Creating a healthy spending plan is critical in your wealth-building journey.
Think about your spending plan like a GPS on a long road trip—it helps you chart the most efficient route to your final destination, detours and all.
When you better understand your cash flow, you can make more intentional financial decisions. Does it make sense to purchase a vacation home in your dream spot? Can you max out your tax-advantaged retirement accounts this year? How can you be more purposeful with your charitable giving?
Here’s the secret to answering these questions “right,”
Align your spending plan with your values.
Putting your values in the driver’s seat brings greater meaning to every area of your financial life. Today, we will explore the significance of connecting your spending with your values and how doing so can transform the way you approach money.
First, What’s A Spending Plan?
A spending plan enables you to optimize the inflow and outflow of your resources. It’s different from a budget because it examines your resources at a higher level.
With a spending plan, you’re not auditing your receipts and stressing over where every penny ends up, like going slightly over your entertainment budget one month. Instead, you build a holistic plan to allocate your resources more broadly.
Dividing Your Spending Plan
You can categorize your spending plan into the following sectors:
Live: Know how much you need to provide for yourself and your family. This category comprises your daily living expenses, like housing, food, utilities, insurance, entertainment, etc. Ask yourself, how much is enough?
Give: Ensure you donate your money with purpose and generosity. Are you giving money regularly? How can you make charitable giving a family tradition? Alongside financial donations, how can you and your family donate your time and talents?
Owe: Analyze your debts and create a structured plan to pay them off. Additionally, this category asks you to be mindful of the type of debt you bring into your life. Only take on debt that will help you in the long run, like a mortgage on a house for your family or a business loan to jump-start your own company. And avoid debt that will hold you back, like credit card debt or buying a material object (house/car/tech) you can’t really afford.
Grow: Build a plan that gives you room to develop and support future endeavors, like retirement, helping your kids with college, building your dream house, etc.
When you inspect your money from this perspective, you get to call the shots about where and how you use your money, not the other way around. Creating a comprehensive plan empowers you to decide where your money goes every day/month/year instead of wondering where it went.
Looking at it this way gives you space to see if there are ways to improve the balance among these categories.
Is the spending category consistently higher than the others?
Are you investing in ways that will help you reach your goals?
How can charitable giving remain a constant and important part of your financial picture?
This birdseye view of your money can reveal when one category outweighs another and if that’s truly best for your life. Keep in mind that your spending plan will look different depending on your season of life, so it’s best to evaluate it regularly.
Reframe Your Spending As Investments
So much of financial success comes from the way you approach money.
As Dave Ramsay would say, “winning at money is 80 percent behavior and 20 percent head knowledge.”
It’s amazing how a seemingly simple mindset shift can alter the intention of your actions, and sometimes, even the actions themselves.
One excellent example is to think about your spending habits as investments.
Yep, all of your spending, from the bag of chips to curb your cravings to the extra percentage you contribute to your 401(k). When you consider spending as an investment, it forces you to think about the value that item either does or does not bring to your life, making your spending more intentional.
Think about it—what was the last thing you bought? How did it serve you? What investment did it make in your life?
Perhaps you filled up the gas in your car, bought weekly groceries, paid off a credit card, put some money into your kid’s college fund, etc. No matter how big—family vacation—or small—ice cream night at the local parlor—your money is an investment in your life.
Every dollar you spend is an opportunity to improve your life. And remember, that might look different for every person. For a busy executive with clamoring kids and a bustling house, their quiet morning trip to their favorite local coffee shop could be the calm they look forward to, and the time they need to recharge for the day. That $5 serves a good purpose and, in this case, is a great investment.
Your Goals and Values Set The Tone For Your Financial Life
In personal finance, it’s really easy to think that the numbers should take center stage. But that’s not how we do things around here.
We believe that you—your life, values, and goals—are the centerpiece of your financial plan. When you put your goals and values first, the rest of your plan takes a natural and organic shape and reveals the actions you need to reach them.
Say your goal is to retire closer to your children and grandchildren. In that case, you might have to move across state lines, save a little more depending on your new cost of living, and figure out a plan for work (you may need a different state license to practice if you’re in the medical or legal field).
But once we know your goal, we can work together to tailor a financial plan that moves you in that direction.
Your goals are the context or the glue that holds the rest of your financial plan together. And you may be surprised to see how this intentionality spills over from your biggest goals to your everyday expenses, like food and tithing.
The same idea applies to using your values as the springboard for your spending plan. When your finances are goal-oriented, you bring more intention and purpose to every dollar.
Ready to put the “personal” back in finance?
Set up a complimentary consultation with us today. We’d love to help you create a plan that lets your goals and values shine the brightest.