Where To Start.
(Deep breath) Embrace the suck and dive in.
Truth time: months ago, when I first realized I needed to figure out my finances, I almost stopped before I started. Why? Because I absolutely suck with numbers. And what skills do you need to figure out finances? A sound knowledge of those numbery things.
If you’re among the blessed and are a “numbers person,” I salute you. You speak a language so foreign to me that I get cold sweats thinking of completing my taxes without the help of TurboTax.
Yes, as a “non-numbers person,” I could have easily gotten discouraged and washed my hands of this entire saving 50% of my income goal. But I didn’t do that, oh no. I took a deep breath and embraced the fact that I suck at number related activities. From this place of acceptance, I began to slowly develop some applicable skills.
Wherever you are in life, if you want to make a change (related to your finances in this case) you need to accept the fact that you will likely suck at some (many) things in the beginning. You’re going to make mistakes. This goes for everyone, no one is immune. It will take time to build skills that seem foreign and awkward at first. This is a core component of change, so toss the notion of being perfect out the window.
Once you accept this truth, change becomes less scary. Yes, you will mess up. You will suck at first. But don’t worry, we can suck together. I say, embrace the suck and dive in. That’s ultimately how you learn, grow and get better.
Start With A Specific Goal
Knowing you’re not going to be perfect off the bat is one thing. Knowing where to start, well that’s a potentially crippling place to be. Trying to create a savings goal can be overwhelming - how much money should I save? How much is enough spending money? What percentage is the right percentage of my income to save? Do I need to save more than that Steve guy at work??
Everyone has their own unique life and personal circumstances to reflect on before selecting a goal. What I can say is that getting specific is very helpful. I embrace the idea of selecting a percentage of income because as a non-numbers person, it’s easy to figure out with the help of tools (enter stage right, the world's BEST percentage calculator).
To better explain, let’s walk through an example. Let’s say your take home is $4,500 a month, and you want to save 20% of your income. 20% of $4,500 is $900. Subtracting this from your total monthly income leaves you with $3,600 to play with or live on. (Yay we did math! Go team!)
Ok, so now what? You’ve selected a goal. Great! You now need to act on that goal. But how?
This is where it gets (deep breath) real. Once you’ve established your goal (whatever it is), you need to make it non-negotiable. Using that example again, you would accept that the $900 you’re saving no longer exists. You no longer have access to it because it’s spoken for. Put another way, you just got a $900 a month pay cut. Harsh? Maybe. Effective in demonstrating the kind of mindset shift needed to accomplish your goal? You bet it is!
Rather than starting from a place of trying to figure out how much money is enough spending money per week or how much money you *want* to have access to per month. Start and operate from your specific goal instead. This will help shift your perspective to embrace living within the means (or savings goal) you have established.
Figuring Out Where the Heck Your Money Is Going
The quickest way for anyone to get a handle of their finances is to intimately understand where their money goes over a set chunk of time. Since our monied lives tend to revolve around monthly payment schedules, tracking your monthly expenses (in detail!) is the best place to start. (Cringe…I know.)
Personally, I resisted doing this for quite some time. I knew spending more than what I was bringing in was bad, but the thought of getting specific about where my money was going made me want to barf. And what a boring exercise, can’t the money just save itself?! No Jill, no it cannot.
Much like setting a specific goal, knowing the specifics of where your money is going is crucial. I know it’s scary to get intimate with money (think of where those dollar bills have been! Ew.), but it’s in the specificity of daily living where savings exist.
Mindless spending - signing up for forgotten memberships or buying that extra pair of workout leggings because they were on sale regardless if you needed them or not - is how money gets sucked out of your life. Trust me on this. Start tracking. Gain a knowledge of your spending habits.
And trust me, I get it, observing yourself can be difficult, icky even. But, when you first start tracking how you spend your money, it’s important to not judge yourself. Think of this as your “financial discovery phase.” Explore your habits with curiosity, allow yourself to learn more about your behaviours without bias or judgment.
Keep It Simple
As a non-numbers person, I wasn’t sure where to begin. I did a little research and decided to start tracking my expenses using a Google Sheet. In order to stay on top of said tracking, I purposefully set time aside each weekend and went over what I spent that week, tracking (deep breath) everything. EVERYTHING. It was difficult. The Amazon purchases alone…ugh.
To make this painful activity a bit more palatable, I decided to build it into a ritual. I completed my tracking as I enjoyed a morning coffee, and over a few weeks it actually became a fun exercise. I highly recommend building expense tracking into something that you associate with pleasure and/or comfort. Honestly, over time I found carving out 15-20 minutes to nerd out on my money per week a worth while activity. It was one of the best things I could do. I embraced the suck, failed a few times, but I developed a rhythm. (And you can too!)
Once you get into a good flow of tracking (which can be done retrospectively), a picture of your costs will begin to emerge. (I think this is what they call adulting!)
A Word On Tools
If you’re like me, a non-numbers person, I cannot stress this enough, keep the tools you use as simple as possible. I repeat: KEEP IT SIMPLE. There are a plethora of tools and apps out there for tracking expenses, a lot are free, some have a small fee attached. These templates are built to capture all possible expenditures and use different equations that may go beyond your skills and knowledge. I would suggest using a tool you understand - whether it’s the classic pen and paper or a complex spreadsheet - and keep it aligned to your knowledge and understanding so you can make changes if you need to.
I personally like using Google Sheets because they are so versatile and easy to use. Never used a Google Sheet? Here is a blank expense tracking template I created, feel free to use it, or create your own! And if Google Sheets and spreadsheets are intimidating to you, all you really need to know is =SUM. Here is a simple resource to understand its use.
Above all, remember tracking expenses isn’t rocket science, this is simple arithmetic. If anyone tries to tell you any different, they are lying.
Know Your Costs
In listing and tracking everything I was spending, two trends started to appear. I noticed I had two kinds of costs - fixed costs (like rent, which stay relatively stable) and variable costs (these have the greatest potential to fluctuate). Variable costs can be things like subscriptions or the range of money you spend on groceries.
Note: this is a simplified way of understanding more complex business terms - business bros, don’t come for me - if you’re interested in learning more, check this resource out.
As I started to understand where my money was going, and what my fixed costs were, I came to see my actions in a different light. Though it was tempting to berate myself - and I did at first, about how many “wrong things” I was buying and how I was mindlessly spending my money - I slowly started to see that I could choose where my money went. And this was an empowering place to arrive at.
Once you understand what costs are locked in (like your rent or mortgage) and what costs can be altered (like that lost-to-time subscription to a Golf magazine), you start to see where the wiggle room in your finances exist. This knowledge, paired with your savings goal, allows you to assess where you can cut costs and how you might be able to live off that $3,600 per month rather than the $4,500.
At the end of the day, your money is your money, and it’s a powerful thing. By tracking and understanding where your money goes, you shift from a somewhat ignorant mindset to a fully knowledgeable mindset. Your money (or power) becomes knowledge. And this allows you to invest your power consciously, and with purpose. Begin to tackle your financial goals from a place of knowledge. Get tracking, and get knowledgeable.
(Deep breath) We got this.
Thanks for the template! (Also trying out the comments on this bad boy)