When I talk to prospective clients, they may have a few specific financial questions that they bring to the table. However, the questions that are actually eating at them are usually much more big picture:
Am I going to be okay?
Am I doing enough right now?
The truth is, everyone’s financial situation is different. It’s tough to predict whether you’ll have enough, or whether you’re doing enough, in one blog post. However, if you take a few steps back to evaluate your goals, and work backward to create a plan – you’ll be able to start piecing together a strategy that helps to make sure you’re doing “enough” now to prepare for a fulfilling future.
Look At Your Daily Finances
How are you spending your money day-to-day? Getting a handle on your cash flow is the first step to knowing whether you’re on track to hit your financial goals. Although I’m always a fan of the classic pencil-and-paper method, there are also many digital ways of tracking your spending. Budgeting apps like Tiller (this is what I use) or You Need a Budget can be hooked directly to your bank account. Take some time to look at your spending weekly, or once a month, for a few months.
It’s not always easy to hold the magnifying glass up to your spending, but try to remain non-judgemental of yourself. Notice:
- How much you’re contributing toward retirement savings each month.
- How much you’re contributing to other savings accounts each month (emergency savings, health savings accounts, etc.).
- How much you dedicate each month to debt repayment.
- What other recurring expenses take up part of your cash flow.
- What “extra” spending is happening – whether that’s eating out, entertainment, etc.
- Are you spending more or less than you’re bringing home in income each month? (this is THE big one to focus on)
When you know where you stand, it’s easier to start piecing together a plan to help you get where you’re going.
Consider Your Goals & Set Priorities
What goals are you working toward? When do you want to accomplish them? Again – I’m a fan of the pencil-and-paper idea here. Sit down and write out all of the goals you’d love to accomplish in the near and distant future. Dream big! This isn’t a time for stopping yourself or trying to live within the confines of what your financial situation can support.
Once you have your larger-than-life list of goals, you can start to reality check each of them. Although some people may be able to accomplish all of their goals, most will need to set some priorities. For example, let’s say you want to retire early, fund your child’s college education, donate a set amount of money each year to your alma mater, and buy a second home on the beach.
Those are some big goals, and not all of them are going to be possible simultaneously. So, maybe you decide that, in order to fund your child’s education, you work until your full retirement age. In order to fund your beach house, you downsize your current home to lower that monthly payment. To continually donate to your alma mater, you set up a donor-advised fund to contribute to regularly, and make your donations tax-efficient.
There are so many different ways to achieve your goals, but that doesn’t necessarily mean you tackle them all at once. Setting clear timelines and priorities for yourself can help you organize a financial strategy that’s easy to stick to, and still designed to get you to your goals.
Are You On Track?
Alright – here’s the not-so-fun part: do your day to day finances match up with the goals you’re working toward? Sometimes, you might find that you’re knocking it out of the park. Maybe you’re on track to meet your retirement savings goal and then some, you’re putting plenty toward your mortgage and other debt, and you still have enough left over to live a fulfilling life and make an impact on the world around you.
However, this often isn’t the case. Many times you might think you’re doing enough to work toward the financial future you’re envisioning, but when you truly run the numbers – they don’t add up.
When you set your goal priorities, you probably took a look at your current financial situation – and what you’re doing to achieve your goals. In some areas of your financial life, you may be coming up short. It’s important to create a plan for your money that moves you toward your goals, while still allowing you to live a fulfilling life right now. However, finding that type of balance can be hard, especially when your goals are big and exciting.
Finding Balance in Your Plan
It can be tough to find balance in your financial life. You might have big goals for your life and your future, but find that you’re stuck feeling unable to save enough, or carve out the money in your monthly budget to achieve them. If you’re struggling to find balance in your plan, it might make sense to do a bit of a values-analysis.
When you look over your cash flow and spending over the course of a few months, did you notice any recurring patterns? What are some big, recurring expenses that are eating a hole in your budget right now, that’s leaving no room for your financial future? You might find that your home, your auto loan payment, or your higher-than-average utilities are hurting you the most. You might also find that smaller expenses that add up when you buy more “stuff” are the culprit for your lack of cash flow.
Whatever the case may be, it’s important that you take a hard look at the expenses that are preventing you from achieving your goals – without cutting out everything that makes life worth living right now!
Oh, and before you conclude that this exercise is all about cutting and controlling expenses, another path forward to the financial future you want is to earn more money. But that’s a topic for another article.
Are you ready to start mapping out your financial future? Speaking with a financial planner can help you create a plan that’s unique to your goals. If you’re interested in learning more, schedule a consultation with me by clicking here.