Let Your Dream Be Your Financial Motivator
May 18, 2022Building a Budget
Spring is a time of fresh starts and new beginnings (and treasure hunting!). It’s a great time to start, or increase your savings, but I know what you’re thinking, “If I had the money to save I would already be saving it.” I hear you. Sometimes finding even a few extra dollars to save is a struggle. The key word here is finding because chances are it’s somewhere hidden in our spending – we just need to find it.
Let’s take a look at how to unveil that extra money that may be hidden in your spending.
Dream. Not what you thought I was going to say, right? But without a dream there’s not a purpose. So, give yourself permission to dream about all the things, big and small, that you would do if you had the freedom to do them, if there were no financial limitations. Get a picture of what you want and write it down. Remember this is not about where you are today, it’s about where you want to go. By doing this you’re able to better create goals. Having a picture in your mind of what you want, and believing that it is possible for you, is what will motivate and inspire you to move toward it. Look through your list and choose 2-5 things that you are going to start working toward and saving for. This will help you with your next step.
Budget. It is not a bad word, I promise. This is the part where you have to be real about where you are today in relation to those dreams, and then plan out how to get there. It’s going to take some work, but if you don’t make a plan, it will only ever be a dream. Think of it like planning a road trip. If you are going to drive across the country, you wouldn’t just get in the car and start driving and hope you get there. At least I hope you wouldn’t. You would have a destination, a map, and a plan. You would likely know who was going to drive each leg, how many miles you could reasonably go each day, and which cities you would stop at to rest your eyes at night. A budget is a road map and plan to get you where you want to go, based on where you are now. It shows your income and expenses on a monthly basis. Budget every single dollar. Dave Ramsey said it like this “If you don’t tell your money where to go, you will ask where it went.”
- Review your expenses and purchases over the last few months. Knowing your spending habits is a big help when you begin budgeting.
- Pay yourself first (we’re looking at those dreams/goals you just wrote down). That means budgeting your savings at the beginning of when you receive your paycheck!
- Have a little fun! Your budget should also make room for fun so don’t forget entertainment or fun money. It is important to be honest with yourself about what you are, and are not, willing to adjust or give up to reach your goals. For instance, if you like to shop, allowing a specific amount/limit for shopping will help you manage your impulse spending without the stress of denying yourself completely. At the same time, its okay to make adjustments if you need to. This is your guide, and you are the only one who can make it work for you.
Emergency fund. Emphasis on the word “emergency.” Experts say you should have 3-6 months of living expenses in savings. This may seem like a daunting amount when you usually have about $3.27 left in your account the day before payday. Start with a goal of $1,000 and include it in your budget for savings. Try having a little of your paycheck automatically deposited into another account or set up an automatic transfer for every payday. That way it’s saved before you ever see it. If you get a pay increase or unexpected cash, drop it into that savings account before you spend it in your mind (yep, we all do it). The important thing is to start, no matter how small, and increase it as you can. Before you know it, you will have that fund built up and standing by.
Manage debt. For many people, it’s unmanaged or unplanned debt that is stretching your budget and making it hard to save. Unless you come into a windfall of cash, it’s unlikely you will be able to pay it off all at once. So, after you have your initial $1,000 emergency fund, shift your focus to debt. The reasoning here is that you are likely paying more in interest than you are receiving in dividends, therefore you are going to save more paying down your debt than by putting your money in savings. My favorite debt pay down approach is the “Snowball Method”. Start taking the amount you are setting aside for savings and apply it to your lowest balance along with the monthly payment you normally pay. Continue making your regular payments on the rest. As soon as you pay that first one off, take the amount you have been paying on it, and apply it to the next lowest balance. I like this method because
- When you apply everything extra to one, you are having a greater impact than if you split up the additional payments between several bills, and
- Seeing the impact you are having on that bill is so encouraging and helps motivate you to keep going. I can’t close this point without stressing – Use Credit Cards Wisely. Know your weaknesses, and if easy access to credit is one of them, don’t carry it in your wallet. If you can’t pay for it with cash, you shouldn’t put it on your credit card. And since you have your emergency savings in place you won’t need to depend on it. Speaking of savings, we haven’t forgotten the 3-6 months goal. Once your debt is managed shift your focus back to savings.
Have a savings partner. If you are saving as a family, be accountable to each other. If you are on this journey solo, share with a friend you trust to be an accountability partner. When we require ourselves to check in with someone on our progress it helps us hold ourselves more accountable. It may even encourage them to up their savings game too. A little friendly competition can also be fun while pushing you to be more diligent than you would be otherwise. I like to win so this is a great motivator for me!
So it turns out this treasure hunt is about a lot more than money. We have financial goals in order to help us reach the things we truly value. The joy of accomplishing the dream in our heart, the satisfaction of being able to help our kids pay for college, the peace of mind knowing our car will start in the morning; even the acknowledgement that our hopes and dreams are valid.
Because money is a vital tool in this process, we must learn to manage it properly. You don’t have to do it alone. Be confident in asking for help if you need it. There are many free tools out there to help you set goals, start and maintain a healthy budget, and get your finances under control. At HAPO we have certified financial coaches available to help you get started, as well as additional educational resources on our website hapo.org.