I wrote “Dreams for 2019” about my New Year’s resolution to drastically improve my health and fitness and how I am leveraging proven techniques to maximize my chances for success. This month, I will share with you some ideas about how your money can become a more powerful tool to serve you in living your best life.
Choose Goals That Matter
What is it about your financial goals that gets you excited and motivated? Making meaningful changes in your life is usually difficult, and successful people arm themselves with strong motivation from the beginning.
Here are some goals for you to consider:
Get Organized – It is common for couples to have no idea what their net worth is, how much they spend monthly or what their total debt is and how their finances are trending. This is the first thing we do—help our clients get an accurate picture of their current financial reality.
Set a Specific Funding Goal – This could be a paid vacation, new car, a vacation home, or funding half or all of the college expenses for your kids or grandkids.
Align your Spending and Values – Isn’t that a much more positive spin than saying “create a budget and follow it”? Many couples just do not plan their cashflow. Symptoms of this are either growing credit card balances (spending exceeds income) or large cash balances (income exceeds cashflow needs). Creating a cashflow plan that aligns your spending with your values makes it possible to be intentional about where your money goes and to see negative trends in time to take corrective actions.
Achieve 50/20/10 in Your Financial Life – I love this one! The 50 represents the fixed expense component of your lifestyle, which should cost no more than 50 percent of your after-tax income. This includes rent, utilities, minimum debt payments and the like. The 20 represents saving at least 20 percent of your income and this includes 401(k) withholdings, debt payments above the minimum, funding an emergency fund, etc. The 10 percent represents your charitable giving, which leaves a full 20 percent for discretionary spending (or 30 percent if you are not in a generous season of life). Some couples just split the discretionary budget and agree to empower each other to spend their half on whatever they wish with no judgment, so long as they keep it within the guardrails.
Another powerful benefit of limiting your fixed spending to 50 percent of your income is that for dual income households, it facilitates financial survival on a single income should one income be interrupted.
This is a big goal and encompasses cashflow, savings and debt elimination.
Work as a Team
I have previously mentioned the importance of going public and seeking support to achieve your individual goals, but financial goals are often more private. If you are in a relationship, making a commitment as a couple will greatly increase your chances of success. Gaining alignment will also boost current and future financial harmony.
Dream About Your New Life
Take 15 minutes and think specifically about how your life will be different when you achieve your financial goal.
—What would it be like in your family to no longer have financial stress or money arguments?
—What kind of peace of mind would you experience if you could spend guilt free on the things that are most important to you?
—How would it feel to be in retirement with zero debt, knowing you can use most of your income to travel and be generous if you choose to?
—What would it mean for your kids or grandkids to be able to graduate from college with a degree and bright future and no student loans following them?
—How will your kids’ financial trajectory be improved when their best example of wise financial stewardship is you?
Individually write down the reasons why this goal is important to you and how your lives and those around you will be different when you accomplish it. Then share your thoughts with each other and write down your joint vision for a better financial future and refer back to this weekly when you have your weekly “money time” (see below).
Do Your Homework and Create a Plan
Other people have successfully achieved your goal for themselves and you can copy the strategies they used. This of course is an area where Stewardship Colorado can be a great resource, but there are other proven resources also. Some of my favorite financial books are:
1. “The Richest Man in Babylon”
2. “Your Money or Your Life”
3. “The Millionaire Next Door”
4. “Secrets of the Millionaire Mind”
5. “Total Money Makeover”
Think hard about what can derail your plans and take steps to optimize your environment. For some people, the challenge is spending, and credit cards may be an obstacle. Others just can’t get into the rhythm of saving money, and enrolling in a 401(k) program is a huge help. Some simplify heir cashflow management by creating a second checking account for discretionary spending and automating bill payment from their fixed expense checking account.
Commit to Your Plan
Anybody can tell what is most important to you by looking at two things: your calendar and your checkbook (or credit card statements). You absolutely have to schedule time to work on your financial goals or they will fade in importance and disappear. Experts recommend setting aside 30-60 minutes per week, as a couple, to review your goals and update your cashflow planning software. Put this weekly meeting on your calendar! This is a great time to dig out your joint financial vision that you crafted together and remind yourselves how important this is and how honoring your mutual commitment will improve your lives.
Can We Help You?
Most people who find us have a strong desire to get financially organized and figure out how to optimize their family finances to be prepared for the future. Everyone wants to feel financially ready for life’s transitions, both the planned ones (homeownership, starting a family, college funding, weddings, vacation homes and a dream retirement) as well as the unplanned transitions.
We offer an introductory, two-meeting financial planning process at no charge to allow us to get to know each other and to start to get organized with a plan of action. Go to meetme.so/StewardshipColorado and schedule a virtual or face-to-face meeting to get started on your journey, or give us a call in the office at 303.500.1930.