Taking stock of your life, evaluating where you stand today is a great way to improve your health, attitude, and confidence. This is no different when it comes to personal finance. Knowing how much you routinely spend will provide clarity on what steps you can take to optimize your income and reach your financial goals. During my years working as a financial planner one of the first things I would do with my clients was a budgeting exercise. While I believe this is a crucial first step to creating a financial plan, people tend to squirm when they hear the word budget. But why? The short version, people think budgets are Restrictive. Boring. Uncomfortable. Most people don’t like the limits they feel when placed on a budget. Others can think of 100 things they’d rather be doing and for some, it unlocks sensitive relationships they have to money. You may fit into one of those categories or maybe you’ve tried budgeting in the past and it didn’t work for you. I’m here to change that! That’s why I call budgeting a “Lifestyle Guide”. Because that’s all it is! Knowing your parameters helps you create a lifestyle around the resources you have available. All of this brings you closer to achieving financial freedom! Here are 5 reasons why you should create a personalized Lifestyle Guide:
1. It Helps You Reach Your Financial Milestones and Goals
Having a Lifestyle Guide isn’t a one and done endeavor. It’s a living thing that will always be evolving just as your life does. You can use your personalized Lifestyle Guide to set realistic financial goals. Things are always happening, whether it’s a friend’s wedding, baby shower, birthday dinner, the list goes on, you are presented with choices you need to make about how you spend your money. Keeping your guide top of mind will help you make the choices that suit YOU the best. You certainly don’t need to deprive yourself of social fun and live like a hermit, but you do need to be honest with yourself. Take ownership of the decisions you make with your money. We are always paying for things throughout the month, whether it be food, rent, gym memberships, etc…so don’t forget to pay yourself. Your Lifestyle Guide will set the stage and allow you to keep the end goal in mind.
2. It Helps You Prepare For Emergencies
To me, it seems each month I am presented with an unexpected expense. Whether it’s a medical bill not covered by insurance, needing new tires for my car, a leak from the washing machine, something always comes up that wasn’t planned. This has forced me to consider more serious situations and plan for financial emergencies. You want to make financial decisions from a place of power and not from duress. An emergency savings fund should consist of 3 – 6 months of your living expenses. Having an emergency fund gives you flexibility when faced with a tough financial situation. It will help you stay on track with your existing bills and not push you into debt during a crisis. You already have enough stress on your plate, you will thank yourself for this extra cushion. Create an Emergency Fund bill on your Lifestyle Guide to help you build this up over time and make sure you are taking care of YOU!
3. It Provides Visibility On Spending Habits
People shy away from looking into their spending habits because they feel like their life is under a judgmental microscope. But the point isn’t to shame yourself. Like anything else, how can you improve or make changes if you don’t know where you’re starting from? You may be surprised at where your money is going and minor adjustments can make a big impact over a few months. Once you have clarity on your spending habits, you can decide on areas you want to cut back and what areas you aren’t willing to give up. It could be as simple as letting items sit in your Amazon cart for 24 hours before you purchase them. But until you have real clarity on where your money is going you may be creating an unnecessary hurdle between yourself and financial freedom.
4. It Makes You Confident
On the surface, having a Lifestyle Guide can help you stay on track to reach your financial milestones. But it does a heck of a lot more than that. It forces you to think about money, talk about money, ask questions about money. For far too long it’s been taboo to talk about money with friends and family. We certainly don’t need to be posting our paystubs on Instagram but we can make room for meaningful dialogue. Breaking the money silence will allow you to share ideas with people you care about and brainstorm on how to create impactful habits. Most of us can’t just ‘save more money’, we need to make habitual changes to who we are to make it stick. If you have a money question it’s likely someone close to you has the same thing on their mind. Why not share what you’re exploring? And let’s be honest. We’ve all made a financial mistake or two or three. Share your past mistakes with people you care about to help them navigate through the same water. The lessons you learn from each other will educate you more than reading about money in a blog (wink wink). As you discover more about money, you will be able to make educated financial decisions. Being financially confident can pave a clear path to achieving your freedom!
5. It Brings You Financial Freedom
Your Lifestyle Guide is your free ticket to financial freedom. The best part of this is it’s created by YOU. The intention of this exercise isn’t to place you on a ton of restraints, if you want the latte, get the f*****g latte! Continue to enjoy your life and have the occasional splurge but don’t do it at the expense of your peace of mind. Having the freedom to make decisions on YOUR TERMS is why you have a Lifestyle Guide. You will be in the driver’s seat of your life rather than letting money dictate your situation. What do I mean? Well, I was at the end of my rope experiencing the winters in New Jersey. I lived in an apartment and would have to shovel myself out of a parking spot in the morning before I showered for work, mostly because of my sweating problem but that’s a topic for another day. But after my shower and change of clothes, a snowplow would come by and block me in again with a fresh pile of snow. The real kicker was coming home at night only to shovel out a new parking spot because we didn't have assigned spots. I desperately wanted to move to Southern California because of my winter PTSD. As time went on and I turned down a social activity or shopped the sale racks, I created options for myself. I chose ME first and was financially free to create a new path for myself. Money creates options.
A Lifestyle Guide will provide you with Clarity, Visibility and ultimately Freedom. To see progress or achieve goals in life you need to know where you’re starting from so you can create an effective and realistic plan. For example, imagine you set a goal for yourself to complete your first marathon. You wouldn’t just sign up for the race and try to run it without a plan. You would create a realistic training program based on your fitness level today. You might even join a running club to help stay accountable and motivated. However, if you put little or no effort into training ahead of time you most likely wouldn’t be able to complete the marathon. Not to mention you could get seriously injured during the process.
So…where do you start? Take a look at where you stand today. You need truth and clarity of what you are spending monthly versus what income is coming in. There are plenty of apps available that will help you track what you spend or have worksheets you can fill out online (ie: Mint.com) I’m a pen and paper gal myself so do what works best for you. Check out my free downloadable Lifestyle Guide to help you get one step closer to achieving financial freedom! https://www.empoweredplanning.com/freebies