The New Year is here! Whether you brought in the new year with a rollicking party, a quiet evening at home with an early bedtime, I hope your 2019 began peacefully.
We’ve talked before about goal-setting in the new year and about setting goals based on how you want to feel. This is one of many goal-setting activities that people do to set their intentions for the new year.
One aspect that many people like to focus on after the hoildays are financial goals for the new year. This week we’re fortunate again to have the knowledgable Emily Shutt with us to share her expertise on financial freedom and lifestyle planning, a new way to look at budgeting. If you’re a person who needs some guidance or simply want to revisit your financial goals as an individual or with your partner, this information will help you reframe your thoughts around finances.
Lifestyle Planning for the New Year
2019 is here! If you’ve set an intention to pay more attention to your finances this year, but maybe the sterile, male-dominated Financial Guru advice isn’t your vibe, you’ve come to the right place! The guidelines below will help you get on track and stay on track throughout 2019 and beyond.
- The B Word: A lot of people get freaked out by the word … budget. It can feel restrictive, and no one wants to feel like they’re giving their freedom and joy away for the sake of saving some money. What if we called it something else? I prefer to use “lifestyle plan” or “financial freedom plan” – it puts a more positive spin on the concept, which puts you in the right frame of mind to start looking at your money in more resourceful and creative ways.
- Lifestyle Planning: What’s important for you to have in place in your life day-to-day? This will likely involve some trial-and-error if you’re new to reflecting on how things make you feel longer-term. Make a list of the “need to haves” and “want to haves” – they’re going to be the basis for your Lifestyle Plan (formerly known as a budget). For example, when I was first learning about the FIRE (Financial Independence, Retire Early) movement, I wanted to go all in and I restricted spending to only the essentials for survival. Dinner with friends? Nope. A yoga class outside of my regular gym? Delete. A movie date with my husband? Not in the budget. What happened? I saved money, obviously. I also felt isolated, sad, and disconnected from my husband. The amount of money I saved was not worth it, so I knew I had to revisit how I used money in other areas to free up some space for social time and recreation. I now have the ideal balance, but I didn’t figure it out overnight, and it’s going to be different for everyone.
- Income: Once you have your categories organized coming out of Step 2, you can allocate your take-home income to those different areas. It probably isn’t going to match up the first time you try it. I’ve been doing this for years, and I still go through a couple of drafts every January before I find the right mix for the year ahead. And yes – I recommend doing it every year (or even more frequently) because your needs will likely change over time! There are a lot of factors to consider. Do you want to take a big vacation? Are you attending any one-off events like weddings, etc.? Do you anticipate any unique medical or household situations coming up? Is your rent going up? Do you want to invest more in your health and fitness? Is there a risk of being laid off at your job? For clients, I recommend not factoring in one-off financial windfalls like tax refunds, bonuses, gifts, etc. because they can’t always be reasonably predicted or guaranteed. Think of that as a hedge against other unanticipated costs that might come up during the year.
- Lifestyle Monitoring: Once you come up with the right match-up of your Lifestyle Plan categories and your income, there’s really no way around keeping track of how you do. It seems like a pain at first, but like anything else, the more you practice it the easier and more efficient it becomes. There are as many ways of doing this as there are people on the planet, I think, so I choose the system that works best for you. There are a variety of online tools that can be helpful, like Mint, Personal Capital, and so on. I personally use a credit card for everything (that I pay off, in full, every month) so that I earn points and it’s easier to track where my money is going. I download the transactions into Excel each month, categorize everything based on my Lifestyle Plan components, and see how I’m tracking relative to the plan. If something is way off, I have to figure out why. Maybe I need to redo the plan to give more wiggle room in different categories, or maybe I need to pump the brakes on a certain type of spending if my income won’t support it and it’s not making me as happy as I thought it would. Or maybe there was truly an anomaly like an unplanned medical expense, which hopefully can be covered by an emergency fund. If you don’t have an emergency fund, please consider making that one of the Lifestyle Plan categories if at all possible, and make regular contributions until you’ve built up a sufficient amount – no one anticipates emergencies, but everyone encounters them. You never want to be in a position where you have to choose between life-saving surgery for a pet or being able to pay your rent and buy food.
- Adjust As You Go: Your needs and wants will probably change a bit throughout the year, and that’s totally normal. If you find that something is consistently “off” for you and you’re not happy, it’s time to reevaluate how you’re using money, with the objective of optimizing your well-being. It’s not about killing yourself to save as much as humanly possible so that you can enjoy a lavish lifestyle decades from now. Of course, you want to make sure your future self is covered, but you also want to do your best to experience happiness now, which money totally helps facilitate. Instead of asking yourself “why can’t I have XYZ?” start teaching yourself to instead ask “HOW can I have XYZ without compromising my financial future?”. Approaching money with a mindset of creativity and resourcefulness is key – you’ll likely find that you can have a life that you truly love, and is specifically tailored to your own personality, without going into debt or destroying your future. If you approach a problem expecting that there is an ideal solution, you’ll train your mind to see it. The more you do it, the easier it gets!
If you would like to go deeper and get more support, consider working with a financial coach who can help you explore what’s important to you, find creative ways to meet your goals, have confident conversations about money and set boundaries where needed so you can stay on track!
About Emily Shutt
Emily began her coaching practice in 2015 with a focus on financial empowerment for women (emilyshutt.com), and still works with financial coaching clients privately through referrals. However, after the sudden loss of her youngest brother, Thomas, in 2017, she realized that coaching principles can be a life-changing part of the healing experience for those living with loss, and now focuses her coaching practice on bereavement and spirituality.
She founded Grief and Grace Coaching (griefandgracecoaching.com) in 2018 and works with individuals, couples and small groups on healthy grief expression, rebuilding spiritual trust and connection after loss, and honoring the legacy of their departed loved ones in meaningful ways.