❝To invent your own life's meaning is not easy, but it's still allowed, and I think you'll be happier for the trouble.❞ -Bill Watterson
Imagine you're in the woods. You don't really know where you are, but you know you need to go somewhere. Before you figure out where to go or what path you should take, you need to first figure out where you are. Once you know where you are, it makes sense to figure out why and how you got there so you don't make the same choices when you start your journey. Next, you get to decide where you want to go and figure out how to get there.
Hiking can be fun, but if your objective is to hurry up and get home so you can throw your backpack off, you're missing the point of the journey. Hiking isn't the same as walking on a treadmill; there will be challenges and setbacks, but overcoming those is what makes it fun.
Living a good financial life is much the same as this hiking scenario. You have to understand where you are, figure out where you want to go, figure out how to get there, and understand ahead of time that there will be challenges and setbacks. If you don't like hiking or haven't hiked before, this analogy isn't great, but I hope you can still see the big picture.
What follows is an outline of the steps you can take in order to live your best financial life.
KNOWING WHERE YOU ARE
The first step toward a good financial life is understanding your current situation. This includes financial statements like your cash flow statement (how much money is coming in versus how much is going out) and net worth statement (what you own and owe), but also what your current behaviors are. What are your thoughts and beliefs about money? What do you not like about your situation? What are you doing well in your current reality?
Getting crystal clear about your current reality will help you define what's possible and how you can achieve what you want out of life.