In which I present completely unqualified advice about money management as I revisit my money management plan (#23).
I have been talking to the hubs and a couple of good friends recently about money. I was frustrated with our money management plan, which had gotten a bit confused. Our current plan is much more complicated now than it used to be, so there has been a learning curve as we settle into and update our plan. (For more about both our old and new levels of organization, check out this post.) I just reset our google spreadsheet that I set up during my first 101 project again with slightly new distributions to the areas we want to save for.
In many of my conversations, I said, “I hate money.” My best friend challenged that statement by asking what I could do to improve my relationship with money. And I was stumped. I know that the hubs and I are doing well. We have been both lucky and thrifty when it comes to our financial situation. But sometimes I feel trapped by our own good plans and envy people who seem to be making purchases looking for enjoyment, rather than financial security. In my head, I know that our way is a better fit for us, but I occasionally struggle against the idea of “still” not being able to spend on a whim.
I kept thinking about her question. The main step in improvement my relationship with money has been my decision to learn about it and create a money management plan so that I could stop worrying. I pay most of the bills and set up the transfers from one account to another because it is important to me to know where our money is going. Of course, the hubs has access to everything and is an equal decision maker, but I am more comfortable because I am involved. Perhaps reminding myself of what I have done to make myself more comfortable will get me out of this hating money funk.
To that end, here are a few tips on improving a relationship with money while setting up a management plan. I’m not qualified in any way to give advice on this subject, but these are things that are working for me.
1. Find someone to talk money.
I have been honored to help three friends set up their own money management plans over the past few months. We’ve talked in terms of percentages as well as actual figures — talking about your money does not require full disclosure of your assets or challenges. But more importantly, I’ve talked extensively with friends about our frustrations and triumphs. Having someone to talk to in my moments of illogical frustration centered on someone else’s purchase or lifestyle has prevented me from stewing on it for too long and making an impulse decision I’d regret.
2. Step back.
Don’t jump into your money management plan at the budgeting level. I’d suggest making a prioritized list of things you want to accomplish with your money. Pay off your car? Save for future graduate school? Take a long vacation overseas? Save for future kids’ education expenses? It is easy to fall into the trap of thinking that there is no way you can save for the things you want. Prioritizing can help you cover the short- and long-term goals that weigh most heavily on your mind.
Once you have your initial distributions decided, walk away for a little while. If needed, remind yourself that saving a little bit is better than saving nothing. If you need to save a specific amount (to pay something off or max out an IRA), calculate how much you have to save divided by the time you have left. For other, “nice to have” savings, ignore the amounts for a minute and look at the percentage of your savings. Sometimes an amount can mask the relative percentage. The amount may feel like too much or too little, while the percentage may click for you, like it did for me.
3. Set things up to happen automatically.
I love having my savings transfer automatically. Without that, I would never save. But I also love creating a spreadsheet that will make my calculations automatically. I spent some time at the beginning of each money planning change to set up formulas so that as our paychecks or bills change, I enter the new information and the spreadsheet automatically calculates the new amounts to transfer.
4. Present your plan in ways that resonate with you. Then pay it a visit.
I nicknamed all my savings accounts so that I can see the money and associate it immediately with the end destination of that pot of money. The labels help me remember the goals I’m working on — kids, vacation, house, retirement. As my plan got more complicated, those goals have been split into sub-grouping accounts (Hubs’ IRA, My IRA; Vacation, Big Fun). So I decided that I wanted an at-a-glance view to see the percentage of our savings that was going to each category of goal. With a little love in our spreadsheet, my numbers will now automatically combine and update a lovely chart. Dorky? Sure. But having things presented clearly helps keep me calm and feeling in control. Right now, the chart of percentages of our after-paycheck savings looks like this:
5. Remind yourself that there is no “right” or “wrong” in a management plan, there is only comfort.
Right now, we have all our savings in fairly low earning savings accounts with ING. To get a better interest rate, we’d need to move it to a CD for two years or so, or to a riskier account. I feel like that might be the “right” thing to do, but it is not something that we are comfortable with right now. So I just remind myself that our comfort is more important than “right” or “wrong”.
Do these hit home with anyone else? Or are there other tips that you rely on for your own relationship with money?
PS. Reminder: get renters insurance. You know who you are.