Financial Management Tip Day 5: Can you Spot the Missing Categories?

Financial Management Tip Day 5: Are you missing categories in your spending journal and budget? 

If we look at our spending journal in preparation for designing and implementing a budget, it is important to consider the categories of our spending. The hardest categories to include are those that do not show up every single month.

For example some spending that you might have forgotten about:

  • Do you pay your insurance monthly or yearly?
  • Do you pay your house tax monthly or yearly?
  • What about about your water bill?
  • Magazine subscriptions?
  • Birthday gifts/cards or holidays and celebrations
  • Vacations
  • Vehicle maintenance, inspection, registration, tire changeover
  • Registering children for summer camp or sports teams
  • Charity contributions
  • Household maintenance

I am a firm believer in the concept of planned spending (budgeted spending).

Any time you fail to plan in advance for spending than you end up short-changing yourself, stressing yourself and your budget out, relying on credit to fill in the gap, or not participating in certain events. So rather include these items in your budget on a weekly and monthly basis.

For example, your daughter wants to play soccer this summer. You need to save $400.00 for registration and new cleats. You get the reminder to register at the beginning of May and you have 4 weeks to find $400.00 -that is $100.00 a week which is a lot to find. What if you had 6 months to save this money? How much would you need to save every month? $67.00 a month or $16.75 a week. These numbers are much more attainable.

What if you decided to go on a family vacation next summer? You know you need money for flights, hotel, food, souvenirs, and outings/activities. You decide you need $5000.00 for this adventure. That means you need to save $417.00 a month or $104.25 a week for the entire year to save up that money.

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Do you need help aligning your life and money goals?

Tips for matching your Life and Money Goals 

You need to remember that every action you take and every decision you make either moves you closer or further away from your life and your money goals. These two sets of goals must match up in order to help you succeed. Money can help you reach your life goals if you learn how to use it correctly.

I suggest trying the SMART method of making attainable goals- you need to be able to reach your goals and make them reality, otherwise goals are just a dream. This method doesn’t just work for financial goals but can be used for any goal such as losing weight, decluttering and organizing your home, or a variety of other goals.

The first part of the process is to make a clear decision about why you want to achieve this particular goal. Why is this goal important?

Start small, try this method with a short term easy to achieve goal and than work towards larger more complex goals. You can use this method to sub-divide larger goals into workable pieces.

Write down each piece of the puzzle. Be clear and concise.

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Goal Tracker

You might want to find an accountability partner or share your goals with others who can help motivate and keep you on track. Maybe you make a tracker that you display on your wall or bulletin board that looks like a thermometer. Make it visual and fun. Use each step as a mini-goal for you to reach.


Tips for making your S.M.A.R.T Financial Goals

How to make your S.M.A.R.T Financial Goals:

S– Make sure your goal is specific -helps to narrow your focus

M– Your goal must be measurable -how can you measure whether you obtained your goal

A–  It must be achievable– setting a goal that is too hard to accomplish can make you frustrated or lead to the inability to meet your goal in a timely manner

R– This deals with relevance and realistic– why are you trying to meet this specific goal? Can you meet this goal?

T– Define a timeline for your goal- what are the mini-goals you can meet along the way? Celebrate any small successes you are able to get- for example, your overall goal is to save $1000.00 for your emergency fund. Start with celebrating each $100.00 you are able to save.

Make sure you consider short, medium, and long term goals: You can and should focus on more than one area of goal setting.

Short-term goals: Paying down debt, replacing a vehicle, family vacation

Medium goals: Building an emergency fund, saving for your child’s education

Long-term goals: Retirement, paying off your mortgage

All financial goals should have a purpose (why), a dollar amount (cost), and a timeline (target date).

Relevance, reliance, and purpose: Don’t just say your going to save money but you need to decide why you are saving? For example, do you want to go on a family vacation, are you planning on getting married or moving, retirement, higher education for yourself or your children? Give your money a purpose- you need to be able to write out clearly (be specific, be detailed) why are you saving? This will serve as motivation later on.

Do your money and life goals align? You might ask how can you determine if your goals align (match up)? It’s important to decide what your life goals are…. Do you value experiences and seeing the world, do you want to travel and see the world? Do you value education and therefore, do you want to pay for your child’s education?

The first step is to decide on your life goals and priorities (I will post more about this later) but you can start by deciding what is most important to you. This must match up with your overall morals, values, beliefs, priorities, and direction of your life. We all make choices…some people love nature or the environment, while others value family and friends, and others may value technology or fancy clothes and cars.

You need to make time for what is most important to you….what are your life goals and what are your life priorities? You must begin to question whether your actions (the activities you choose to participate in on a daily basis) help you get closer to your goals and priorities or are they doing nothing to add value to your life.