A few months ago, a friend of mine relayed an interesting fact to me: a blindfolded human being will walk in circles, not in a straight line. As he told me this, we began to discuss the countless stories about lost hikers walking in circles for days. To me, this seemed odd since walking a straight line seems like it should be second nature. After doing some more research on the subject, I discovered that it, in fact, is not.

Jan Souman, a psychologist at Max Planck Institute for Biological Cybernetics in Germany, put this theory to the test. He strapped a GPS to a group of volunteers in the Sahara desert and again in a German forest. Both environments offered very few clues to the participants about their location. They were forced to rely on the sun, stars, and their own intuition for guidance. On cloudy days, with no visible celestial bodies to follow, the participants walked in circles sometimes crossing their own path several times. In a follow up experiment, 15 people were blindfolded in a field and asked to walk in a straight line. All the participants walked in a circle, some as small as 66 feet in diameter. When we lose our bearings, we walk in circles. And, circles don’t get you anywhere.

As my mind is prone to do, I began to consider how Dr. Souman’s findings could be applied to navigating the untamed wilderness, financial planning. While this may seem like an odd metaphor for reaching financial goals, I find the similarities quite revealing. The number of people who show up in my office at the exact same spot they were a decade ago is unsettling. I recently had breakfast with an individual that followed the financial advice of the professionals perfectly. He did everything they asked and a decade later found him in the exact same position. He was frustrated and rightly so. His only mistake was adopting the goals of his advisor and not his own. He took the “expert” advice blindly because they supposedly knew about the smart money habits.

In order to successfully find your way through the financial jungle and reach your desired destination, you must have your own vision, a finish line and a well-defined course. If not, you risk following a path not your own. Ultimately, it is up to you to define where you would like to go and find a path to get you there that you are comfortable following. Financial planners are a great resource for planning your financial journey, but be sure that they understand your needs and desires and help map out a course that is right for your particular situation. With that said, it is important to take time to establish your bearings so you don’t find yourself, like the lost hikers, circling in the dark.

Money Management Tips

One of the smart money habits is to investing in 401(K) of your employer’s program. Availing it means gaining complete returns on every matched fund. Do so, and you will see how fast your retirement fund is growing. Moreover, it will support you whenever the market goes down and that too at the expense of your employer. Invest their minimum 10-15% of your gross income monthly in that employer’s scheme. For the year 2017, the highest compensation amount you can get as an employee from 401(k) plan is $18, 000. Increase your knowledge about the 401(k) by visiting here.

Opt for emergency funds. This is a great saving plan to help you during emergencies without breaking your bank. If you’re a working person, try to save at least 6 months expenses. It is indeed a huge amount. In case, you don’t have that big money, start with saving only $600 monthly and it will help you in the long run, though may appear small initially.

However, prior to opening your emergency account in a bank, make sure you have asked them about their interest rates. Mind it, if the annual yielding percentage is less than 1, it’s not a good deal.

The Bottom Line

Map your financial journey considering your bank. At every stage of your life, you will have a different financial goal. Consequently, managing all the money in a single bank is difficult. So, multiple financial institutions are there to help you in the process.

While setting the financial goal, be realistic. Unrealistic goals will only make you frustrated creating a huge burden on you.  At the right time, open the right account in various banks. Reading personal finance books also help many people in showing the right path. So, these kinds of books definitely deserve your attention. Making financial progress every year is significant to secure your and your family financially.