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You just realized you need a budget. Whether it's because you'd like to be saving more money, you plan on investing in a retirement plan, or you want to straighten out your current finances, you know that having a reliable budget would make your life easier.
Creating a budget for the first time can be one of the most overwhelming experiences, especially when you're just starting to look critically at your financial situation.
Take a deep breath and don't stress out! There are just a few simple steps that you can take to reach a reliable, stable budget. I have some excellent pieces of advice that I give to all my clients, family members, friends, and even neighbors. Let me guide you on this financial journey.
Ready to get started?
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The first step to getting figuring out your finances is to figure out what you have been spending. Print your bank statements for the last three months and categorize each item in your statement on to a new spreadsheet. The Federal Trade Commission has a convenient website www.consumer.gov suggests categorizing every expense, including:
Once you have your spending history, review your daily, weekly, and monthly expenses. Looking at the big picture and the tiny details all in one place can help you make small changes that have significant impacts on your finances. Reviewing all of this information lets you easily formulate your budget for next month without the hassle of digging through your bank statements.
Start with a small, short-term goal. Set one finance goal to obtain over three months and use smaller milestones to meet the finish line you set for yourself. Use each week to reassess your goal and make adjustments as needed. When the goal is achieved, make another, and another, and another. Goals may require modifications, but it's an excellent way to set yourself up for financial success. You'll have something to be proud of every time you pass a milestone. And when the goal is reached? Reward yourself with something—that's still in your budget, of course.
I can't stress this enough—once the budget is set, don't be afraid to readjust as needed. There is no shame in making necessary changes to your budget. Situations change all the time, and nothing has to be concrete. Flexibility is key. Being rigid can make things harder for you and your family if something unexpected comes up and you need to spend more in one category than previously thought. Adjust smartly, not just because you want to splurge on a new gadget or pair of shoes.
As I said in step three, adjustments are necessary. While you should remain flexible, if you notice that month after month, week after week, your budget seems to need changes, it's time to review. Reviewing your budget monthly will put your mind at ease if everything is going according to plan or allow you to see what hiccups caused you to veer off-course. Remember, no budget is perfect, and we all have to work towards a happy, balanced budget.
This is just a beginner's toolkit that can help you keep your budget in good health. These are my starting points that seeks to help you get to your financial happy place. There's no need to stress anymore. You don’t have to be perfect. I’ve seen too many people give up on budgeting because they made one mistake and got mad at themselves. Give yourself the grace to be human. As long as you are making more good decisions than bad ones over a long period of time, you can work towards getting to where get to where you want to be. You have a roadmap, and you can make your finances a priority quickly with just four simple steps.
Retirement is a big deal, and there are a lot of moving components to plan out. Those issues multiply when there is another individual added to the mix. My definition of retirement is the financial freedom to move into the next chapter of your life, and that next chapter is different for everyone –especially spouses! This is not the time to assume the two of you are on the same page or decide that the two of you will figure it out later. Most people know that I’m a big proponent of talking to your spouse about everything financial, and retirement is no exception. Be sure to take the guess work out of this process so you can enter the next chapter of your life in harmony.
It’s not uncommon for couples to not see eye-to-eye on retirement. About half of couples don’t agree on what age to retire[i]. Less than 10% of surveyed couples retired at the same time[ii]. And 47% disagreed on how much they would need to save for retirement[iii]. With so many areas to disagree, from where to retire to how to spend your days, how do spouses work together to achieve their cumulative goals?
I always like to recommend the couples start off by taking my financial compatibility quiz. Not only does this show the areas you may not see eye-toe-eye on, but the quiz generates a lot of conversations. Continue these conversations at monthly financial date nights to make sure that the two of you continue on the same path towards the same goals. Talk about the details – at what age do you want to retire, how do you want to spend your days in retirement, and how much of that time will be spent together. Keep in mind that most people have spent over 40 hours a week away from their spouse for decades. Retirement frees up all that time, which can be too much “togetherness” for some couples. This is why I like to take my clients through a discussion on “your time, my time, and our time,” well before it is actually time for retirement. Discussing these things in advance can allow you to compromise on issues before emotions flair and make a world of difference between living together happily in retirement or, in worst cases, filing for divorce.
Once you have an idea of what your retirement goals are, you need to formulate a plan. An experienced financial planner can be a great resource at this time, bringing up things you may not have touched on and running “what if” scenarios for you to see how your retirement dreams can be converted into actionable goals. Please start these discussions early because financial independence takes many forms, but you can’t figure out when you’re going to get there until you plan your route.
Marriage is many things, but ultimately, it is a partnership. The two of you work together to move the household forward. You may not always agree, but you find common ground by talking and sharing and compromising. If you plan ahead and plan together, you can find the right way to your coupled vision of retirement.
Take our FREE Financial Compatibility Quiz here.
[i] https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/couples-retirement-fact-sheet.pdf
[ii] https://assets.aarp.org/rgcenter/general/retired_spouses.pdf
[iii] https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/couples-retirement-fact-sheet.pdf
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
