You want to know a secret to financial wellness? The truth is you probably already know what these secrets are, but you’re likely highly underestimating them. We did. For years. And knowing them but not doing them almost ruined us financially.
Everyone wants financial wellness, however few are willing to do what it takes to have it. You may have read about the secret habits of millionaires, but how many of them are you doing? How badly do you want to stop living paycheck to paycheck and start saving more money?
When are you going to get so sick and tired of being sick and tired that you start doing things differently? When you get to that point, the point where you just can’t take being broke anymore, you have to start with these two things. But first……you have to
Know Your Why
Before I share the hidden gems of financial wellness that will get you on the road to financial independence, you have to know why you want to get out of debt and build wealth.
Why is your “why” important?
Because it will give you the motivation to stick with your plan through setbacks, boredom and temptation. A written list of your whys posted prominently where you can see it daily will remind you of why you are making the sacrifices you make and taking the steps that you take to get financially well.
It will remind you why you are foregoing the “you only live once” lifestyle in search of better things. Your “why” list might have things on it like ours does:
- Because we don’t want to freak out about money anymore; we don’t want it to be our master for even one more day.
- Because we want peace of mind for our family. I personally want it for my hubby, who wants so desperately to be a good provider for this family. He deserves peace because he works so hard.
- Because we want more for our kids. We’ve got the greatest kids ever (next to yours, of course), and we don’t want to ever again have to say “no” because we’re trying to figure out how we’re going to pay the bills.
- Because we don’t ever want to have to say to our kids “We have to move because we’re losing the house”.
- Because we want to be able to give abundantly, wherever, and whenever, the Lord leads us to.
Or your “why” list might be totally different than ours. Think about all of the reasons why you hate being in debt and not having any savings, and make them into a list that will motivate you to stick with your plan to make a better financial life for yourself.
Then, start by doing these very important two things. And before you walk away in disappointment, hear me out on why they are indeed the hidden gems of financial wellness.
Hidden Gem #1
The first hidden gem of financial wellness is called budgeting. Yeah, I know – you’re bored already. For years we tried to live within a budget and for years we never made it through the first week. Budgeting feels boring. Restrictive. But the truth is that learning to live within a budget will set you free.
How?
Because making and living within a budget means you will have the freedom to finally spend your money in ways that are truly, truly important to you.
Let me ask you a few questions.
Are your thrice weekly runs through your favorite fast food drive thru more important to you than financial freedom?
Does that new electronic gadget you bought last week bring you the same joy that no debt and a plush savings account would bring you?
Did that new DVD/sweater/shoe/video game purchase bring you more peace than knowing you aren’t tied to your job for financial reasons would?
I’d be willing to bet that the answer to all three of those questions is a resounding “NO”.
Creating and living within a budget will allow you to allocate your money to go where you want it to go instead of having it piddled away on stupid stuff that really doesn’t bring you any joy. You can set a monthly dollar amount to go toward paying off debt, and another to go toward savings and investments, and even another toward buying stupid stuff. But once you have a plan in place you’ll see your goals being reached and you’ll likely find stupid stuff purchases a lot less enticing.
You’ll start to get a little buzz when you pay that extra money toward your credit card debt, car loan or mortgage. You’ll see your balance dropping faster and faster, and all of a sudden debt free won’t seem so far away. You’ll learn that you CAN reach your goals, and it will motivate you to work even harder at budgeting well.
This is the hidden truth behind budgeting, but most people never get to uncover the gem because they don’t stick with it long enough to find out that hidden truth. But you will be different. 🙂
Now’s the time: Why Didn’t They Teach Me This in School?: 99 Personal Money Management Principles to Live By
Hidden Gem #2
The year before Rick and I started our “get out of debt” journey, we “thought” we were spending less money. We had general ideas of what we wanted to spend in each category and thought we were following our guidelines. Then I went back at the end of the year and wrote down everything we’d spent by category and found that we were way, WAY off.
- We thought we are spending “around” $600 a month for groceries; we were spending $900
- We thought we were spending “around” $75 a month on eating out; we were spending $175
- We thought we were spending “around” $150 a month on gasoline; we were spending $275
As you can imagine, all of these hidden overages in spending added up to a lot of debt in a short amount of time. Suddenly, the reason why we couldn’t seem to get ahead financially became crystal clear.
We initially thought we were struggling financially because we just didn’t make enough money, but the truth was that we were spending huge amounts of cash without even realizing it.
What do you REALLY want out of life? Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence: Revised and Updated for the 21st Century
How Spend Tracking Changed Our Lives
As with budgeting, it was tough to begin tracking our spending. At first, we’d feel guilty every time we spent money. There was a lot of emotional baggage we were carrying about money that we didn’t even realize.
Once we stopped condemning ourselves for our money situation and started focusing on the “now”, spend tracking became an incredible gift. Here’s why.
Spend Tracking Gives Us an Up-to-Date Picture of our Spending, i.e. No More Money Surprises
This means that there is no chance of looking at stuff at the end of the month and going “Holy buckets! I spent THAT much on going out to eat?” No more surprises in our spending means we have more control over our money.
Spend Tracking Helps Us See Where We Need to Improve
Spend tracking will help you to have a day-to-day analysis of your budget and see where improvements in money management might be needed. When you can look at your chart and see that it’s only halfway through the month and you’ve already spent $300 on clothes, you can learn to reign in your spending and set measures in place to stop the financial leaks.
Spend Tracking Allows us a Clear Picture So that we Can Redirect our Money
When you are tracking your spending, it’s easy to spot wasted money that could be used toward your financial goals. This means you improve the chances of reaching your financial goals.
