Have you had a chance to review the first two steps towards creating financial stability? In our last post, we discussed the benefits of unpacking your money beliefs and leveraging your numbers. Now we’re going to review three more important steps to creating financial stability: saving, setting and keeping your money goals, and discussing finances with your family.
Step three: save, save, save!
Have you pushed your savings accounts to the background? Even if you don’t have much leftover after paying your bills, you can – and should – be contributing to savings. We recommend focusing on these three areas of saving:
1.An emergency fund account
Don’t use your credit card as your back-up “savings.” What happens when you hit your credit card limit? Instead of hoping your card will save you, plan ahead and create an emergency fund. This account will provide you with the money to pay your bills should you lose your job or become unable to provide an income. Work towards setting aside 3-6 months of expenses. Trust us, having an emergency fund will provide you with peace of mind.
2.An account for future goals
Create a separate savings account for goals such as vacations, renovations, or schooling. Putting this money in its own account will help you not dip into your emergency fund.
3.A retirement savings account
No matter where you are in life, it’s important to be contributing to a retirement account. Start investing in your future now to take advantage of compound interest. (It’s been called the “8th wonder of the world!”) If your employer offers a retirement plan, you MUST take advantage of it.
Understanding how you’re going to pay yourself in retirement might motivate you to contribute more frequently. Ask yourself, “what source of income will I have when I retire?” It’s easy to think of Social Security as a retirement account, but we urge you not to lean into that belief. It is up to you to create your own retirement income stream.
Step four: setting and keeping financial goals
We often pair goals with an activity, such as, “I’m saving money for a house, or a trip.” But consider creating financial goals a bit differently — without adding numbers to them. Ask yourself these questions:
“If I could change one thing about my finances, it would be ___.”
“I would like more ___, less ___.” (Such as “I would like more confidence, and less stress.”)
“In a year from now, I want to be able to ___.”
This is a great way of looking at goal setting. If we have a big number goal, we’re likely to give up. Create specific, measurable, and realistic goals. Make the commitment to not quit on your goals! The more you stick with it, the more you will be able to do.
We recommend using a vision board to help you visualize your goals. Place post-it notes with positive affirmations or specific words around your home, or in your wallet! Share your goals with others and surround yourself with supportive people. If your friends or family members don’t understand, try using language such as, “I would love to get lunch out with you, but that is not in my spending plan right now.”
Step five: Create money harmony within your family
Your relationship with your significant other
Learning how to talk about money with your significant other will go a long way in establishing financial security. Make a date out of your money conversations, which we recommend having at least once a quarter. Consider enjoying chocolate or wine at the end of your discussion as a reward for making the conversation a priority. Celebrate your wins!
If you’ve never talked about money with your partner before, start by discussing step one — your money beliefs — and what your experience with money was growing up.
Evaluate what budget line items you both value spending money on. These could include education, relationships, travel, etc. It’s important to come together on common values that you can both save for. This makes saving become more meaningful!
Know your role in your relationship with your significant other
In most relationships, one person serves as the money manager. This person knows the details, while the non-money manager might only know an overview. Both people should have access to bank accounts and understand how the bills are paid. This ensures that if the money manager should become ill or unable to handle the money, the non-money manager can step up and take over. If you are the money manager in your relationship, keep passwords written down in a safe place, and take notes on how you pay the bills.
Your relationships with your kids
Just as your parents played a role in how you view money, you now have a big part in the money story that your children will grow up with. Be careful with the language that you use about money, and involve your children in financial conversations. Talk about the activities you’d like to do as a family, and how everyone can work together to save up. Teach your kids to think strategically and empower them by getting them involved with purchases. Let them experience consequences of mistakes while they still have the safety net of being under your care. This ultimately will build their money confidence!
Your relationships with your parents
Don’t forget to also talk to your aging parents about money. Make sure everyone is on the same page with how your parents’ money will be handled if they’re ever in a position to not be their own money managers.
You’ve now learned the five steps towards creating financial stability! If these steps seem overwhelming, remember that financial stability is a lifelong process. You won’t master all five steps in a day, week, or even month! Focus on completing each step fully, and then move on to the next. We encourage you to celebrate your victories, no matter how small they seem. You’re on your way to becoming a money master!