Figure Out Your Finances, Feel Empowered

Tips from a financial planner (and mother) on how to figure out your financial goals and take control of your budget.

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While professional athletes may be born with more endurance or height or strength that allows them to excel at sports, there is no genetic marker that makes a person more adept at finances. Everyone is bad at money—including many women.

No one is born knowing how to budget, save, and invest. We must acquire our financial knowledge throughout our lives. It’s passed on to us by our parents, teachers, and friends. We often learn the hard way through trial and error. So, you shouldn’t feel sheepish if you don’t know what you don’t know.

The world of money and finance is constructed to make us feel overwhelmed and inadequate. It’s a modern marketing machine. The fear of making a mistake can be crippling, and the only way to overcome our paralysis is to take action. Why is this particularly important to women?

Women drive 70-80% of all consumer purchasing decisions in the US, yet few have much budgeting or investing knowledge, and many married women don’t even know how much money their spouse makes.

Understanding finances comprehensively empowers women to set long-term goals and feel confident in our ability to reach them—outcomes that are great for the health of the whole family. So, where to start?

Step 1: Define your goals.

Let’s start by defining your goals. Most of us know what we want to achieve in the next few months, but beyond that, it’s a moving target.

It’s helpful to first put a few of the basics in place for overall lifestyle goals. Would you like  to retire comfortably? Perhaps you’d like to buy a house or take an extravagant vacation, but you have to pay for childcare each month.

Identify what you must have to feel whole, and from this, you can figure out how much you need to save and how much is left over to spend today.

Here’s how you can think about getting a handle on your budget. First, start with these steps:

1. Make a date to dive in. Getting clear on a budget might take you a while, so make sure you have time blocked off to really focus. Spend some of that time figuring out what you actually spent in each category of your budget, such as groceries or rent.

Start by looking over the last several months or maybe the whole year to come up with a monthly average. Remember, unless you have a good handle on how you spend your money, your projected numbers won’t be based on your actual numbers, so you want to make sure those numbers are as accurate as possible. Otherwise, you're just pulling numbers out of the air, and it won't be helpful.

2. Take advantage of free tools. There are dozens of online tools available to help you track and categorize your expenses. Some of the best one are  Mint , You Need a Budget, or Buxfer.  Here’s a breakdown of what the categories should look like:

Fixed Expenses: Rent/Mortgage, Utilities, Car/Transportation, Loan Payments, Health Insurance, Retirement Savings.

Variable Expenses: Groceries, Restaurants, Shopping, Personal Care, Health Care, Entertainment, Gifts, Charity, Travel.

And here are the formulas you can plug in:

Average monthly inflow = salary + any additional income - taxes.

Average monthly outflow = fixed + variable.

Step 2: Don’t freak out.

If the expense numbers are way higher than you anticipated, don't panic. You're already in a much better position now that you know what's up and what needs to change. Remember, the most practical benefit of knowing your spending figures is the ability to use that information to change your behavior.

Step 3: Make some changes.

Understand your priorities: Maybe it's more difficult because you need to spend less on spin class, and your whole identity is tied up in spin class, so now you're spiraling into an existential crisis. If that's the case, you need to get real with yourself and figure out how you're going to bridge the gap. It’s simple, but it’s not easy:  Prioritize the expenses that are essential to your quality of life and target the expenses that you can live without. For instance, keep going to spin class but skip the white-tablecloth brunch afterwards.

Shopping and dining out are Achilles heels for almost everyone. Unsubscribe from each and every newsletter you receive that entices you to join a wine club, shop the latest sale, or take a weekend jaunt down the coast. When you’re in the mood to do a little online shopping, put the items in your cart and wait 24-48 hours before you complete your purchase. You may just find yourself buying fewer items each month.

Step 4: Keep up the good work.

After you’ve done all this great work, you want to make sure you maintain good habits. Some basic best practices:

  • Look at your accounts—you should have one checking account and one savings account.

  • Put money directly from your paycheck into retirement, savings, then checking. Otherwise it’s easy to spend everything available.

  • Automate all bill-pay.

  • Savings is best in a high-yield savings account.

  • Pay off credit card debt, not just the minimum payment!

  • Schedule a quarterly household review to make sure you’re on track.

Once you take these first steps, you should start to feel more confident about your financial abilities and gain the confidence that you, too, can be good at money.

Sarah Behr is a financial planner and owner of Simplify Financial, a practice she founded after working many years in private wealth management at large investment firms. Her mission is to make financial planning and investing more accessible to her peers.

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