professional clown, or starting a family, all the way down to how many times you choose to eat out each week. None of these choices by themselves is going to make or break you — rather, it’s the sum of them, the direction you’re heading, the path you’re walking, that determines where you will go. Creating a system is simply plotting out that path, so that in the end, you get where you want to go. You’re not going to get out of debt or save up for your retirement in a day or a even a month — you need a system to gradually take you there, over months or even years.
So: next step! First, you identified the exact problem you were going to solve, then you identified a system to try. The key word here is “try” — there is no One Perfect System. Once you realize that every system is an experiment, then you’ll realize that failure is not only okay, it’s expected! First, though, you need to set up criteria for success — how will you know the system is working? — and make a special note of it. If it’s obvious — I’ll know that my system for handling debt is working because my debt will decrease — then great. Make a note of it anyway; this will be important in step 4. If it’s not obvious, take some time to figure out your criteria for success. Things are tense between you and your spouse when it comes to money? Start tracking how many times you fight about money, or how many times you get that sinking feeling in your gut when talking about it, or some other arbitrary-but-meaningful measurement. Even if it’s entirely arbitrary and in your head, it’s vital to identify criteria for success before continuing.
Why? We’ll go into detail on this next week, when we get to the final — and arguably most important and least followed — step to creating a system.
Last week, we talked about a crucial step in creating a financial system: identifying the correct problem. Now, in some cases this is dirt simple: “I’m in credit card debt and I want to get out” or “I need to start saving for retirement but I never seem to have any money left over.” Maybe they’re more complicated — “my spouse and I always fight about money” — but you’ve sat down, talked it over, and figured out that you each just need a little money that you can call Mine Not Theirs. Now that the problem is identified, we can start looking at possible systems.
Good news: generally, there’s no need to come up with a system out of thin air. Money — even credit cards — have been around long enough that people who geek out about finances have come up with some good systems for handling it. Credit card debt? It’s really hard to beat the envelope method. Need to save for retirement? Pay yourself first, start slow and ramp up. Need money that’s yours and not your spouse’s? Check out Yours/Mine/Ours. Find a financial expert, blog, or book, and talk/read until you find something that resonates.
Alright — so you’ve found a system, or maybe a few systems, and you’re trying to figure out what to do. You’re probably hesitating — will this system work? For me? Is it the best system? What if I don’t like it? What if it’s hard?
That’s lizard brain talking. It’s natural for it to resist change — after all, back in the early days of homo sapiens, foolish change might mean death. In the case of money, though, it’s your lizard brain that’s being foolish.
True, the system might not work. It might need tweaking, or it might not be the right system. So it’s fine to do a little research, maybe ask a financial geek with experience. The key to remember, though, is this: every system is an experiment. Nothing is permanent. You don’t have to make a choice and then follow through forever. Rather, pick a system and get started. Not sure if it will work for you? Well, there’s only one sure way to find out! Once you’ve got some experience with a system, you’ll have a much better idea of what kind of tweaks it needs or whether you need to try something completely different.
Picked a system? Great. Stay tuned next week for the next step.
A while back, I wrote a post on “working the system”, where I talked about how systems are a great way to solve your financial problems. (It’s worth going back and reading, if you haven’t recently.) “Great,” you say. “But…how do I do it? How do I know which system will work for me? How do I even know where to start?” These are good questions, and I’ll be covering them over the next few weeks.
First, identify the problem you want to solve. This seems obvious, but it’s critical. Don’t run off and start building a system until you’re sure it’s solving the right problem! If you’re stressed about money, sit down and think about why. Is it because you never know whether you’ll have enough money to pay the bills? Or can you generally pay the bills, but the credit card debt seems to be piling up? Or is it because you haven’t started saving for your child’s education, and you don’t know where to start? The systems for solving each of these problems will look very different! If you’re not quite sure (and believe me, it’s not uncommon to be stressed out without immediately knowing why!), then sit and think about each of the things that *could* be stressing you out — you know, all those things you’ve been trying to avoid. The one that gives you a sick feeling in your stomach? That’s the one you want to tackle first.
If you and your spouse are fighting about money, it’s doubly important to identify the right problem. This will take some effort, because you’re going to need to sit down with them and figure out exactly why you’re fighting — and it may have nothing to do with money at all! Oh, you may think you know (She can’t follow a budget! He won’t let me spend any of our money!), but I guarantee that unless you take the time to really understand your spouse, you’re going to end up running around in circles trying systems that don’t work.
Next up: finding the right system! In the meantime, though — have you ever spent time barking up the wrong tree because you didn’t properly identify the problem, whether in relationships or money? Tell your story in the comments below, and I’ll tell you mine!
While this blog is a great source of financial info and discussion, I feel that it’s my duty to inform you of another: our facebook page! If you Like it, not only will you get links to articles from this blog, but you’ll get excellent micro-posts with links to other news sources, like:
A great review of the Nest: A thermostat that learns? Three months with the Nest
Tips on using Google Calendar for personal finance: Manage Your Money with Google Calendar
Another review of the Ooma (curiously, published just after ours was): Frugal VOIP Home Phone Service
Exactly how much money it takes to be happy: Don’t Indulge. Be Happy
And more. Hey, if you’re going to take a Facebook break, why not use it to enrich yourself? So head on over there — and while you’re at it, post a question! I guarantee you’ll get an answer, whether from me or one of the other financial geeks that like to visit.