Budgeting Archives - Page 2 of 2 - DESMO Wealth Advisors, LLC

Is Lifestyle Creep Holding You Back?

When I finally got out of school and started getting a decent paycheck, my first thoughts were mainly about all the things I could spend the extra money on. That nicer car, a new bike, better hotel and restaurant choices, and more. If you feel this applies to you, know that it’s perfectly natural and very common. In personal finance, the steady increase in spending as your income grows is called lifestyle creep. Some lifestyle creep is good and understandable. After all, part of why we are working hard is to get the things we like. There is the risk, however, that you get used to spending habits that hamper your ability to reach more meaningful long-term goals.

How it happens

Lifestyle creep typically starts when you get a raise or see your checking account growing to higher levels than you are used to. If you have money to spare, the easiest thing to do with them is to spend them. You reward yourself for the hard work you have been doing. A nicer car, better clothing, a first-class upgrade, you go out to restaurants more often, and so on.

The problem isn’t that we do all this. The real problem is that left unchecked, lifestyle creep can create bad habits. You get used to the lifestyle and what you initially thought was a reward now becomes a necessity. Slowly, you find yourself making twice as much money but still haven’t started saving for important things like retirement or your kids’ education.

A matter of mindset

The biggest issue with lifestyle creep is one of mindset. You start viewing discretionary and luxury expenses as necessities or something you deserve and overlook the opportunities that saving more could provide you. As a result, you may end up prioritizing spending relative to achieving long-term goals. If you are a high earner (find out here) and you often feel like you don’t know where your money is going, then lifestyle creep may be a problem.

Make a plan

The best tool to limit or eliminate the negative effects of lifestyle creep is a financial plan based on your values and priorities, even a simple one. The main benefit of a financial plan is to change your mindset, from just “going through” life to “having a strategy” to make the most out of your resources, including money. Lifestyle creep is a result of not having a strategy. Going through the process of identifying your values and setting measurable goals and actionable items can change your mindset. Kowing what’s really important to you can help you focus on it and lead to better decisions today. So our first advice is to think about why money is important to you and start planning.

Be aware of your spending habits

Lifestyle creep can start small and doesn’t have to be about luxury goods. It generally includes what we call discretionary spending. Discretionary spending isn’t just about things that you don’t need. It also includes spending on something more than what is strictly necessary, like buying a pro bike when you are only cycling once or twice a week (ouch!). The key to deciding whether some spending is good or bad, however, depends on your values and priorities. If fine wine is your passion, spending on wine is not a bad thing. To find out how well it aligns with your values, track your spending for a while. Try this challenge: write down all your expenses for 30 days. At the end of the period, compare your spending to your values and priorities. Is your spending in line with the things that matter in your life? After tracking your spending for a while, give budgeting a try.

Some other tips to control your spending

If you have worked on your simple plan and started tracking your spending, try some of these ideas to help you reduce the risk of lifestyle creep.

Pay yourself first. Saving is not a burden if you realize you are buying a slice of your most important goals. Automate some savings each month. You can reward yourself for this good behavior by also setting aside some ‘fun’ money.
Use goals-based investing. Writing down goals and setting savings aside for each goal helps you remind you what’s really important to you and gives you meaningful feedback. For example, if you are on target for your goals and find yourself with extra cash, you don’t feel bad about spending more.
Make gradual changes. As you track your spending commit to small, realistic spending reductions and commit that money to savings. Getting started is big progress.
Spend intentionally. Avoid spending for the wrong reasons, like things or features you don’t need just because you can afford them, but don’t feel bad about buying something expensive if you actually value it. Make a list of your monthly wants and don’t buy anything right away. Let it sit and go back to it after a couple of days to prioritize them.
Beware of debt. Debt is a commitment. Just because you have good credit and can afford to make the payments, it does not mean you should get the loan. When you take out debt, you are committing yourself to make payments for the duration of the loan. Every additional dollar of debt you have to pay back is a dollar you could use on something else.

Everyone deserves to indulge every now and then, so you shouldn’t feel bad if you don’t think you could live the same way you did during college or grad school. The key is to be aware of your spending habits, making sure they align with your values, and to understand the opportunities that saving today can buy you tomorrow.

