One of the biggest misconceptions about being financially responsible and prioritizing saving for your future is that you can’t enjoy life today. Not true!
It is possible to live the lifestyle you want and prepare for your future. You just have to be willing to do the upfront work to get your finances organized in a way that allows you to successfully accomplish both objectives.
If you are simply saving money and default to, “There’s nothing left for fun,” or you regularly lose track of your spending and default to, “There nothing left for saving,” you are letting your money control you rather than taking control of your money. But there is a way to bridge the gap between spending and saving and thoughtfully taking charge of your finances in a way that aligns with the life you want to live today and the one you’re preparing for tomorrow.
Here is what you can do so you can enjoy your lifestyle and save toward your future.
Understand Your Cash Flow
The first step to organizing your finances is to understand how much money is coming in and how much is going out.
Creating and maintaining a simple monthly budget is one of the easiest ways to keep track of your cash flow. You can do this retrospectively by reviewing prior months’ cash flow activity. Your starting number is how much take-home pay your household brings in. This is the total dollar amount your family has to spend after the cost of employee benefits (medical, dental, vision, etc.), federal taxes, and social security taxes have been deducted from your paycheck.
Then, review where you spent that money in the past few months. From your mortgage or rent, to fixed costs like insurance and car registration, utilities, groceries, entertainment, credit cards, and any savings. Take the time to get a clear sense of where your money is spent after you earn it.
Do you need a tool to assist you with tracking your cash flow from the past three months and creating a budget? If so, see the HANDY, DANDY & ACTIONABLE MONEY-SAVING TIP below.
Re-Envision Your Cash Flow
Now that you have insight into how your cash flow has operated in the past, begin to re-envision it going forward. Maybe you didn’t realize that you were spending so much money on eating out or buying stuff on Amazon. Or perhaps you were pleasantly surprised to find that you saved nearly half of what you brought in.
A good rule of thumb is to save anywhere from 15% to 25% of your gross income for retirement. Obviously, the more you can save the earlier in your life, the better. So, if you went back to a blank budget worksheet and filled it out proactively for future months, what would it look like?
Accounting for your fixed costs, savings, and known obligations like utilities and any outstanding debts or loans, what’s left for discretionary spending is where you can take back control.
Automate Your Finances
When you know what you have and you envision what you want, you can put a portion of your finances on auto-pilot so you don’t have to think about them anymore.
For example, you can set up automatic deposits into your retirement savings accounts and emergency cash reserves account. This helps to ensure that you are saving each month to fund your retirement, build up emergency cash in case something happens, or fund a short-term financial goal.
You can also set-up automatic payments so that your mortgage/homeowner’s insurance/property taxes are paid from your checking account. You can set-up automatic bill pay as well for your utilities, just remember that these bills tend to fluctuate seasonally. If you have any student loans or car loans, you can also set them up to be paid automatically each month.
Any money that is remaining, is for you to use how you want!
Prioritize the Rest
There is freedom in spending money when you know that you have your bases covered. You don’t need to wonder if you have enough money for that latte, pair of shoes, or trip with the guys if you know how much money you have left to spend and prioritize your dollar bills according to what you want.
And for larger items like the dream car you want to drive or hobby you want to enjoy, maybe you can’t afford it right away, but a little delayed gratification can help you afford it comfortably with some planning.
Saving for your future doesn’t instantly disqualify you from enjoying your life today. I’m a believer that you can do anything if you’re willing to work for it.
HANDY, DANDY & ACTIONABLE MONEY-SAVING TIP:
I am super excited to offer readers of the FRANKly SPEAKING Financial Planning Blog access to Future Map Financial’s secure Financial Planning Tool. This free tool will help you:
- Create financial goals.
- Review your cash flow history by aggregating your financial accounts (i.e. checking acct, savings acct, credit card accts, student loan accts, etc.). The account aggregation tool pulls in all your financial transactions for the past three months and updates daily.
- Establish and monitor your budget.
Access the secure Financial Planning Tool by clicking HERE
NEXT FRANKLY SPEAKING POST…
Financial mistakes can be scary. Especially, if you make them unknowingly! Be sure to check out the next installment of FRANKly SPEAKING, where I’ll reveal the thirteen scariest money mistakes people make and offer helpful tips on how to avoid them.
As always, I invite you to reach out to me – in real life – with any comments, feedback, or questions! [email protected]
Disclaimer: The information contained in this article is for informational purposes. None of the information provided in this article is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. Please consult with your accountant, finance professional, and/or legal counsel regarding your specific circumstance. Reproduction of this material is prohibited without written permission from Frank Shields, and all rights are reserved. Read the full Disclaimer.