Turn Wishful Thinking Into Reality
By Dara Duguay
Spring 2005
How many dreams actually come true? Disney's Cinderella sings, "A dream is a wish your heart makes." Cinderella found her prince, but most dreams require money to become a reality. Short of winning the lottery, financial dreams require a specific goal and a plan to achieve it.
A goal that remains only in your mind is just a wish. The path toward turning a wish into a goal starts with writing it down. The simple act of putting the goal on paper immensely increases its likelihood of success. It may seem hard to believe that something so simple can make such a big difference. But once a goal is written down, the mind starts working on ways to make it a reality.
Beth wanted to buy a house. She was only 22 years old but knew that she would not become a homeowner anytime soon unless she started saving now. Beth's goal of buying a one-bedroom condominium was not unrealistic, but the required down payment seemed beyond her reach.
Her salary was typical of a young professional just starting her career. Even though her current expenses were relatively low, she still found it difficult to save each month. Her paycheck was very popular; it seemed that everyone wanted a piece of it. After rent, food, utilities, gas for her car and other essentials, her paycheck was gone.
Beth despaired that her dream of owning a home would remain just a dream. It was only when her friend Brian suggested that she work out a step-by-step plan that Beth started to gain hope. He offered to share the plan that had enabled him to buy a home, which involved creating a budget that included "actual" spending.
Beth assumed that her fixed expenses (rent, food, car payment, etc.) would leave no money for savings. It was only after she tracked her expenses for a month that she discovered, to her amazement, that some extra money actually remained after necessities were paid.
She realized that money was slipping through her fingers on non-essential "wants" - as opposed to "needs" - such as entertainment, meals out with friends, happy hour drinks, manicures and pedicures, and weekend mini-vacations. If Beth could cut back on some of these non-essentials, she would indeed have money to start saving for her house.
The next step in the plan was to choose which expenses to reduce or eliminate. These were painful decisions. Who wants to pass up a great shoe sale or tell friends not to expect her for happy hour? Beth had to keep reminding herself that it was a trade-off: She was giving up things she wanted now in exchange for something she wanted even more in the future.
Beth decided to save $200 a month. By reducing her spending, she was able to do it. When she moved on to a higher paying job, she resisted the temptation to increase her standard of living. She kept her expenses the same but doubled her monthly savings to $400 a month.
She determined that her salary could comfortably afford her a $100,000 home with a 20 percent down payment. This meant that Beth needed to save $20,000 - a formidable but achievable amount once she calculated that her regular $400 monthly savings with interest working for her would add up to $20,000 in approximately four years. At her current pace, she had only two more years to go.
The most important part of the plan was to never deviate from the plan. It certainly was tempting to step off the path. Beth's friends whined that she was no longer any fun since she turned down most of their offers to go to movies, malls and bars. But in spite of the pressure, Beth remained steadfast in her resolve. She even taped a picture of a condo on her refrigerator to give her inspiration.
Two years later, Beth was the proud owner of a lovely one-bedroom condo. At her housewarming party, her friends were jealous. But all they could do was dream. Beth had made her dream a reality by writing it down on paper, transforming it into a meaningful goal and setting a plan in motion.
This isn't about buying a home; the steps Beth took are essential to reaching any realistic financial goal. Once you decide on your goal, write it down and write the steps needed in the process of achieving the goal. Break up the goal into manageable pieces, and it will not seem so overwhelming. Most of all, adopt a will to succeed by sticking with your plan in spite of the temptations and distractions you will face along the way.
Remember, there was only one Cinderella.
# # #
Dara Duguay is Director of the Office of Financial Education for Citigroup and the author of several self-help financial books. Her most recent is "Don't Spend Your Raise: And 59 Other Money Rules You Can't Afford to Break." Her books may be found at www.amazon.com or at any major bookstore.
