“Hey Dad, how do I start my financial journey?”
The most important thing is to start, kids:
Just like with anything that you “need” to do, you have to have the right mindset. You have to (1) Be ready to do it and (2) Be willing to commit to it. You may “want” to do it, but if you’re not ready and committed, it’s just not going to happen. Just like with losing weight or quitting smoking, many people give it a shot, and a month or so into it they give up. They really want to do it, they know they need to do it, but they just aren’t mentally ready to stick with it. Some never even get started. Habits are very hard to change. So again, “the most important thing is to start”.
Challenge Your Habits (Try This):
Sit or stand and fold your arms. Look down at the position of your arms. Typically, your left arm comes over your right arm and your left hand is tucked under your right armpit. Your right hand comes up under your left arm, to rest either on your left bicep or under your left armpit.
Here’s the challenge: Reverse your arms. (“I’ll wait”). It feels weird, right? It’s not uncomfortable though. Try folding your arms in reverse for an entire day. This will require you to be extremely mindful and committed to taking the right steps every time you fold your arms, just like you will need to do for your successful financial journey.
Second, you need to know where you are. You can’t get to where you are trying to go if you don’t know where you are. Think about it. Someone calls you and asks, “how do I get to your house from here, you’re not showing up on WAZE?” The very next thing that comes out of your mouth will undoubtably be, “where are you?” Once you know where you are, giving you some clear direction becomes so much easier. “Turn left at the big red barn, then turn right at Big Dave’s Gas-Laundromat-Chicken, then turn right onto the third dirt road on the right. I’m at the very end of that road”.
In order to find out where you are, financially, you need to answer these questions:
How much money do you make per month?
How much money do you spend per month?
How much money do you save per month?
How much money do you have saved?
How much debt do you have?
How much are all of your financial obligations?
Do you track any of this information?
The answers to these questions can be challenging for some and potentially depressing for others. Either way, ignoring or avoiding your financial issues won’t make them go away. Chances are these issues will only get much worse before they get better. You need to take some action and accountability, now!…“Rip that Band-Aid off”.
At this stage you need to document your “Cost of Living”. I once heard, “You Can’t Manage What You Don’t Measure”. Which means, “you can't know whether or not you are successful unless success is defined and tracked.” Microsoft Excel, Google Sheets and even old fashion notebook paper are good tools for tracking your progress.
How much do you spend per month to sustain your current standard of living? Frankly, many people live day to day, only knowing that they have just enough to make it through to the end of the month. And then there are others that have “more month left at the end of their money”. In either case, rarely are the dollars tracked close enough to be able to create any strategies to change these outcomes.
This step requires you to be deliberate, intentional, and committed if you expect to see any positive changes in your financial situation, whether you are living paycheck to paycheck or “rolling in dough”.
Here’s where I can help you. I have created a 1-month Cost of Living Worksheet that is divided into 7 expense categories and a summary section:
Housing Expenses
Vehicle Expenses
Credit Cards and Loans
Personal and Family Expenses
Pet Expenses
Discretionary Expenses
Savings and Investing
Summary “What’s Left”
The purpose of the worksheet is to be able to evaluate your current cost of living. Your assignment, should you choose to accept it, is to pick a prior month and fill in the information as complete as possible. The summary should provide a good indication of where your money is being spent. While there may be no surprises upon the completion of the worksheet, it will most certainly provide a framework for developing financial improvement strategies going forward. Select the “Open Worksheet” button below to get started. Feel free to email any questions you may have about the worksheet to dad@heydadmoney.com
(Note: The worksheet is in PDF format, making it easy to write on. There is a “FREE” Microsoft Excel version available upon request through email)