Every year after Mardi Gras is lent. Fat Tuesday, then Ash Wednesday. For the Christian, lent is a time of fasting with the purpose of drawing nearer to God. For me, lent is a time to search the depths of my soul for those attitudes and those behaviors that are inconsistent with my faith and things I value, and to grow out of them with some sort of lasting change.
Stay with me, even if you don’t celebrate lent. I think you’ll get value from what follows.
Slowing down and reflecting on our life, our attitudes, and our behaviors is something in our fast- paced culture that we don’t do enough. Regardless of your faith, I encourage you to consider to use the next few weeks reflecting on your life, specifically your relationships, your work, and what I want to talk about, your money.
As a financial planner, I want to give you 4 areas to focus on to improve your finances now. But first let me lay down a bit of background.
I approach money from an idea of stewardship. Stewardship is essentially this idea that you are in care of someone else’s resources. You are charged with taking care of something of value that belongs to someone else. You can do that well or you can do it poorly.
For you Lord of the Rings fans, think of the Steward of Gondor. He was responsible for ruling and protecting the Kingdom of Gondor until the rightful king returned to the throne.
Many Native Americans understood this idea of stewardship as it related to caring for the earth. There is a Native American proverb that says, “We do not inherit the Earth from our ancestors. We borrow it from our children.”
Stewardship and Your Money
What does any of this have to do with your money? I believe that if you manage your money as if it belonged to someone else, someone you have a ton of respect for and were required to give account to them for how you manage it, you would more than likely do some things differently.
What I’m saying is that most of us can improve as stewards of our money.
4 Areas Of Focus To Improve Your Finances Now
Income doesn’t really matter. I mean, it matters, but as long as you spend less than you make, you’re headed in the right direction.
Do you overspend? Do you buy things, and then think, “I really didn’t need that.” Or do you find yourself at the end of the month wondering where all your money went? In fact that is something I observe with many people, they don’t know what they spend their money on.
Print your last 3 credit card and bank statements. Look over all your transactions and make note of the things you could have cut.
The problem with overspending is that you get into debt. You are basically spending money that you have not yet earned. Americans do this at a rather alarming rate. Borrowing is costly.
You’ll probably need to borrow to buy a house or a car, but that can be done within reason. But it is credit card debt that is a killer. Does your debt weigh on you? If you could have a do-over, what are somethings you would have passed on buying?
Make a list of all your debt. Include the balances, interest rates, and minimum payments. Use this sheet if it helps. Make a plan of attack to start squashing your debt.
I typically talk about 3 types of savings, but I’ll focus on just 2 here, short and long term savings.
Short-term savings are your emergency funds. I like to call it the “O’Crap Fund”. Do you have enough stashed away to cover an emergency? Let’s say you need to evacuate from a hurricane, or replace your AC in the dead of our New Orleans’ summer. Can you do it without borrowing?
Short-Term Savings Action
Open a desperate savings account at your bank. Aim to save up 3-6 months of your living expenses.
Long-term savings is your retirement account. Social Security won’t be enough for you in retirement, and very few companies offer pensions anymore. So it’ll be up to you to save for the portion of your retirement not covered by Social Security. How much do you have saved up in your retirement plan (401k, IRA, 403b)? Does your company offer a 401k, and if so is there a match?
Long-Term Savings Action
If you have a 401k at work, contribute, at minimum, enough to receive the company match, that’s essentially free money towards your retirement. If you don’t have a 401k, open an IRA. Work towards maxing it out. Overall, work your way up to saving 10% of your income in your long-term savings accounts. This may take time. Stick with it.
I think it’s really important to be others focused. When you are intentional about giving to something you are connected to outside of yourself, it gives added purpose to your work. Do you currently give to a cause? Would you like to give more? Is there an organization you’d like to support but don’t feel like you can because of debt or because you are behind on your savings?
Make a list of causes you believe in and organizations doing work you support. If you don’t currently give, start small. Increase your gift over time. If you currently give, challenge yourself to give more.
A note on how much to give
I am often asked how much someone should give. Giving is often tied very closely to your individual values and the faith you identify with. I have always appreciated what C.S. Lewis has to say on the matter:
“I do not believe one can settle how much we ought to give. I am afraid the only safe rule is to give more than we can spare. In other words, if our expenditure on comforts, luxuries, amusements, etc, is up to the standard common among those with the same income as our own, we are probably giving away too little. If our charities do not at all pinch or hamper us, I should say they are too small. There ought to be things we should like to do and cannot do because our charitable expenditure excludes them.”
Money Attitudes and Behaviors
Your attitudes and behaviors towards your money are fundamental to becoming a better steward. Your behaviors regarding spending, debt, saving and giving drive your wealth. The goal is financial security and aligning what you do with your money and your values.
Start by making small changes that are sustainable. Don’t expect dramatic changes over night.
Going at your money alone can be difficult
Here are a couple of ways I can help.
I’ve partnered with Data Points to offer financial assessments to help identify key behaviors and attitudes that impact your financial success long-term. Understanding these money related attitudes can help you identify areas where how you view money management might be in conflict with the best way for you to reach your financial goals. Learn more here.
Financial Health Snapshot
Building on the financial assessments, The Financial Health Snapshot takes a look at your current finances through the lens of my 5 Pillars of Confident Financial Plan. We then build a short plan addressing the 2 most pressing areas of concern for your money. Learn more here.
Don’t Ignore Your Money
Money and finances are a constant in your life. There is no time better than now to spend time reflecting on how you can better your financial life.
Posted by Erik Garcia on Mar 09 , 2018