When you spend 40 hours a week or more at your job, it can be hard to envision a life outside of the grind. Or perhaps it is easy to envision, but hard to accomplish.
This post focuses on the many ways you can prepare to restyle your life in order to accomplish the goals you set forth.
While the methods are plentiful, most people simply do not want to think about this process.
So let’s review what our process at Capstone is all about.
Understanding Your “Why”
Simon Sinek has created a fascinating book and a fun presentation on realizing your WHY — or as he titles his Ted talk, Start with WHY. The idea behind his presentation is that we as individuals will be happier, more invigorated and excited about what we are doing when we determine what it is that truly drives us.
At Capstone, we want to know your why. Once we know what it is that motivates you, we can then set the road map of how to get there. Our strategy begins with organizing a list of goals. From there, we backtrack our steps to figure out the funding mechanisms needed to achieve each individual goal.
For some individuals, the primary thought process is to think about what areas we can pull from in order to fund the desired goals. Tracking your expenses and saving intentionally helps make funding these goals possible.
All too often, it is easy to let the day-to-day life take over our true intentions. Determining your top priorities in your job, family, community and business allow you to live more intentionally. Of course, the difficulty is to then be disciplined enough to live by these priorities without letting the noise get in the way.
There are financial considerations to make when it comes to funding your priorities. The first is an emergency fund – this is an amount of money that exists solely for one purpose – to cover unintended expenses. If your air conditioning breaks, the roof leaks or your hot water heater gives out, you need the funds to cover this.
Having an emergency fund prevents you from either going into debt, or being forced to take funds out of investment accounts at inopportune times.
The funds in an emergency account should be in a safe, accessible place such as a savings account or money market fund. Despite the low interest rates we are seeing now, do not expect your money to grow and avoid putting it into an account that may be inaccessible when you need it.
Once your emergency fund has been established, you can direct your focus on the next funding priority level, which is major expenses: buying a home, purchasing furniture or paying for home renovations.
Before we know what we can spend, we need to determine if we have any money to save.
For most people, talking about expenses equates to creating a budget, and organizing a budget is simply no fun.
If you don’t want to set up a budget, the easiest way of understanding your expenses and savings opportunities is to look at the value of your checking account at the end of each month. If you have money left over, you have money to save.
Of course, this simple method does not allow you to know what you are spending your money on. Paying $269 for your monthly cell phone bill, or spending $186 on housekeeping and paying for a landline when everyone in your house owns a cell phone may not be top priorities; however, you must know what you are spending your money on in order to be intentional about what you are saving for.
Begin by simply tracking your expenses. Don’t dive into setting budgets and limits just yet. Instead, find a method that works for you that you are capable of performing on an ongoing basis to track what you spend. There are several ways to do this. You may find that it’s easiest to write them down in a log, or you may opt to use a spreadsheet, a software system such as Quicken, or an online service like Mint.com.
Whatever method you use, build it into your routine and keep up with it daily or weekly – lapses mean you have to catch up and catching up can make the process a much more daunting task.
Through this exercise, you will see patterns in your expenses. This will help you make better decisions on items that you do or do not need. You will subconsciously begin to spend less on discretionary items and will gain a clear picture of what you have available after each paycheck.
Starting this process is essential. Whether retirement is still years away or right around the corner, you cannot plan for the withdrawal phase without defining your expenses.
Stay tuned for part 2 on how to properly save for the restylement process!