Do you ever wish you could hit the “reset” button on your financial life and start over with a clean slate? Wash away any bad decisions or missed opportunities and just start fresh? Today, I want to give you that opportunity. While I don’t have a magic wand to clear out any past debts or obligations, I can give you a strategy to create a new plan for moving forward.
Shift Your Mindset: As you turn over a new page, it’s important to identify any limiting beliefs that are holding you back from being financially well. You might believe you are bad with money, you’ll never get out of debt, or you’ve made too many financial mistakes to be able to turn your life around. Take a few minutes to identify any beliefs about money you need to let go of so you can start fresh. Resist the urge to skip this internal work; if you don’t do it up front it’s sure to impede your success later.
Tip: While it’s easy to say “just let go of the beliefs that are no longer serving you,” that strategy isn’t often very successful. In order to get past these money beliefs you may need to deal with your financial guilt so you can truly leave the past in the past. You may also need to create a replacement mantra or belief that you can put in place of the old one you held so dear. Check out this blog post on limiting money beliefs to help you do that.
Create a Realistic Budget: Instead of dreaming about where you’d like to be, focus on creating a realistic budget you can stick to today. Begin by getting a clear sense of the income you have coming in as well as your necessary expenses, like rent/mortgage, utilities, food, vehicle payments, and gas. Create a spending plan that pairs the money coming in with the money that needs to go out. Once you’ve made a plan for your necessary expenses, then you can add discretionary ones, like eating out, entertainment, and travel. Look back at your bank and/or credit card statements to see what you actually spent vs. what you think you spent. If you can, leave a small margin for fluctuations in expenses ($50-$100) and set aside any leftover money to use toward savings and/or debt repayment. Take a month or two to live into this budget to make sure you’re able to handle all of today’s expenses before moving on to the next steps. Make any changes as needed. Resist the urge to rush the process — rebuilding your finances takes time.
Tip: Setting and tracking a budget can feel a bit overwhelming and tedious, especially if you’ve never done it before. To make it easier, I suggest using this budgeting for slackers method.
Set an Intention: Now that you have today figured out, take some time to dream about tomorrow. What do you want your life to look like 10 years from now? What will be the same? What will be different? What goals do you hope to reach? Where do you want to live? Use this blog post to guide you in creating your vision. This is a great activity for you and your partner to do separately and then come back together to share before deciding on a unified vision.
Tip: Keep that vision front-of-mind by finding or creating an image that evokes it, and posting it where you’ll see it regularly: on your fridge, computer screen, or bathroom mirror.
Circle Back to Your Budget: With this vision in mind, check and see if the way that you are spending, saving, and giving is going to get you there. How does it fall short? Are there things you might need to pull back on or eliminate to make this vision come to life? Resist the urge to make a lot of changes at once. Instead, make a few at a time, checking in at the end of each month to see how things went.
Tip: You don’t need to give up everything you love to make this vision come to life. In fact, if you do, you’re more likely to abandon your plans. Instead identify those things that really bring you joy, and as you do any needed reductions and eliminations be sure to keep some of these in there. It could be something small like having a special dessert for your date night or something bigger like going on a family vacation together each year.
Take Stock of Your Financial Life: Once you feel good about your budget and you’ve created space to make your future vision come alive, take a look at the other key elements of your financial life: emergency savings, retirement savings, investments, and any debt you might have.
Tip: Use this financial audit to help you take stock of everything and see where you are in relation to your goals. Bonus: Since you’ve already created your budget, you’ve already completed one step of the audit.
Set a Goal: It may be tempting to set 10 different financial goals at once. Don’t! Instead, set one (just one!) goal that is realistic and attainable. Work toward it, and when you achieve it, pick another one. Getting a few wins under your belt will help you get the momentum you need to move forward.
Tip: Use part 2 of the financial audit to decide what you might take on first.