Building a firm financial foundation

Each new year provides a natural time to take stock of the direction of our lives and make changes where appropriate. This includes our financial lives. After all, our financial plans and behaviors should be supporting our broader life goals. Here are steps you can take to align your financial goals with your life goals so you can get on the road to true financial freedom. 

Since your finances should support your life’s goals, we need to start there. Have you taken time to think — I mean really think — about your life’s goals, especially over the long term? 

Prioritize wisely

I remember hearing the story of a young man who was very talented. He graduated from college at the top of his class and went to work for a large company, setting a goal of eventually becoming CEO. As the years progressed, he rapidly climbed the corporate ladder, but along the way, didn’t recognize that distance was opening up between him, his wife and their children. His relationship with the Lord became secondary. All of his focus was on reaching the top of the corporate ladder. As time progressed, he and his wife divorced, his relationship with his children was permanently damaged and he stopped attending Mass, all while still pursuing his “goal.” Eventually, he reached the top of the corporate ladder, but after the initial high of doing so, realized that he had been climbing the wrong building. 

Why do I share that story? Not because setting a goal to advance in our work isn’t a worthy thing. It is. But it needs to be in a broader context. We don’t want to spend years, maybe decades, climbing the wrong building. As stewards of Providence (Catechism of the Catholic Church, No. 2404), the recognition that God is our Creator should lead us to desire to grow closer to him as our highest priority. As we come to know him better, and grow in holiness through the sacraments, prayer and teachings of the Church, we will better fulfill our role as his steward or manager. We will dedicate ourselves to building strong family relationships and managing our money based on God’s principles.

Build a personal plan

Once you’ve reviewed your life’s priorities and goals, you are in a position to develop financial plans to support them. A financial review starts by assessing where you are. That means putting together a balance sheet listing your financial assets, liabilities and net worth, and asking a few basic questions. 

Are you saving and investing at a rate that will provide for your future obligations — especially retirement and the education and formation of your children? Have you anticipated additional needs that will require “Reserve Funds” in the future, including such needs as replacement vehicles, weddings, and home improvements? 

Are you managing debt with the proper level of caution described in Scripture (Prv 22:7)? Do you have unproductive debt — debt used to purchase depreciating assets or everyday expenses? If so, it’s critical for your financial future that you create a plan to eliminate it rapidly and follow through on that plan. Unproductive debt is a major obstacle to financial freedom. 

Are you falling into a habit of turning what might have been productive debt at one point into unproductive debt by extending out payment terms? I come across far too many people who repeatedly borrow against the value of their home for unproductive purposes and have a large mortgage in retirement when they should be debt free. 

Your next step will be to develop an annual cash flow plan that takes into account the review of your balance sheet and your responsibility as a steward of Providence. It should reflect generosity, saving for the future, and a temperate lifestyle that honors the Lord with the gifts He has entrusted to you. 

Finally, it’s important that you periodically measure actual activity as you progress through the year with your original plans. If married, I suggest family meetings, where husband and wife come together to review and update financial plans. This will help build the unity in your marriage (Gn 2:24) that our Lord desires for you. 

Properly recognizing God’s role as Creator and ultimate owner of all you have and fulfilling your role of steward of providence well, will move you forward on your journey to true financial freedom in 2013. God love you! 

Phil Lenahan is the president of Veritas Financial Ministries and the author of “7 Steps to Becoming Financially Free” (OSV, $19.95). Submit questions for columns to