Four Recipes to Financial Success

Below are four recipes to financial success. By that, I mean that if you focus and do just one of these things well, the chances of having success with your finances will increase. You can be successful and find a level of success that will propel you to even more success. Everything starts somewhere, and the beginning to making better financial decisions can start with the recipes or tips below.

A Recipe to Financial Success is Having a Plan for Your Money

Having a plan makes a big difference in whether or not we win with money. By plan I mean having a spending plan. I like to call it a spending plan for two reasons. One, it is a plan to spend your money. Two, when you hear the word budget, you think of restriction or something you cannot do.

Calling it a spending plan gives you permission to spend on purpose because it’s your money anyway.

Spend Less Than You Earn

Live within your means. Just because you have created a spending plan does not mean that you are home free. Now you must stick to your spending plan, which is a whole other thing. You cannot be successful and spend more than you allocated for a particular spending category in your spending plan. So, for example, if you plan to spend $300 at the grocery store, you cannot go out and spend $400. This kind of overspending is a destroyer of spending plans.

Financial Success is Preparing for Unexpected Financial Events

Another issue for spending plans is the unexpected event. Let’s say you created your spending plan and are moving well through the month. You are following your spending plan, and then an unexpected event happens. Your mom or dad gets sick, and you must travel to see them.

Emergencies or contingencies are going to happen, and although we know that they are going to happen, you cannot plan for them specifically, but you can plan for them in a general way by saving up an emergency or contingency fund.

With this fund, you can take care of emergencies and contingencies when they come, and it does not affect your spending plan. A good rule of thumb is for three to six months of expenses into an emergency or contingency fund.

Preparing for Expected Events is a Recipe for Financial Success

Preparing for expected events is another key to financial success. You have spent most of your adult life doing things the “right” way. You planned to spend your money, you saved, and lived within your means. Then you get to the point in your life where your children are ready to go to college, and you have not saved enough.

How about retirement, are you ready? Have you saved enough? If you have not, what do you do?

The other side of this is to plan for these expenses and begin to save for them. The key is to determine the number or amount you are trying to reach. How much will you need to save for your children’s education? How much will you need to retire the way that you want to? Once you find these numbers, you can begin to save and reach them. Preparation is the key.

These are just some of the keys to financial success…can you think of others?

Tips for Reducing Financial Stress

If we are honest with ourselves sometimes our financial stress is caused by our expectations not being met. We want things to go one way with our finances and they go the other. Below are some tips for reducing financial stress in your life.

Losing a job, the inability to find full-time work, paying bills on time, and not being able to deal with the increasing costs of living can be disappointing.

When this happens, when our financial reality does not line up with our expectations, we can sometimes become stressed. Try the following tips to help you reduce your financial stress.

Set SMART Financial Goals to Reduce Financial Stress

Goals provide course of action. And financial goals provide direction for your financial matters. They should determine how you spend your time and your money. When setting goals, decide what you want, where you want to be, and what you want your money to do. Further, when you set goals, set goals that are SMART (specific, measurable, achievable, realistic, and have a time constraint).

The best goals are the ones that cause you to “stretch” as you do your best to reach them.

Make Your Time and Money a Priority

Use the “80-20 Rule” originated by Italian economist Vilfredo Pareto. The 80-20 rule says that “80 percent of the reward comes from 20 percent of the effort.” The key to prioritizing is to identify the valuable 20 percent.

Once identified, prioritize your time to work on the items with the greatest reward. If you value managing money well, prioritize the time it takes to manage it well. Knowing where you stand with your finances will help you reduce feelings of stress.

Take Some of the Stress Off and Be Flexible wIth Your Spending

According to Peter Drucker, a management consultant, author, educator, and the described father of modern management, “Doing the right thing is more important than doing things right.” Doing the right thing is effectiveness; doing things right is efficiency.

Be flexible when working on your money, focus first on the urgent, effective task, then concentrate on the important, efficient task.

Reduce Financial Stress by Planning To Spend Your Money

Using time to think and plan is using time wisely. Some would say that if you fail to take time for planning, you are, in effect, planning to fail. Additionally, be consistent with that time. If Monday after work is your money management time, then work your money Mondays after work.

As I have written before, managing money is a job, it takes time, so plan accordingly.

