My husband and I have budgeted for years. I mean for most of our 22 years of marriage. But before you begin to think I’m bragging or that we have always had our finances together, it really wasn’t until the last few years that we really started to take our budget seriously. Before then our attitude was if we kept under budget, great, but if not we were sort of like, “oh well, guess we’ll need to try harder next month”. Any maybe we did. Or more likely we didn’t. Looking back I realize our attitude was like that for a couple of reasons. One, we were never in a real financial crisis – even when we were in debt we were always able to pay our bills on-time. So there was never an urgent need to create and stick to a good budget. And two, we never had clearly defined goals. I mean sure we wanted to save money every month, but we weren’t hard pressed about it – it wasn’t a priority.
Now fast forward a handful of years. Like it often does – life happened. We had a daughter who was preparing to go to college (which meant college bills) and we were beginning to see the end of a market that supported our business. A business my husband started almost 20 years previously and that supported not only our family, but several other families as well. It is amazing how quickly our attitudes changed with looming college bills and thought of selling our business and facing early retirement (we are only in our mid-forties). All of a sudden we could see our goals more clearly and sticking to a budget became a major priority. And since life can happen at any time it is critical to have an honest budget and to stick with it. Every. Single. Month. It is the only way to avoid a true financial crisis.
Below are three steps that helped to get us on track to achieve our financial goals and that we continue to use in order to maintain our financial fitness.
1. Set goals.
One of my favorite quotes by an unknown author is, “If you aim at nothing, you’ll hit it every time. “ And it is so true. Like anything you want to achieve in life you won’t get there unless you know where you want to go. So you need to set goals. You may need to spend some time thinking on this one. You may need to ask yourself some questions that few people ever take the time to truly consider. When do you want to retire? What does retirement look like to you? If you want to retire in your 40’s then your budget is going to need to reflect that (which means if you haven’t started to save and invest you better get started today!). Not only in terms of saving and investing, but also in terms of what are you willing to sacrifice for the short-term in order to achieve your goals? What are you will to do in order to make your goals and dreams come true? Take the time now to discuss possible goals and dreams with your spouse or a good friend who can offer honest feedback. Remember, if you want to hit a target you have to know what you’re aiming for.
2. Track your spending.
This seems so basic, but so few people do this on any consistent level. How will you know if you are hitting or missing your goals unless you are tracking your progress? According to statisticbrain.com as of December 2015 69% of people never balance their checkbook. YIKES! (Side note: In a day in age where identity theft is so rampant – an estimated 17.6 million Americans experienced multiple types of identity theft in 2014 – it is crucial to keep an eye on every dollar that is leaving your bank accounts or being charged in your name.) Tracking your spending to achieve financial goals is the same thing as trying to achieve fitness goals. You want to lose weight? Track what you eat and daily exercise. You want to save money, pay-off debt? Then track your spending. Nowadays it is so easy – there are online apps like EveryDollar, Mint and YNAB (You Need a Budget) that there is literally no excuse to not be tracking every dollar you are spending. [Reviews.com did a nice write-up on all the different personal finance software options here if you are curious.] Don’t have a smartphone or don’t trust online tools then guess what? Paper and pencil will do just fine. Regardless of the tool you decide to use just be sure to be consistent and track everything you spend so you know where every dollar is going.
3. Review your goals and budget often, then make adjustments accordingly.
Just like you can take a wrong turn or exit when you are following driving directions, the same thing can happen when following a budget. Because it is so easy to get off track, it is critical to review your budget at least on a monthly basis if not more. You certainly won’t know if you are anywhere near your goals unless you take the time to sit down and review the road map you are using to achieve them. If you find yourself off track, don’t panic, and certainly don’t give up. It takes time to create the perfect budget, and just like life changes, so do goals. You are going to make mistakes; accept it and move on. Make any necessary adjustments that are needed and carry on.
We can help if needed
These are just three steps that we have followed over the years to keep our budget on track in order for us to successfully achieve and maintain our goals. I believe by following them you too can be financially fit, but perhaps you are unsure of where to begin? As Dave Ramsey Certified Financial Coaches, helping people achieve financial fitness is what we love to do. Contact us and let us help you get started today!