Until Next Time!

Massi De Santis is an Austin, TX fee-only financial planner. DESMO Wealth Advisors, LLC provides objective financial planning and investment management to help clients organize, grow and protect their resources throughout their lives. As a fee-only, fiduciary, and independent financial advisor, Massi De Santis is never paid a commission of any kind, and has a legal obligation to provide unbiased and trustworthy financial advice.

For 2022 Make a Financial Plan!

For 2020 Make a Plan! | Goal Plan | DESMO Wealth Advisors, LLC

Forget new year or new decade resolutions. In 2020 make yourself the gift of a financial plan. If you think financial planning is boring and by the numbers, we are here to change that. A financial plan is much more than that. Keep reading and you will realize that financial planning is about making the connection between the tangible things in life, like money, and the intangible things that bring us life satisfaction, like watching your kids learn how to swim or helping someone in need. Life and money questions are connected.

Start simple

We are not talking about a 60 pages plan full of pie-charts, simulations, or accurate budgeting over the next 25 years. No, we are simply advocating for a simple plan that contains a few, carefully selected elements. This simple plan is a single page, written with a sharpie, and it may have no numbers. Take a piece of stock paper, divide it into three areas, and write as headers, from left to right: Values, Goals, Actions, like this.

The idea of the simple plan is to change your mindset, from just “going through” life to “having a strategy” to make the most out of your resources, including time, energy, passion, and money. Going through the process of filling this out will bring you awareness of what’s important to you and what’s not, so you can focus on the former.

Discover your values

The first benefit of financial planning is discovering your values. At DESMO, we use the word values to summarize anything important that you are trying to achieve in life. Money is important to you only to the extent it helps you achieve life satisfaction. You can’t start a financial plan without first thinking why money is important to you. So, the first step in planning is discovering, through deep thinking or a conversation with a trusted friend or advisor, of the really important things in your life. Examples are more time with your family, starting a business, spending time cycling with friends, and traveling to a new country every year. Having clear values is not just a step in creating a personal plan. Your values are the why of your plan. Values act as motivators, can help us acquire and stick with good financial habits and can get us out of negative thinking when things get tough on the way to our goals. Learn how to discover your values here, and write them down in the Value column. Use sticky notes to add color if you like.

Set life goals

“If you don’t know where you are going, you may not get there,” says Yogi Berra.

If values are the why of your plan, goals are the what. Use your values to set measurable goals that require planning to achieve. Determining goals is crucial in determining the actions you are going to take to maximize the likelihood of achieving them. Examples of goals are “save $X in 5-10 years to follow my passion and start my own business,” or “retire at age 60 with $Y per year available to travel.” Your goals have to be consistent with your values, so one way to set goals is to ask “what measurable result(s) will help me live up to my values?” Read our blog on how to set meaningful goals to get you started and write down a few, important goals that are consistent with your values. We have written a few blogs on retirement or education planning, which are common goals, so browse our blog page. If we haven’t covered your goal in our blog posts, let us know about it, and maybe we will. Write your goals under the Goals column.

What’s next?

Start with this simple question: “What can I do, starting today, that will get me closer to my goal?” And write down the answer. Repeat the question and answer as long as you want. Here are a couple of ideas, to get you started.

Get a clear picture of where you are

Knowing where you want to go isn’t helpful if you don’t know where you are. Do this by getting financially organized. Make an inventory of all the things you own and the things you owe. No need to get this down to the penny. Consider the things you own first. Your bank account, your 401(k) or similar account, any savings or investment accounts, your house, your cars, and other investment properties, like any real estate you may own besides your primary home. List them along with their values. Next, go through everything you owe. Your credit card balance, any bills or payments that are due in the next month or so, student loans, mortgage, car loans, etc. List them and add them all up. The difference between everything you own and everything you owe is your financial net worth.

The other key tool to help you get a good picture of where you are is budgeting. Budgeting is simply being aware of your income, expenses, and the difference between the two, which determines your saving capacity. We have written a few posts about budgeting, including a recent one on the XY Planning Network. To get started, read about our budgeting challenge.

