Mistake #1: Focusing on everything else instead of your relationship with money.
What I mean by your “relationship with money” is how you personally approach your economic activities like: how you earn money, how you spend it, save it or give it away – and the thoughts and feelings associated with those activities.
What I have found with my clients is that they don’t feel in control of their relationship with money, because either they don’t understand how it developed or they never even thought about other ways of relating to money. Instead, we end up focusing on other areas of our lives.
Your own approach may have made sense at one point, but now perhaps you are a bit older, in a life transition, or looking to retire soon. Money often becomes the cause (or excuse) for people not living their dreams or exploring what their life could really mean. Taking a clear honest look at your current financial situation and how you got there is an important step in orienting yourself toward positive change.
A good first step is to review your lifetime income and create a personal balance sheet. This will give you an idea of how much money has come into your life and what you have to show for it? Getting clear with the past prepares you to come into the present.
What is Lifetime income?
- Lifetime income is your income history which includes both reported and non-reported income. You can find out your reported income from the Social Security Administration, old tax returns, or just estimate.
- Non-reported income is money, other than taxed wages, that has come into your life. Much of that is undocumented so you will have to remember and estimate. You can go back through your memory year by year, ask family members, and look at your bank statements for deposits.
Why explore your income history?
- The process is empowering; it will remind you that you can bring money into your life.
- Your income history, along with your Personal Balance Sheet, will help you realize just how you’ve stewarded that money.
- If you have made very little money over the years, it will help you recognize how resourceful you’ve been in living on less.
Why is a Personal Balance Sheet important?
- The personal balance sheet is the starting point for you to create a new map to your financial future – an awareness of where you are, financially, right now. Your personal balance sheet will serve as the “You Are Here” spot, as you chart a course into the future.
- A balance sheet of assets and liabilities is a fundamental business practice. Treating yourself as a business will help you get an accurate, objective view of your current financial situation.
- A personal balance sheet is a snapshot of a moment in time; it is based on things that change regularly, like bank account and loan balances. If you have easy access to your balances, you can pick today’s date for your “snapshot.” Otherwise, pick a date in the near past for which you have all your records.
Create Your Lifetime Income Estimate
- Download the Lifetime Income worksheet instructions
- Download the Sample Lifetime Income Worksheet
- Download a Blank Lifetime Income Worksheet
Create Your Personal Balance Sheet
- Download the Personal Balance Sheet Instructions
- Download the Sample Personal Balance Sheet
- Download the Blank Personal Balance Sheet
Review and Reflect
- Download the Review and Reflection for optional exercises
