“ Learn how Titi conducts a gap analysis of her finances to prepare her for success in 2020 ”
2019 is almost over and Titi has a lot to be thankful for. First off, she is thankful to be alive and healthy which is the most important thing. Secondly, she is enthusiastic about the future, and the wonderful things that the new year will bring. After all, 2020 marks the beginning of a new decade- For Titi this represents a coming of age in her life and many opportunities to achieve her goals. So to absolutely crush it in 2020, she decides to review how her finances were managed in 2019.
She begins the process by setting questions to help her reflect on the past year. After about 10 mins, Titi typed a list of questions into her computer to help her do just this:
What areas did i spend too much?
What unnecessary things did I spend on?
How did I perform overall with my money management? (Budgeting, saving, tracking my spending, education, giving )?
Where are improvements required ?
What opportunities did I miss this year to grow my finances?
What triggered a lack of discipline in my finances?
Where am I on my journey towards my financial independence
What were repeated mistakes this year?
As she answers these questions, she recalled (rather painfully) various situations that weakened her financially over the past year. There was the unplanned night out when an old friend visited the country- in the excitement, she bought food and drinks for way too many people ( yes, she had one too many drinks). She squeezes her face in disgust, as she recalls the event vividly.
There was also spending a lot on Uber rides during her summer holiday in New York (which could have curbed by learning how to use a train). She makes a mental note to remember not to repeat such a mistake.
The review is helping her understand some behaviours that led to failure in the past. The goal isn’t perfection, but to gradually get better by taking responsibility for her financial situation.
Also, by reflecting on her unplanned splurge on her infamous night out she revisits where here true values lie. Through this exercise, Titi re-lives the pain of wasting her financial resources on a moment of excitement , instead of directing her resources towards optimising her life for goal achievement.
After 2 hours of asking and answering questions, she had enough information to understand her current situation. Now she needs to carve a path forward- To realise this clear path, she asked one final question of herself:
What’s my game plan to curb these mistakes going forward?
Titi then conducts an extra hour of thinking, in which she comes up with a gap analysis of her financial situation. The main point of this particular exercise is to develop a game plan for managing her money in 2020. The plan encompasses the key areas of money management: budgeting, saving, tracking my spending, education, giving, and Entertainment.
Titi’s Gap Analysis Table
| Activity | Where am I now? | Where I’ll like to be | Game plan (what will get me there) |
| Budgeting | I have a budget but I never remember to look at it, so I forget what my actual budget is | Actively track my spending in relation to my budget | Make my budget the wallpaper on my phone; check balance the end of the week ( against what was spent) |
| Track my spending | I struggled in the first half of the year, but got better in the second half | I create a routine/system to make this easier by entering spending in my phone memo after every transaction | I will reward myself at the end of the week for keeping to this routine with some ice cream.
Also, I will review spending to cut cost every quarter |
| Saving | This was great. I achieved my savings goal | Automate bank app to transfer at the start of the month. I can search for better yields for my investments. I can allocate more capital towards investing | Stick to quarterly goals of saving to hit the bigger goal by the end of 2020. |
| Investing | I focused on money market investments solely this year | I seek out more interest bearing investments for the long term | I learn about other asset classes and set a deadline, explain to a friend, then invest in one. ( to make sure I understand the asset class before investing) |
| Education | Bought books every month | I invest in taken 2 online courses next year ( and completing them) | Register for a personal finance course and commit to completing it on social media |
| Giving/ Tithing | I tended to go over budget in this area | I can reduce budget in expenses to allow for giving more | I will make my budget the wallpaper on my phone to help me achieve this |
| Entertainment/ Play | Spends 10% on entertainment | I will earn more money to increase my entertainment budget by the second half of 2020 | Make more money from side hustle |
Now Titi has identified her blind spots- she can now eliminate the causes of failure in her quest towards financial independence. Next, she turns her plan into a compelling mission statement. It took her another 10 minutes before she came up with a mission statement for her finances. It reads thus:
Titi’s Money Mission statement for her finances in 2020
” In 2020, I enjoy the rewards of improved money management practices throughout the year. I achieve this by looking at my budget the wallpaper on my phone, and also cross checking the balance of my budget at the end of the week ( against what was spent) by doing so, it will also help me manage how much I give to others, so as not to cause a strain on my finances.
I will track my spending, and reward myself at the end of the week for keeping to this routine. I will also review spending to cut costs every quarter.
To improve my savings, I will stick to quarterly saving goals so as to hit the bigger goal by the end of 2020. I educate myself by taking courses that increase my earning power and commit to completing these courses on social media.
To improve my investing, I will learn about other asset classes each quarter. Upon learning, I will explain to a friend then invest in one.
I will work to make more money from my side hustle, so i can fund more interesting activities in my life.
By committing to this, I create more discipline, balance, fun, and confidence in my life. I will sleep better knowing that my finances are going exactly where they are supposed to be: towards building me a better future. “
Lastly, she commits to reading the statement 4 times every morning upon waking up and four times in the evening before going to bed. The idea behind this habit is to remind herself constantly why she is doing what she is doing ( achieving financial freedom), and improve her discipline.
Titi’s attitude towards her personal finance is progressive, as she is leaving little to chance. She completes the 2019 review feeling enthusiastic about the future, fully expecting to achieve even more favourable results going forward. She drops her notepad, then sends her best friend, Rita , a message on whatsapp, to see how she’s faring in preparation for the new year.
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Key takeaways
- Conduct a gap analysis to bridge the gap between where you are and where you need to go. A review of what you did well, what you didn’t do so well, and how you plan to improve the results prime’s your mind for success.
- What’s even more compelling is to create a narrative (mission statement), that repeated often, will be a natural guide to improving your finances. It should include the motive, the steps required, and the reward of keeping to it. Even better, write it in an affirmative manner, just like Titi did.
- Use review questions (such as the one’s Titi used) to have a clearer understanding of your financial situation is.
- Set GOALS (with actual deadlines); saving and investing goals give you a clear target for growing your finances
- To create alignment, have daily, monthly, quarterly, and yearly goals as it relates to your financial vision – e.g. make your budget the wallpaper on your phone , read your money management mission statement multiple times a day, read 2 books on investing a month and so on.
- Put those goals where you can see them. – e.g. your wallpaper or on top of your bathroom mirror- remember out of sight, out of mind
- Share your goals with family and friends- the accountability factor will make your efforts focused
Happy new year 2020!!!!
Here’s to a successful new decade for you and yours!