It’s simple. Your goals tell you where you want to be. Your net worth tells you where you are. Your budget tells you about the path you are taking to get to your goal. There has to be alignment between these three, or chances are you won’t reach your goals. Read our blog to help you get financially organized and sign up for our complimentary tool.

Review your investments, talk to a Fee Only Financial Advisor in Austin TX

Think of your investments as tools to help you reach your financial goals. Wouldn’t it be great if your investments were working in sync with your goals? Unfortunately, that’s not how most people build their investments. So it’s always a good idea, as we review a plan, to think about this question: “are my investment aligned with my goals?” Go through our most important investment questions, and build investment guidelines that work for you. You may also want to think about managing your key risks. Do you have adequate insurance coverage? Think about life, auto, liability, disability, or potentially long term care needs. When was the last time you reviewed your insurance policies?

Conquer your fears

Many of us are afraid to go through this exercise because of fear of what we may find. But it’s well worth it. Many times our clients are nicely surprised by what they find. All their properties and investments are scattered through different accounts, so putting them together makes them realize they own more than they thought. And if that’s not the case, now you have information and a plan. You just started to make life changes, for the better.

Put it together

Here is what an investment plan may look like at the end of the process.

Yours may look completely different. You may need to review your insurance coverage, make a will or other estate planning documents, buy a boat to travel the world. All these are OK as long as there is consistency between values, goals, and actions. That’s it, you have your first financial plan!

Decide if you want to talk to a Fee Only Fiduciary in Austin Texas, Desmo Wealth Advisors can help

Go through this simple plan, get inspired, start working towards your goals on your own, then determine if you would benefit from talking to an advisor. Most fee-only advisors, like us, offer complimentary consultations, so talk to us. Don’t assume comprehensive financial planning with an expert is expensive and for rich people only. It’s much more affordable than you think, and the cost of not planning with an expert can be much higher.

Get started and commit to the process

You can be proud of what you have accomplished. Going through the process of putting together your plan is going to save you time and energy down the road. Think about the time and energy we normally spend just thinking and worrying about our finances. Having your values, goals, and actions clearly stated on a piece of paper brings awareness and focus. This focus can help you direct your time, energy, and money away from distractions and towards things that really matter to you.

Build momentum on what you just did. Go through the action list you just created. When you are done, review your values and goals, and update them as you go through life. Planning is a process, just like life. That is also why long financial plans and analyses don’t work. The key to a financial plan is to narrow your focus to what matters, and make small, consistent changes through time. So start with our simple plan and use it to build momentum.

Until next time!

#2020Plan

The Power Of Budgeting

Budgeting is the heart of financial planning. Achieving your goals starts by being aware of how you use your money, so you can make changes that align your money choices with your goals. Learn how you can create a budget and how to make it a central piece of your financial planning process.

Last month we proposed our 30-day spending challenge. We suggested, as a way to get most of the benefits of a budget without actually doing one, to track your spending for thirty days. I know some people did it and told me about the benefits of going through the challenge. Tracking your spending really goes to the heart of financial planning, which is making the best use of the resources available to you to achieve your life goals. Monitoring your spending for a while creates awareness of how you are using your resources now, and what you can do going forward.

So if you haven’t started it yet, there is no better time than the Holiday Season to track your spending. Whether you have done it or not, what are the benefits of the challenge, and what comes next?

Why do it?

You need to know where your resources are going to be able to make the best of them. After paying taxes, some of our money is used to cover basic needs, including shelter, food, and basic social interactions. After that we have what is called discretionary spending, which is spending on our wants rather than needs. What’s left after spending on today’s needs and wants can be saved towards future goals. By tracking our spending, we can create awareness about the relationship between our resources and our goals.

Night guy, morning guy

For most of us, there is a tension between our discretionary spending today and the savings required to achieve our long term goals. It’s what economists call a tradeoff. Many times, the way we make this tradeoff is exemplified by Jerry Seinfeld in his night guy, morning guy piece. We spend on things that yield instant gratification and we don’t think about our future selves. When you track your spending, even for just 30 days, you will start to make the connection between the two.

