If you are like most families, resources are tight and financial planning isn’t something you are excited about doing. It reminds me of the routine maintenance of going to the doctor. I know I need to visit the doctor every year and if I’m being really honest with myself, I’m not ready to step on the scale and see that number, or hear that my cholesterol needs to be checked again to see if it’s come down. I can tell you it hasn’t come down, because I know I haven’t changed my diet or exercise patterns to get it to come down – so can’t we just skip all that? I might rather enjoy skipping the doctor altogether this month, knowing I will need to get the needle in my arm to find out what I already know. In the back of my mind is that little subconscious part of me trying to convince me “I’ll do something for myself instead”! Then, begin the negotiations such as “I know I am not the healthiest person alive and I’m OK with that to a certain degree”. Isn’t this how we tend to look at our finances, too?
Pause for a moment and day dream. Think about the next 6 months only of all of your financial needs. Don’t go beyond a year (I knew you were going to do that). Write down in your mind something that you hadn’t planned on doing, but that you really, really want to do. Doesn’t matter who it’s with, who it’s for, it has to be something you want. Keep thinking, be a little selfish if you aren’t letting yourself, and give yourself permission to want this. Wait for something (or multiple things) that make you get butterflies, that make you smile, that make you potentially want to cry… This is it! These emotions will drive you and motivate you in a way that your brain will not.
This is the secret to financial planning – it’s goal setting, tied to your specific wants and needs.
Don’t worry, I’m not going to leave you there. There are some steps to take to bring something to fruition for it to have the impact that just made you want to laugh, cry or smile. Let’s break down the basic steps that are easy to follow.
These steps will take some time and effort on your part, and in my experience, these three steps only take one hour if you have the tools in front of you already (add time for building the tools). For the purpose of this process, I encourage you to do these steps yourself for now. You will see how to fold in your partner when it’s time.
Analyze your spending. Go backwards a month and track each transaction for an honest reflection of what has happened in the past. Don’t go more than a month, and make sure you include all of your accounts. This step is probably the hardest because you will have to take a long, hard look in the mirror. It will tell you exactly what you actually spend on food, for example. I can tell you every time I ask clients what they think they spend on food, they never guess it right, and it’s sometimes double what they think it is. Caution here, if you are looking at your joint expenditures, do not use this as ammunition to go pick on your partner about everything you think they are doing wrong. Instead, look at it as the starting point of the budget you have both unintentionally created for yourself. The question is, what do you have to work with?
Set a new budget. You will come up with a great plan the first time, and then you will probably have to tweak it again, and probably again, because you will be off. This is normal because we are humans, not robots. This is the yucky part about financial planning, it doesn’t manage itself. You have to modify your numbers until you get it right and to something you can work with, keeping your plan in mind.
Set your goal! Think about that day dream you had a moment ago – how will you get there? You will miraculously find some money, right? Especially if you realize you can easily cut back here or there, reduce or cancel a bill over there, negotiate this one over here, and all of a sudden you are reducing your expenses! Set a date for your day dream. You will have to get out your calculator or spreadsheets for this part, but something tells me you have mad wicket skills in this department already. Figure out when you can reasonably do what it is you are trying to accomplish. Your day dream just became a goal: “Paris, April 2020”. Now, when you are getting pulled in by the online shopping you tell yourself you don’t do on the weekends, your mind will think about that beautiful Eiffel Tower and you will literally say to yourself “Paris, April 2020” and you will walk away smiling, thinking about that trip.
The best part is when you get to go on that trip. Whatever your goal is, you will see that it can be achieved. This is your day dream – it’s your emotion. Don’t apologize for it – embrace it! Go buy that beautiful purse, hire that housekeeper, save for that girl’s trip, or have that date night at your favorite restaurant that you’ve been putting off. You don’t have to share it if you don’t want to, and you don’t have to explain it either. It already put a huge smile on your face thinking about it, so own it and make it yours!
Sarah Cobb is the proud mom of one and stepparent of 5 children, and comes from a family tree with many “steps” that she only knows as family. She holds a Master’s Degree in HR Administration, and has enjoyed a wide variety of HR and business careers, including one she stumbled into and found a passion for in personal financial planning. She continues to work in her chosen field outside of finance so she enjoys helping others achieve their dreams on the side. You can contact Sarah via Twitter @SarahCobbAFC