The tips for reducing financial stress above can help you reduce money stress in your life. Be careful with stress as it can cause mental, emotional, and physical health issues. How do you manage financial stress? I would love to hear from you.

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Reaching for Financial Goals in 2022

Are you reaching for financial goals in 2022? Although creating goals is something that is popular on January 1^st, as we reach the middle of the year, there’s still time to reach your financial goals this year.

Goals are good as they provide direction and a path to follow to achieve an objective.

Defining Goals

According to Dictionary.com, goals are the result or achievement toward which effort is directed. Short-term goals will activate soon, a day, week, possibly a few months. Long-term goals are achieved over a longer period; semester, one year, first quarter, five years.

Financial goals help you move towards your objectives with money. For example, if your objective is to save up enough money for an emergency fund ($1000), your goal might be to trim some expenses and save a certain dollar amount weekly or monthly until you reach the $1000 goal.

Reaching Financial Goals in 2022: Four Ways Goals help you Meet your Objectives

As you are developing financial goals for next year, keep in mind that goals affect your outcome. They help you meet your end objective in four ways.

Goals give you a choice in the matter. With a goal, now you must choose whether I go out to eat for lunch or bring my lunch to work. Goals focus your attention towards your objective and away from distractions.
When you have goals in place to meet objectives, you become energized about meeting your goals and you increase the effort toward them. A goal will induce greater effort toward saving money than no goal at all. No one wants to fail at a goal.
When you have goals your ability to work through setbacks increases. So, because of an unexpected expense, you are not able to save as much as you wanted to this month. Goals will help you to work through this set back, keep pursuing the goal, and keep you on track to saving in the next month.
Goals can lead to individuals developing and changing the behavior. The goal of saving money will help you think about saving money and help develop a saving behavior.

SMART Goals

When you set your goals use the S.M.A.R.T. test. S.M.A.R.T. goals are:

Specific – detailed and focused and specify the result.

Example: I want to save $1000 so I can have a beginner emergency fund, the final objective.

Measurable – quantifiable. There must be a method of comparison that indicates when the goal is reached.

Example: I want to save $100 per month to reach my goal of $1000 saved.

Action-Oriented – tells what is to be done to reach the goal. Action Verb tells the type of activity performed. You want to keep the goal in front of you. Write the goal down and keep a copy in your purse or wallet. Put a copy of your goal on the mirror in your bathroom; keep it in front of you as a reminder.

Example: I will save $100 dollars per month until I reach $1000.

Realistic – practical, achievable, and possible. Goals must motivate individuals to improve and reach attainable ends (not too easy or too hard).

Example: I plan to save $20 per week.

Time constrained – scheduled or regulated by time.

Example: Save $1000 by the end of the year.

When your goals meet the S.M.A.R.T. test, they will be better goals and more attainable.

Reaching Financial Goals in 2022: Did You Know

Did you know that only 5% of the population has clearly defined written goals? According to a recent study, people who write their goals are more successful at achieving them, whereas those who did not write goals down were only moderately successful.

The value of writing down goals, cannot be understated.

You can begin reaching financial goals in 2022 by setting objectives for what you want to achieve with your finances, and then develop short-term and long-term goals. Celebrate the achievement of each goal, and by all means, stay focused. I am a financial coach and would love to help you set some SMART financial goals. Contact me if you are ready to be coached.

Fixed and Variable Expenses

My spending plan and your spending plan contain fixed and variable expenses. What are fixed and variable expenses? And what do they mean for your spending plan.

What are fixed expenses?

Generally, fixed expenses are expense in your spending plan that are the same each month. Fixed Fixed expenses do not change with out considerable effort.

What makes this important is that fixed expenses are much easier to plan for in your spending plan than variable expenses.

Examples of normal fixed expenses include car payments and house or rent payments. Although your house payment can change by signing a new lease or a car payment may change by refinancing your car loan, these are not easy to do without considerable effort and won’t change until then.

Other examples of fixed expenses include your car insurance, your cell phone plan, and loan payments. And again you would need to take considerable time and effort to change these payment amounts. Additionally, the biggest part of your spending plan is normally your fixed expenses.

If you are just starting to plan to spend your money, and you need to cut expenses, focus on the variable expenses.

What are variable expenses?