Small spending adds up

Ever go to the Home Depot, Ikea, Target, Pottery Barns, [you name it] wanting to get one thing? What happens next? You find ten other items on sale and all of a sudden you need a cart to carry them. We think we saved on great deals, but did we really? How much did we spend on things that don’t really make a dent in increasing our overall life satisfaction? If you write it down, you will see how much.

It’s quite likely that a few days after your excursion to one of the above places, you need to go to another one in the list. Do you remember what you did the previous time? Not really. If you tried our challenge you know this. As you write it down, you see that you have done it a few times in the past month. Small spending here, small spending there. And it adds up to an amount larger than you expected. Tracking helps you remember what you spent on and how much. After a while, you may realize that a sales sign does not necessarily means saving.

How does it feel?

We often desire shiny new things like jewelry, new clothes, expensive bikes, big SUVs, etc. Sometimes we even reason how the purchase will be valuable to us for years to come. How does it feel when we get the new thing? Remember that one of the things we suggested writing down along with the purchase was your feelings about it. Usually, we feel pretty happy right off the bat. Then what happens? That good feeling of happiness does not last very long. We get used to it, and move on to the next thing we desire. Why is that? Unless a purchase is aligned to our values and long term goals, happiness does not last. Go back to your notes. How many of the purchases are truly aligned to your goals? Be honest. I like to spend on cycling gear. I do ride a fair amount, and spending time outdoors riding is one of my values. But do I need the lightest, carbon-made bottle holders available?

Awareness, not judgment

Don’t get me wrong, tracking isn’t about judging or feeling bad about your spending habits. It’s just about creating awareness of your habits. If you see a pattern that is not fully consistent with your values, you have just found an opportunity to make a change that will make you feel better.

Your spending habits may also reveal something about your values. How we spend our money, and our time, may reveal what we really care about. If I consistently spend on cycling, maybe I should direct my efforts to cycling more, reaping greater benefits from my purchases, and at the same time reduce my spending on wines or movies.

Take it to the next level

If you haven’t started our challenge, the best time to do it is now! But whether or not you have been tracking your spending, here are some of the things you can do to make the most of your resources.

Work on your values

Read our blog on identifying your own values. Values are the why of our plan; they act as a motivator to work on your life goals. Combined with our spending records, values can help us identify areas that we can work on to save more or to get more value out of our money. Clear values will come to mind the next time you are flirting with bad habits, like overspending on something you don’t need just because it’s on sale. Reviewing something we believe in during tough times can appeal to our aspirational nature, and help us find the strength to overcome setbacks. Research in behavioral economics and psychology backs this up.

Try budgeting

We used the 30-day spending idea to get the most out of budgeting without actually doing it. Realizing how valuable this awareness can be, why not give budgeting a try? Here are a couple of ways to get started. Continue for another 30 days, or even 60. This will give you a total of 90 days if you have done our 30-day challenge. Three months is a good amount of time to be representative of what your spending looks like on average. Then group your expenses into

Fixed necessities (rent, loan payments, health insurance premiums, etc.)
Variable necessities (utilities, taxes, food, home or car repairs)
Fixed discretionary (club dues, various subscription services)
Variable discretionary (entertainment, vacations, eating out, most wants purchased as lump sum)

Why these groups? Necessities cover your needs, so there isn’t much you can do to reduce them in the short term. Knowing how much of your spending is variable can help you understand how much your needs may vary month over month. Discretionary items are ones you can work on to reduce or control your spending. Discretionary isn’t just an expense that you don’t necessarily need. It also includes spending on a good or service more than what is strictly necessary. Everything in the fixed category is a financial commitment. It may take longer to change those spending items than changing variable discretionary spending. Consider this the next time you make a purchase that requires a long commitment.

Budgeting as a guide

Once you have divided your spending and identified your values and goals, you have great information to take the next steps. What do you need to change? What are you willing to change? Plan to make the changes for the next 30 to 90 days. Use an app, like our complimentary budgeting tool, to monitor your spending and stay within your goals. The budget will give you a yardstick to measure your progress towards your long term goals. Stay within your budget and celebrate progress at the end of your 30 days!

Life and Money, the two sides of planning

At DESMO, we emphasize the importance of planning, and not the plan itself. You can create the most detailed plan, only to put it in a drawer and never follow it. Planning is a dynamic process where we link your money choices with your life choices over time (Desmo is a Greek word that means link). The process we offered through our challenge is an example of that.

