Are you knee deep into your list of resolutions yet? Or, are you still eye deep into the New Years and holiday hangover??? As the ball drops at midnight and the champagne flows every year we roam around the room wishing everyone much health, wealth and happiness. But as we wish those sentiments to others, do we have a realistic plan for ourselves??
Do you find yourself latching onto the same bad spending and non-existent saving habits that lead to the same outcomes year after year? By month’s end, do you wonder where all the money went? Do you wait yearly for that tax refund with hopes of buying yet another must have techy item that will become obsolete in 6-12 months, just to turn around and do it again? Women especially need to get a hold of their finances, create a workable budget and not shy away from investment, and learning the tips and tricks in the finance world that can sometimes be led by men but will help you gain true financial freedom.
Financial stress can take over your life in ways that you don’t even see. It plays a role in your every day decision making leaving you living a life confined by your financial limitations instead of enjoying a bountiful one that you have control over. Look at money, wealth and debt differently this year and change your perspective of the “things” you want versus the actual “needs” in your life that matter. Really ask yourself some serious questions and allow yourself a real answer. Do you really need that new hot techy-watch? Is this something you will use daily to the fullest ability, or is this an item that will start collecting dust in 6 months, right next to the fit tracker thing you got excited about last year. Reprogram your mind and how you approach spending. It’s not an easy thing to do but nothing worth while is. Every single time you shop, ask yourself, do I need this or do I want this? And don’t cheat yourself by playing the justifying game. Be serious and fair TO YOURSELF. Do I NEED or do I WANT? Once you gain control of yourself and your finances, you then allow time to focus on bigger purposes such as starting your new business that you are passionate about. Or getting your kids lined up for college so that they don’t fall prey to the chains of student loans. There is no time like the present to set the stage with a more healthy perspective on money and wealth and the effects it has in your life.
Here’s the reality, you MUST have a BUDGET! This is not a fun exercise for most of the population, but must be a priority if you are to attain any type of financial freedom for your future. To simplify the process, first sit down and itemize your spending by two columns: fixed and discretionary, this is key to see it written down. Not sure what they are exactly? Your fixed spending is recurring costs like your rent or mortgage, utilities, car loans, insurance, student loans, etc. Your discretionary spending will be your vacations, any entertainment purchases, eating out and shopping trips for those techy-gadgets we seem to feel we need as soon as they hit the market. Once you have your lists complete, do an inventory of your spending. This also allows for you to see how much you are spending versus how much you can be saving. So if your discretionary list includes a monthly tab of $85 at Starbucks, (as it sadly did for me when I was getting myself organized) then make a mental note to reduce the amount of visits you make to our favorite addictive latte spot. Don’t go cold turkey either because it’s unrealistic. Just significantly cut down. Allow yourself one Starbucks treat a week until you can completely ween yourself off of it. Next thing you know you are $80 richer at the end of the month. Get the example?
Your fixed costs can be looked at to make sure you have those in check as well. When you want to buy a home the first step is getting pre-approved for a loan. The step that mortgage broker or banker will look at is your credit as well as something called your debt-to-income ratio. You really need to keep that below 50% of your pre-taxed income, and if possible well below that if you are trying to build a savings, shave off some debt, possibly save for that dream home and build your future. Your discretionary spending is where we usually skim over, tread lightly, and not trim nearly enough to put a dent into the current debt we have. A normal savings should be at minimum 6 months of your fixed monthly spending. The reality, however, is most Americans have little to no savings whatsoever. Start by taking the end number you come up with for the bills you have and multiply that by 6 months and this should be your goal to saving. Will you get there overnight? No, but saving is attainable if you take an accurate account of your current situation and make the necessary adjustments. At the end of this exercise you may not like what you see, but this will in fact ensure you have a clearer picture of what you need to do to get on the right track. The old saying goes “when you know better, you do better”.
As a full-time realtor, I had a rude awakening when the market crashed in 2008-2009. As a very young commissioned sales agent I was left with nothing, and I mean nothing when it all fell apart. Not even the money to put gas in my car to go to work. The good times had stopped and no one could ever know at the time just how bad things were about to get. But sometimes the rude awakenings in life are the ones that teach you the hardest but best of lessons. If after itemizing your finances down to your bare needs and you’re still strapped because of debts, outstanding bills, then get yourself a part time job. We’ve all done it. Just make sure to keep yourself in check and only use that money towards chopping off those debts! Because the point here isn’t for you to work yourself to death with two jobs. No! It’s to sacrifice for a short time and this will help you slash your debt off your shoulders, and start saving! This is a gift you give to yourself and take back control of your life and your future.
Still feeling like you need more hands on guidance? Want a more modern method to make your first budget, keep it, track it and make those adjustments? With the use of modern technology we have apps and programs at our disposal to help us make these scary but necessary steps a reality, and usually for free. Apps like Mint, programs like Quickbooks or even good old Microsoft Excel can allow you to see first-hand where you need to cut back to save for your future. You can also find Dave Ramsey’s Financial Peace University a priceless tool to get you thinking the right way! It’s one of the tools we used and it definitely works!
We have also had the pleasure of meeting the great entrepreneurs behind Society of Grown-Ups from the Boston area, and what they are doing is a major key! They are explaining and teaching financial literacy to young adults. We are taught so much in school about how to take and pass a test, how to write essays, simple math, but we do not teach and give the gift of financial literacy. How to control and keep track of your own wealth especially after college and when those student loans become a part of your life. This is key especially to young women as well, who usually are the individuals taking care of the kids, their activities, buying the groceries, but maybe not planning their budget and their 401(k) and tracking where they are by months end. A pay gap between men and women is a problem in our society, so women starting behind the eight ball need to pay close attention to their money, where it is being allocated and how to save for their futures.
When writing out your fixed spending go ahead and PAY YOURSELF no matter how small that number may be. Once you can do this, put a portion of your income away monthly to start building that nest and your future self will thank you immensely! No matter how big or how little that number is to start out with is not a concern as long as you start! If you are honest about making a real-life budget, cutting unnecessary spending and making a long-term plan, that number you save monthly will grow in no time and so will that savings account! A REAL modern BOSS truly understands the importance of having financial independence and seeks out the knowledge to have that freedom. Seek it, as financial freedom is around the corner for you.
Nicole L. Rymer
The PowHer Hub