This month, as part of my quest to becoming more disciplined, I am working on financial discipline. Overall, I feel like our finances are in pretty good shape. We are able to live within our income and still put money aside into savings and retirement accounts each month. That being said, this year we have set some pretty high financial goals for ourselves.
Last year we were able to pay off both our car loans and medical bills, plus put a months worth of expenses into an emergency fund. I’ll admit I was a bit skeptical when we set all of those goals but with hard work and a little bit of sacrifice we were able to accomplish it all, as well as enjoy a vacation in Hawaii. This year, we are aiming even higher. We want to start building our emergency savings further so that we have a full six months worth of living expenses saved, as well as start saving for a down payment on a home (we are currently renting). Once again I feel the doubt sinking in. Can we really do all of this plus actually have a little bit of enjoyment? Travel and having experiences as a couple and as a family are really important to each of us and we don’t want to sacrifice those at the expense of accumulating money. We want balance.
That brings me back to the doubts. Can we really reach the financial goals we have set for ourselves plus experience some enjoyment along the way? My head tells me “NO WAY!”…experience though tells me “YES!”. However, that doesn’t mean it will be easy. Meeting financial goals means constantly asking yourself, “Where am I putting my money? Are their ways I can redirect my money, or change my spending habits so that I can put more towards my financial goals?“. One thing that has helped me over the years is to track my money so that I know where it is going.
Have you ever found yourself looking at how much money you have brought in during a month or year and asking “Where in the world did that money go?”. I know I have, and it is depressing! When I start asking this question I know it is time to sit down and find out where the money is going. Technology today gives us many ways we can do this. There are budget trackers like mint.com or personalcapital.com that allow you to link your bank accounts up to a budget so that you can digitally see where your money is being spent. Some banks have online features that will do this for you as well. If you are more old school you can save and categorize all of your receipts over the course of a month or year (I did this for the first time when I was 16 and boy was it eye opening). You can also use a spreadsheet to enter in all of your expenses. It takes some dedication to do this but the results are well worth it. Every time I do this I gain a better understanding of my spending habits, as well as my financial strengths and weaknesses. Once I sit down and go through everything, I am also better prepared to make the changes needed to reach my financial goals.
This past weekend Brad and I sat down together to go over our finances (we try to sit down and do this together at least once a month), and as part of that we looked over where are money went this last month. Even with how good we generally are, doing so helped us learn some lessons which will help us fine tune what we need to be doing to be successful. Here are just two of them:
Lesson 1: We should be setting aside money each month to replace old electronics. Brad’s phone stopped working near the end of December (even though it seemed like it was in good condition) and we ended up having to get him a new one. Although we had the money for it, we had to dip into some of our savings allocated to other categories in order to pay cash for it. What might be next, our television? Computer? We want to be better prepared next time.
Lesson 2: We do not make good financial decisions when we are hungry and food cannot be VERY quickly prepared. In other words, if we do not plan ahead about where we will be when we get hungry and how we will satisfy said hunger without eating out we will choose to eat out over waiting to go home and prepare something. This means that if we go out and about more we tend to spend more on eating out. Preparation and thinking ahead is also necessary here for us to stay on target.
Needless to say, by sitting down and following our money trail we were able to talk about how we could be more prepared so that these situations won’t derail our financial success in the future. Knowing where your money is going can do the same. If you haven’t ever followed your spending for a period of time, or if it has been a while, do it! I promise you won’t regret it. I know that by doing it you will be one step closer to success in reaching your own financial goals.