Start by setting your values and goals. Monitor your spending. Review your goals, and revise if needed based on your spending habits. Review your spending, categorize expenses. Set spending goals. Follow your budget guidelines. Celebrate progress, you are getting closer to what really matters for you. Set goals, monitor, review, revise, and repeat!

Happy Thanksgiving from all of us at DESMO Wealth Advisors, LLC!

Until next time!

Massi De Santis is an Austin, TX fee-only financial planner. DESMO Wealth Advisors, LLC provides objective financial planning and investment management to help clients organize, grow and protect their resources throughout their lives. As a fee-only, fiduciary, and independent financial advisor, Massi De Santis is never paid a commission of any kind, and has a legal obligation to provide unbiased and trustworthy financial advice.

#2020Plan

What Is Budgeting Anyway?

If I told you there was a tool that can help you reduce unnecessary spending, solve your money problems, and achieve your financial goals, would that get your attention? Probably. If I told you that tool was budgeting though, your reaction would be more like, “what else you got?” There is just something about the word budgeting that makes it uninviting. And it maybe even more off putting if you actually know what budgeting is. Carl Richards of the Behavior Gap compares budgeting to flossing. We know flossing is great for you dental health, but most of us do regularly only around dental visits, about two weeks a year. With budgeting, we may get started along with all our New Year’s resolutions, but we how long do we keep up?

Our Challenge

So, as I was thinking about a budgeting post, I asked myself. What if there was a way to get most of the benefits of budgeting, without actually doing it like a financial planner? I thought about it, I asked Carl Richards, and I came up with a fun way to start. And I challenge you to try it, starting today! Post about the challenge on our facebook page! At the end of it, you may want to pick up budgeting. If not, I am sure you will learn something valuable about yourself. Now, if you already do budgeting, just like flossing, keep doing what you are doing, you are doing great! But join us anyway, you may learn new things about yourself.

Awareness without a budget

Here is the big idea. If you want to get good at anything, where do you start? The answer is awareness. You need to know your strengths and weaknesses. Only then can you hope to improve your game at anything, from sports to enlightenment. Budgeting is so crucial to financial planning because it brings awareness about your financial strengths and weaknesses, and you can use this awareness to achieve your life goals. I am happy to tell you more about budgeting and how we do it with our financial planning clients any time. But is there a way to increase financial awareness without setting up an actual budget?

Just track your spending

So here is the challenge. Give it a shot. Track your spending for the next 30 days. Yes, that’s it. Don’t worry about what app to use. The best way for the purpose of awareness is writing down each purchase. Just carry around a pen and a little notebook, and each time you make a purchase, write down what you spent and how it made you feel. This is a no questions asked, no judgment exercise. Just behave as you normally would, and simply track spending. If you think tracking your spending affects your behavior, write down how it does so. At the end of the 30 days, go back through your notebook and just notice. Become aware. That’s it.

You can use apps and your phone or tablet if you want. Use Notes or Keep, or your favorite note tracking app. You can use Mint if you like. But I suggest simpler is better for this exercise, so find a little notebook and start writing. Make this fun, challenge your significant other or best friends to do it. Remember when you walked around the office with the step pod or fitbit to measure your steps? A spend-tracking notebook is way cooler.

Focus and awareness

Here is why it works. For each expense over the next 30 days, you take an extra moment to reflect on that spending, just by writing it down. That’s why I suggest writing; it increases your focus and awareness. You can learn a lot about your behavior in 30 days.

At the end of the 30 days of tracking, review your spending notes. You will notice certain habits. Maybe you’ll be surprised by how much you spent on cycling gear, those wine bottles you had to try, or the expensive yoga clothing. And that may or may not be bad. If one of your values is to spend time cycling, wine tasting with friends, or doing yoga, at least part of that spending aligns with your values. If you find it is all of the above though, chances are you are overspending.

What’s Next?

