As the year comes to an end, it’s important to reflect on what things you want to continue doing and what things you can improve on next year. The top three resolutions every year continue to be exercise more, lose weight, and save more/ spend less money.
While you can turn to personal trainers, coaches, and nutritionists to help with the first two goals, people usually turn to Certified Financial Planners for help with their finances. Understanding and improving your relationship with money is the first step towards getting your finances in order and achieving your goals.
Here are some important steps to take to improve your relationship with money:
Become aware of where your money is going
When I first sit down with prospective clients, I ask them if they have a general understanding of where their money is going. What I mean by this is:
- Do you know how much you are spending each month?
- Do you know how much you are saving each month?
- Could you be spending less and saving more?
If you don’t know the answers, you are not alone. It is very common for people to not realize how much they are actually spending on eating out, subscriptions, and gifts for others.
I encourage you to sit down and write out a spending plan. The spending plan doesn’t need to be perfect; just a high-level overview of your current spending based on general categories. After you’ve completed what you think you are spending each month, compare it to your actual credit card and checking account statements.
Are you spending more in areas than you thought? Should you have extra money at the end of the month, but actually don’t? Once you start to have these realizations, you will start building awareness around where your money is going.
Align your spending with your personal values
Despite what your parents have told you, not all spending is “bad”. In fact, when your spending aligns with your personal values, you feel happier about where your money is going and thus have a higher quality of life.
We all can remember the time we spent that cringe-worthy amount of money on something and instantly regretted it. But have you ever spent money on something you were truly excited about? Chances are you never even gave it a second thought. It could be a cast iron skillet, a pair of shoes, a vacation, or even as simple as organic groceries. If your values include cooking, fashion, travel, or sustainability, then these purchases are perfectly acceptable.
If you’re not sure what your personal values are, there are many quizzes available online to help you determine your personal or core values. While everyone’s values are unique, some common ones are Family, Travel, and Independence. When it comes to evaluating your monthly spending plan, if you find expenses that do not support your values, you should consider cutting these. After all, if you’re passionate about nature and hiking, you may want to cut back on unused streaming services.
Become confident and informed
When it comes to money, do you ever feel confused or overwhelmed? With so much information available online and in the news, analysis paralysis is a very real thing. Whether you’re overanalyzing or overthinking your situation, the chances of you doing nothing are very high. When it comes to your finances, doing nothing can be just as detrimental as doing the wrong thing.
One of the best ways to build confidence and improve your financial literacy is to read books, follow blogs, or listen to podcasts. Here are some great resources:
- The One-Page Financial Plan by Carl Richards
- The Psychology of Money by Morgan Housel
- The Millionaire Next Door by Thomas J. Stanley
These are just a few of the personal finance resources available and a great place for “beginners” to start.
Building a healthy relationship with money is one of the first steps towards getting your finances in order and achieving your goals. If you would like to work with a financial planner to walk you through your options, I would love to help you!
To learn more about becoming a client, schedule a complimentary meeting now!
Disclaimer: This blog is for informational purposes only, and should not be considered advice or recommendations. All opinions expressed herein are solely those of Amaral Financial Planning, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made to another parties’ informational accuracy or completeness. You should consult your financial advisor, tax professional or legal counsel prior to implementation.