Variable or flexible expenses are the ones that are different for week to week, and month to month. Your expenses that change and always different like electricity, and weekly or monthly food, and gas are your variable expenses.

If you are new to creating and using a spending plan, once you start tracking your expenses, you will be able to find variable expenses to cut. Tracking your spending will help you to think about your purchases and you will see the purchases do not line up with your values. Additionally, this will help you keep unnecessary spending under control.

Final thoughts

As you are working your spending plan expenses, start with listing fixed expenses first and then listing variable expenses. Remember, your first variable listing should be savings. Therefore, every month you are saving something and that amount changes, it’s variable, based on the other spending plan expenses.

Along with income, fixed and variable expenses categories makeup the parts of the spending plan. And basically, fixed expenses are the same every week or month. Variable expenses are different all the time. Tracking spending will help you to see where you can possibly cut some of your variable expenses. Take care and contact me if I can help you.

Five Tips for a Better Spending Plan

Creating and working on your spending plan is a way you manage your money better, and below are five tips for a better spending plan.

There are many benefits to creating a spending plan.

For all the pitfalls and changes that come when creating and working with a spending plan, here are some tips that can help.

Step 1. Call your budget a spending plan.

Instead of calling it a budget, call it a spending plan. I do not know what it is but when most of us hear the word budget, we think of bad things, lack of control, and things we can’t do.

So instead, call it a spending plan and think of it as a way to be a better steward of your money. Just planning to spend your money, a spending plan, sounds like you are doing better.

Before you receive any money from a paycheck or any other income for the pay period, you want to sit down and “plan to spend” that income. On purpose, you want to plan out where all your paycheck will be spent. Often, we do not plan to spend our money and end up letting others spend our money for us as we buy things that we do not plan to.

Step 2. Track where your money is going.

It’s difficult to effectively manage your money if you do not know where it is going.

Tracking your spending lets you know exactly where every dollar is going. From the grocery store to the gas pump, tracking your spending will tell you where your money went. Tracking allows you to have a more accurate spending plan because now you know how much you spent at the grocery store last week or month. Sit down once a week with your receipts and write down where it was spent, how much was spent, and what the money was spent for.

You will see patterns in your spending that you did not notice before and behavior that you will want to change, and that is the key to managing money better, changing behavior.

Step 3. Cut your expenses.

Once you track your expenses for a while, you will have a much better understanding of how, where, and what you are spending your money on. You are not ready and able to cut unnecessary expenses.

Get radical and go into deal mode and use coupons to save money. Make a list for all shopping trips and never, never, never go shopping hungry. Business is very adept at getting you to spend your money; it’s called marketing. Instead, stay home and read, exercise, or do some yard works to keep your mind elsewhere. Even try car polling and taking your lunch to work.

Take a good hard look at all your spending and see where you can cut.

Set up some financial goals for yourself like an emergency fund or a Christmas savings account. Find a way to keep your goals in front of you. Tape them to your bathroom mirror. Keep a copy of them on the dashboard of your car. Take them with you when you are out and about. Refer to them often, they will help you stay on track and prevent impulse buying.

Step 4. If need be, increase income.

If you have less money coming in than going out, and after cutting expenses, you still have part of the month left after the money is gone, you may want to try and increase your income. A second job to help pay off debt is not a bad in the short term.

Be sure to have a plan or goal for the money that you make at a second job and stick to the plan. If it’s to pay bills, then it’s to pay bills. Maybe you start a small business doing something you like to do or do well for extra income. The possibilities are endless.

Step 5. Use spending plan tools to help you manage money better.

So, you ask, “What are spending plan tools?” A spending plan tool is something that helps manage the spending plan.

Probably one of the oldest and best tools is the envelope system.

In the envelope system, you develop a spending plan, cash your check and distribute your paycheck funds into different envelopes with your spending categories labeled on the envelopes. When a particular envelope is empty, its empty and no more spending in that category.

There are other tools such as calendars which help you to keep track of payment amounts and due dates. It’s a helpful way to estimate how much money will flow in and out in a given month. Some people will use spreadsheets to track the different spending categories.

Whether you use all these tips or none, do something different to manage your finances. Do not keep doing the same thing and expecting a different result; that’s insanity. How do you manage your spending plan? Comment below and subscribe to get spending plan and financial management tips.