First, make a connection between your spending and your income. Categorize your entries by essential and discretionary. A discretionary expense is something you could do without, or that is more expensive than necessary. Be careful what you determine as necessary, cable or frappuccinos aren’t (what is a frappuccino, anyway?). How large are your essential and discretionary expenses as a fraction of your income? If you find you have a lot of discretionary expenses, there is good news: you have room to improve!

Review the values we have worked on here. Does your spending align with your values? If not you have to consider whether to change your habits or your goals and values. There is no right or wrong answer, and now you have the information to make the change. It may be OK to spend on wine if time with friends is one of your values and you like to share your passion for wine with them. You may just have to consider how this value ranks with others in your life.

Just do it

There are two main reasons why you may want to avoid my challenge. One is that you already know where your money is going. You think you got it under control. I hate to break it to you, but you don’t. When it comes to spending, there is our spending self, great at rationalizing all our spending, and then there is the truth. We don’t know the truth unless we see it in front of us. So I challenge you to take our challenge. The second reason may be that you are not sure you really want to know. But this exercise isn’t about making us feel bad. There is no judgment. It’s really simply about observing our behavior. The behavior may reveal something about our values, and can help us prioritize our goals going forward. So it is just as much about finding what matters to us than it is about changing behavior.

Start our 30 days awareness challenge today! Then read our post 30 days from now to learn what to do next!

Until next time!

Massi De Santis is an Austin, TX fee-only financial planner. DESMO Wealth Advisors, LLC provides objective financial planning and investment management to help clients organize, grow and protect their resources throughout their lives. As a fee-only, fiduciary, and independent financial advisor, Massi De Santis is never paid a commission of any kind, and has a legal obligation to provide unbiased and trustworthy financial advice.

#2020Plan

The Best Time Is Now!

Mailchimp says the best time to build a marketing mailing list is when you first get your business idea. But if you didn’t do it then, the second best time is now! When you think about it, the same goes for many other things. The best time to join a gym is when you first get the idea. The second best time is now. The best time to start studying for a test is when you start the course. The second best time is now. You get the idea.

Last week we talked about retirement planning. The best time to start savings is when you get your first paycheck. But what if that’s not you? What if you rarely thought about 401k decisions and your retirement plan? Or maybe your retirement plan is OK, but you have been putting off something else important, like planning for your children’s education, reviewing your insurance needs and coverage, your student loans, you name it.

Don’t Get Discouraged

If you feel this way, know that you are in good company. Most of us feel the same for one reason or another. With limited time on our hands, we simply tend to prioritize things that give us instant gratification or solve an immediate problem over things that may be more important but don’t affect us right now, like retirement or estate planning. One reason we may put something off is that we perceive it as overwhelming. Financial planning can certainly feel that way. If you are a family with young children, you probably have to think about your career plans, insurance needs, mortgage payments, your children’s education, your retirement plan, and basic estate planning on top of everything else that affects you right now. Where do you even start?

Another reason we put off planning is that we may hear advice that we believe is unattainable. For example, you may have heard that to retire comfortably you need to replace 80% of pre-retirement income, or that you need to accumulate 25 times the retirement income you want in retirement. Say you make $100,000 now. These rules of thumb mean you need to generate income of $80,000 a year throughout retirement, which you can do if you accumulate $2,000,000 by the time you retire. Many of us don’t even want to go through these calculations for fear of what we may find.

Start today!

Whatever the reason why you have been putting off important plans, don’t get discouraged and take some action today. First, you get a hug from us at DESMO. Like us on facebook and we’ll like you back. You got this. Then, forget about rules of thumbs or the idea that planning is painful and overwhelming. Here are two simple ways you can go about this today:

You focus on making a few, high impact actions, starting today;
You hire a certified financial planner or CFP®.

Let’s discuss (2) first, as it’s the simpler option. Many good planners make it really easy to schedule a consultation from their website. They usually have a button that works like this. I suggest you look for a CFP® professional because they adhere to a higher set of ethical standards for clients, and are trained in comprehensive financial planning, the only way to have a truly personal plan. Look for someone that you can connect with. Hiring an advisor is like hiring a personal trainer to help you reach your fitness goals. Besides being the expert, the advisor acts as the ‘workout buddy’ you need to accomplish your life goals.