If you’re viewing budgeting and spend-tracking as mundane, restrictive tasks that take away all of the fun in life, I encourage you to change your perspective on these two financial gems.
Start viewing them as the powerful, wealth building tools that they are and use them to make some serious progress toward your goals of financial freedom.
Have you discovered the gems in budgeting and spend tracking? If not, what’s stopping you from implementing a budgeting and spend tracking plan?
We have discovered these gems in budgeting and spending tracking. One of the big benefit of doing this was/is the peace of mind it brings. There’s no stress, anger or fear when something unexpected pops up because you have a plan. It’s all about changing your money mindset, which can be tough but so worth it.
Yes!! People often underestimate that peace, I think. They focus on the short-term hassle, and ignore the long-term benefits…..
Isn’t it amazing how much you can underestimate how much you are REALLY spending in on particular category!? I know I do the same thing. I’ve been keeping an eagle eye on spending now in each category so I can get really honest with myself and try and make any adjustments!
Yeah, it’s amazing how much you forget you spend when you don’t write it down. It’s tough facing the spending music sometimes, but well worth the effort for the financial peace and security it can bring.
The spend tracking was life changing for us. I think we tend to underestimate how much we’re spending when we aren’t tracking – and often forget the little things that really do add up. I check in every week on spending and adjust throughout the month – this really is the gem that keeps our spending/budget in check.
We do that too, Amanda. It makes a huge difference!
Knowing your WHY is so important? It’s so easy to lose motivation if you don’t know the answer to that question. I think we need to do a better job of tracking our spending…I’m sure we can find a lot of leaks in our budget and I’m sure we think we’re spending less on some categories than we really our.
It’s amazing how much the “why” will motivate a person. I know it’s kept us on track through many periods where we needed extra motivation.
My wife & I slack on our budget periodically, but, we do make sure to track our spending and make sure we spend less than we have earned & have even made early payments on the credit card just to make sure we don’t overextend ourselves for the month when we make big purchases, instead of waiting for the statement to arrive and hope we spent less than we earned.
I’ve found that tracking spending helps even when one does blow the budget a bit. There’s something about seeing the numbers in black and white that really makes a difference in your attitude toward spending.
Tracking is so important.
“What gets measured gets managed” – This is so true.
I gather all my spending and income at the end of each month. I don’t necessarily do anything about it, but I know how much I spend on everything. IF something is out of whack, then I can deal with it.
Knowing is definitely half the battle, Erik, because as you said, you know what you have to deal with.
Great points, Laurie. There are so many more benefits to financial wellness than just having a better handle on your money. Another gem we’ve found is that we become more creative, learn more useful skills, and work together as a team instead of fighting over who spends more.
The team concept is huge. Once you get on the same side as your spouse regarding money, anything is possible!
We track every penny. It helps us know how much we’re spending and also allows us to make comparisons. Like I recently realized we’re spending a bit more on groceries this year. But that’s OK because now that we have time to shop during the week we’ve added more fresh fish and produce to our meal planning. The other huge benefit is it shows us what we can cut out, if that becomes necessary.
This is the great thing about spend tracking: you can look at your expenses and figure out if overages are worth it, if they’re not, or where you can cut other places to make up for them. I love the birdseye view that spend tracking gives you!
We use a physical budget book. The added advantage is it’s objective. It doesn’t nag, cry, blame shift, or fudge. It’s a thing, not a person. It lays out our common goals and let’s us know how we’re managing with what we have. It also keeps track of our giving, so we know whether we’re reaching those goals as well.
Yes! It just tells you the truth about how you’re handling your money. We do the same thing on an Excel spreadsheet. One click and we can tell quickly whether we’re in line with our saving, spending and giving goals.
I don’t implement a hardline month-to-month budget. I don’t think that having one is really realistic. I prefer to set an approximate yearly budget. This is because my expenses will naturally fluctutate from month to month. For example, last month my old laptop broke down and I dropped my new one into the ocean (while on a boat). So buying 2 new laptops wouldve put me way above a monthly budget (if I had one).
Oh no!!! We do a monthly and an annual. This gives us flexibility in our spending. We look at our monthly expenses, and then we do an average based on our annual budget to see if we’re on track for our annual – it works out great for those types of unexpected expenses.
We love our budgeting and tracking! We’ve done both for over 10 years and it has helped tremendously in managing our very tight budget. Quite honestly, I can’t imagine managing things without them.
Same here, Gary. Those tools have been vital to us growing wealth and eliminating debt. They are so precious to us! I never thought I’d go from hating budgets to loving them so much. 🙂
Isn’t it crazy how simple tracking and budgeting seems? But often it’s the hardest first step to getting out of debt. It’s easy to think you’re doing super well if you don’t know where your money is going. Mr. Picky Pincher were in that mindset when we first got married and spent $1,000/mo on food. Ouch!
“It’s easy to think you’re doing super well if you don’t know where your money is going.” Ain’t it the truth!! Spend tracking is SO eye opening, but it’s also the first step to a better financial life.
I help facilitate the Dave Ramsey FPU class. As I type this Dave is in the background talking about the importance of budgeting. Every time we hold this class it’s amazing how many people had no idea how much they were spending in certain areas. It isn’t until they analyze their finances that they see the light and how the spending adds up over time.
That is so awesome, Rob. I want to do that some day as well. Knowledge truly is power, in the area of personal finance and everywhere else!
The “why” is *SO* important. As my friend Tim Mauer likes to say, financial fitness is all about “ruthless prioritization”. When you have a strong “why” then handling your money is all about making sure your priorities are in order.