Is making better financial decisions on your list of New Year’s resolutions? Our former Director Xiomara Lorenzo shares her 2017 resolution story and gives her #nofilter perspective on budgeting.
What do you think is the most common New Year’s resolution for 2018? If you thought “getting more exercise” or “eating healthier”, you got it! They are tied at the top of the list. But there is one more resolution tied for the top spot: “Saving More Money” (a.k.a better budgeting). According to The New Year Survey by YouGov, 37% of respondents reported one of these to be a New Year’s resolution for 2018.
As I thought more about these top three resolutions, “wellness” surfaced as the key theme. A resolution of “getting more exercise” or “eating healthier” can help people work toward better physical and mental health, and “saving more money” points toward better financial health.
Physical, mental, and financial health are all really important components of overall personal wellness. They’re all related. For example, stresses in one’s financial life can have a big impact on both physical and mental health. And vice versa.
All of these top resolutions are definitely easier said than done. So how do you get there?
Ground yourself in the understanding that you won’t have a perfect solution right away. You’ll have to learn what works and what doesn’t work for you. It’s ok to make mistakes and learn by trial and error. It’s just important to get back on track.
Create momentum. What will allow you to make the changes necessary to reach your wellness goals? Automated savings and routine money check-ins are great action steps. When I headed up the Design Research team at Society of Grownups, we found that the majority of Grownups were not using digital tools to help with personal finances outside of their bank’s mobile app, Microsoft Excel, or notebooks. More recently, according to Sofi, “only 10.8% of 25-34-year-olds have used digital tools to actually achieve financial milestones”. Using savings & personal finance apps are an excellent way to help you get your footing and can supplement what you’re already using.
Put your learnings to use. Of course, the theory of these steps sounds great, but does it actually work? My wife and I have been working on the “saving more money” resolution for a bit more than a year now. Getting started was a tough step and it’s been a long process, but we’re in a better place now.
As I reflect back on our quest to save more money, I realize that the progress we’ve made can be largely attributed to learning about ourselves. Here are a few of the things that we’ve learned along the way:
Understanding our past helped us plan for our future. We spent the first part of 2017 using tracking apps like Mint & Albert to review a few months’ worth of our expenses. Not only did we see where all of our money actually went, we were able to reflect on why we made certain purchases. This understanding helped us to identify how much we wanted to spend in certain areas and to know where we were going overboard – such as take-out meals, which were costing us $200 more than our food budget each month. Take-out meals felt good at the time because of the convenience but seeing them add up put things into perspective. So we decided to incorporate more meal planning in order to direct savings toward bigger goals, such as weekend getaways with friends and a summer trip.
Our monthly expenses are definitely not consistent. Even though we have some fixed expenses like our rent and student loan payments, we realized our monthly expenses fluctuate quite a bit month to month. The unexpected expenses like when our front car bumper needed to be replaced (Hello! $1000 deductible) and the non-fixed expenses such as our heating bill made it difficult to settle into a budgeting routine. So we concentrated on planning ahead.
We do best when we outline, estimate, and set money aside for bigger annual expenses. For example, my wife and I planned ahead for our bi-annual trips to Costco. We outlined our typical Costco list and we estimated how much we would spend. Then we created a plan to set money aside for our Costco shopping. We use an app called Qapital to set savings goals like Costco runs and use its automatic savings feature to fund them. But to be honest, sometimes we underestimated – like budgeting $400 for our first Costco trip and really spending closer to $600. Initially we were annoyed that we miscalculated, but it turns out it was a great learning opportunity and now we set more funds aside for it.
Just like setting aside time and energy to exercise more, refining your budgeting plan is all about trade-offs. You may have to make some sacrifices now in order to reach your future financial goals. And a big key to the process is to cut yourself some slack. It’s OK if you skip a day at the gym or have a few cheat meals here and there. It’s OK if you feel a little guilty about the impulse gift you bought on vacation. That’s life. The important part is getting back up, understanding why you made that decision, and putting those learnings to use so that you can get yourself back on track.
So how can you start getting yourself back on track? Check out our online course Spending Plans: A Better Way To Budget to learn more. And make sure to tune in next month for some more True Reflections.
As former Director of Society of Grownups, Xiomara brings together deep expertise with consumer-focused investment and retail banking research, while wearing the latest in 3D printed fashion.
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While Society of Grownups hopes the information is useful, it’s only intended to provide general education. It’s not legal, tax, or investment advice, and may not apply or be useful to your specific financial situation. If you need recommendations geared to your personal financial situation, schedule time with a financial planner.