There may be two types of deterrents to working with an advisor. One is cost and two is having enough money to invest. You may think: how can I add this cost if I am already behind with my savings? Keep in mind you are not simply paying for a plan or a service. You are paying for a better outcome. If the outcome you can achieve after paying the cost is better than what you can achieve on your own, the cost is worth it. Some advisors may require a minimum of investable assets, like $300,000 or $500,000 to invest with them. That’s typically because they charge you for managing your money, and include financial planning as a free service. Usually you get what you pay for, so seek fee-only financial planners that charge for the financial planning service and don’t have a minimum requirement. At DESMO, we believe everyone deserves a personal plan and so we have no minimums.

Now let’s discuss (1). If you are a DIYer and aren’t ready for the help of a planner, focus on making high impact decisions today. First, get financially organized. As we discussed here, financial organization equals awareness. You can use this awareness to set realistic goals and find ways to save more towards them. If your main goal is retirement planning and feel you are behind, save as much as reasonably can, and review your cash flows regularly for ways to increase your savings. Take a look at our guides, and read up more on the subject of planning. A good book to start with is The One Page Financial Plan, by Carl Richards.

Whether you hire a planner or decide to improve your financial wellness by yourself, the best time to act is Today, so don’t wait!

Until next time!

Once More with Passion: Let’s Get Financially Organized!

Find Your Focus | Tools | DESMO Wealth Advisors, LLC

Why? You may ask. I already have trouble keeping my room or office tidy. I get it. But trust me, it pays off. You will thank me later. Getting your financial house in order has a number of immediate advantages, nicely organized below.

A catalogue of your most valued possessions. You may find you own more than you thought, or highlight things may be you don’t need to own. This may help you “declutter,” an investment wisdom that helps you align financial possessions to life goals.
Increased awareness. What’s the best way to improve your golf swing, or your freestyle stroke if you are a swimmer? Take a video. Seeing is believing. Getting organized lets you see at least two things:
- Your net worth. This is the sum of everything you own, like your house, your IRA investments, etc. minus what your owe, like your mortgage and other loans. Your net worth can tell you how close you are to achieving your financial goals, like . It’s one of the measures you can use to monitor and celebrate your progress, or to make adjustments if you have a setback.
- Your statement of cash flows. This is the sum of all your income sources, including wages, rental property income, etc. minus all your expenses. The greater this number the more cash flow you generate that can be used for your long term goals.
More savings. You never realize how much you can cut spending until you start looking at your spending patterns. If you need to save more towards your goals, dig deeper into your spending patterns. We can all find expenses we could have avoided. Wait, did I really buy that second mountain bike?
Helps you align your behavior about spending and investing to your goals, and give you the best chance to actually achieve them. It’s simple. Your goals tell you where you want to be. Your financial dashboard tells you where you are. Your statement of cash flow tells you about the path you are taking to get to your goal. There has to be alignment between these three, or chances are you won’t reach your goals.

I realize that point two may be a contentious one. Many of us don’t want to see because we are afraid of what we may find. This should not discourage you. First of all, you may actually realize you are more on track than you think. And if you find that’s not the case, what you see can help you find a solution to your problem. The sooner you act the better.

Key Steps

OK now, If you can’t wait to get started, here are four steps to get financially organized.

Start using a password manager.
Start using a password manager. Yes, this is so important, I thought I should say it twice. I too, thought I could just use one password for everything or write my passwords down in a secret little book. But that’s when all I was doing on line was checking yahoo mail or bidding on ebay. Now we run much of our lives online. Real cyber security experts suggest the use of password managers like LastPass, Keeper, etc. Beside cyber security, the password manager generates strong passwords so you don’t risk running out of ideas, and it remembers them for you! Plus, you can use it across all your devices. I don’t remember having to reset a password since I started using a password manager, because my app always remembers them!
Use technology like Mint, RightCapital, Personal Capital or others to link all your accounts. All these can create a net worth statement and will monitor your spending. You can do this in minutes if you have a password manager.
Start paying attention to your spending habits!

This process works best if it is integrated in a comprehensive financial or investment plan.

So check our website to learn more about how our investing and planning approach can help you achieve your life goals, particularly if you aren’t convinced about financial organization yet!

Until next time.