Welcome back to our latest installment of Financial Health 101 where we’ll be talking about spending. Now, of all the financial health aspects we went over last time, spending money is probably the easiest one to do. New sneakers drop basically every week, there are organic juice bars literally inside the gym, and who doesn’t want to grab a few cocktails with some friends at the end of the week? The trouble is, it’s become too easy to spend money these days. Add to that the increasing number of monthly subscriptions on offer and it can be tough to stay on top of things. However, like most things related to sound financial habits, planning and a little extra work can go a long way. So, let’s start taking some notes.
It’s audit time
Before you break into a cold sweat at the mere utterance of the word, we’re here to remind you that just getting an idea of your monthly spending is a massive step in the right direction. Set aside some time to sit down at the end of the month and figure out where all your hard-earned cash is going. How much of your monthly income is going to essential bills like rent, utilities, and a cell phone? Figure out how much you’re spending on food – do you order all the time? Have you been brushing up on your home-chef skills since the pandemic? It’s important to know exactly how much is coming in and how much is going out so you can more accurately determine what your discretionary spending can be. Now back when a cup of coffee cost a dime and the Dodgers still played in Brooklyn, balancing your checkbook was how you kept tabs on your spending every month. Thankfully, we’ve advanced and there are a ton of awesome resources and apps out there that help you better track your spending so you don’t have to be a math genius to balance your budget.
Balance the budget
Speaking of balancing budgets (what a segway, huh?) it’s time to make one! While deciding to create a budget can seem like a daunting task, think of it as setting yourself up for future success. You wouldn’t go for a 10-mile run without at least planning what type of shoes to wear and a general idea of a route, would you? Creating a budget creates fiscal guidelines for you to adhere to that allow you to better achieve the goals you decide are important. When coupled with your initial audit, creating a budget will give you a more complete view of your financial health and help determine which goals are most realistic. It’s also a good time to decide which subscription services are absolutely necessary and which ones you can smash that unsubscribe button on.
Get some funny money
While cash with jokes on it would be cool (maybe?) we’re talking about extra spending cash for the fun stuff you want to do. After you figure out what you take in each month and what you’re immediately spending on bills, it’s time to budget for the extras. While we’re going to get into a savings plan in more depth later, starting to think of some savings goals can be helpful here. Knowing you want to put away $200 a month in your savings account will help you better budget how much you’re able to allocate for extras. Let’s say you decide you’re comfortable spending $350 a month on going out with friends. If you’ve already reached your limit by week 3, maybe it’s time to start working on your at-home craft cocktail skills. The important thing to remember is setting limits and boundaries shouldn’t feel like handcuffs. Setting real and tangible money spending (and saving!) goals will help make your decisions and sacrifices feel like an investment in your future.
Unfollow the Jones’s
You work hard, you’re doing well, you’ve got some nice things but… that person on Instagram with 2 million followers just bought ANOTHER Ferrari?!? It can be easy to get sucked into the game of impressing those around you but it’s a dangerous one to play. Social media can make outrageously lavish lifestyles seem almost normal which can make living outside your means tempting. That’s why it’s important to remember your budget and goals, it helps keep you motivated and reminds you that the payoff will be worth the work. Of course, there’s nothing wrong with treating yourself to something nice from time to time, it can be a great way to reward yourself for sticking to your budget or hitting one of your financial goals.
Alright class, that’ll do it for our lesson today. I’m reminded of a Michael Scott quote that has always stuck with me, “I am running away from my responsibilities. And it feels good.” Don’t be like Michael. Unless of course you’ve done a phenomenal job at auditing and budgeting and running away from your responsibilities is well within your discretionary spending limits for the month😎 Do remember that the path to financial wellness is one of learning. There will be bumps along the way but the more you learn, the more you’ll gain. Until next week, enjoy the holiday weekend!