Treating Personal Finances Like a Well Run Business (aka A Spending Plan Improves Money Habits)

In our side-hustle society, there is one well-paying gig that is often overlooked. That’s the part-time job of managing your money. A basic tool for creating a spending and savings plan is a budget. Budgets help us develop good money habits that lead to better money habits. Budgets are often considered to be restrictive, tedious, boring or hard. I believe that a budget is a mirror that reflects our values. Whether someone plans beforehand or not they still have a budget - their actions still demonstrate some kind of spending habits. Money Management Tip: It’s better to plan ahead and direct our money than look back and see that it has directed us.

Regardless of the size of the business, a budget is a tool that helps a business plan for how it wants to reach its goals. Out of control spending or unexpected expenses are major challenges for businesses especially in the startup phase. As an individual begins to use a budget as a planning tool for their goals the same can be true.

What if a company decided to close up shop instead of re-evaluating their goals and priorities and making simple adjustments? The personal equivalent of shuttering operations is to get out of the business of managing our money the first time our spending doesn't match our budget exactly. Don't give up! It's just feedback for the next time. It's all good information you can use to understand your unconscious habits and to take control and adjust for next time.

What if a budgeting tool was dynamic, simple and, dare I say it, fun? Picture yourself pre-paying for a vacation. How much more would you enjoy yourself if you knew you weren’t coming home to a big bill? Paying interest on umbrella drinks is the real hangover. Imagine having a lower car payment or affording a shorter payment term just because your credit score improved. How about reducing debt faster than you ever imagined because of the visibility of the impact of where you are directing your decisions. All of these and more can become reality with you becoming the CEO of your new part-time business of managing your money. Becoming a spending planner with the use of a spending plan worksheet puts you in control. With a little time and attention on a regular basis, you can have peace of mind around your finances.

Utilizing a Financial Coach is like having a personal trainer for your money. Find out if an accountability partner, guide or cheerleader is right for you by scheduling your FREE 30-minute Q&A call.

How to Not Be Broke

This is my first blog entry and I truly believe that success is a series of positive habits. Having an emergency fund is an important first step for anyone who wants to not be broke and for their relationship with money to be healthy and empowering. So, as I reflected on my journey, I realized that one positive habit - learning how to save wisely to build an emergency fund - is essentially the foundation of all of my financial success. As a client, I will share money saving hacks and money saving strategies with you.

This makes sense since:

40% of adults in the US don’t have $400 of cash on hand to be able to cover an unexpected expense.

61% can’t cover $1000

Even if you have only a portion of your emergency fund saved when you need it, that's better than having nothing. Be grateful for what you did have set aside and get right back to it. If your boss told you that you were receiving a pay cut, you would figure out how to live on what’s left after taxes. Give your future self the gift of a chosen pay cut and just start saving on your own terms. This is a great way to start the journey of how to not be poor. In my experience, a magical thing happens when people are intentional with their money. As we start out managing a little bit of money somehow more comes along. Luck favoring the prepared (mindset and behaviors) definitely comes into play here. There is a reason that most lottery winners end up in worse financial shape than before they won. Many people are not actually prepared to be in charge of their money in an intentional way. Most of us were not taught in school how to be a good steward of our money. Combine that lack of knowledge with a perceived windfall and as the song goes, “Mo money, mo problems”. Getting a solid financial education is a great way to learn how not to be poor.

After paying off credit cards, my wife and I talked a lot about what to do with the money that was previously going toward the credit cards each month. Let's say it was $1000. Rather than just spending that, we decided to continue the discipline we had established. Instead of directing the $1000 to credit cards, now that the cards were paid off, we decided to direct that $1000 toward building the financial future we wanted. First, we saved that $1000 until our emergency fund reached our goal amount. This ended up being more powerful than we initially realized. Not only did we end up with less stress, a sense of accomplishment for meeting a goal and confidence that we would be OK if something went sideways, but we also avoided lifestyle creep because that money had a predetermined purpose. We figured that if we could sacrifice to pay debt then we would be supercharged when we got to the point of saving for ourselves. And as it turns out, we were right.

We did a couple of things that were very simple and easy. First, we automated our savings by setting up transfers to savings accounts so that we didn’t have that money readily available to spend. Then we created nicknames for the accounts. We renamed our emergency fund account to Reserves and began referring to it as such. We found that talking about emergency or seeing the word emergency in our bank account had us thinking too much about the bad things that could go wrong. The word Reserves felt more empowering. Whether it is just semantics or woo-woo positive thinking who knows, but my heart races less when I log in to my bank account and don’t see the word emergency.

After funding our Reserves we began saving for our first home in an account named FFA (Financial Freedom Account). It felt amazing watching that grow. Although we had spent years at this point not going on vacations or splurging at trendy restaurants or even going to the movies (my wife’s popcorn addiction made it more expensive than just going to the theatre for a matinee) we found that it was getting easier to save for our dream of homeownership. Much easier than it was to pay off credit cards and save for our Reserves because everything we set aside was for a future that we were designing. We substituted staycations for vacations, eating out at trendy restaurants for our true favorite In-N-Out Burger and Netflix DVD’s for going to the theatre (we did splurge for a popcorn maker which has paid for itself repeatedly). Both of us grew up poor, so we were really grateful for having the option of choosing to act broke vs. actually being poor.

Utilizing a Financial Coach is like having a personal trainer for your money. Find out if an accountability partner, guide or cheerleader is right for you by scheduling your FREE 30-minute Q&A call.