6 Steps for Re-tooling Your Finances
What does your financial life look like? Does it cause you stress and create tension in your household? I know that it took me years to figure out how to adjust whenever our financial picture changed or we encountered some unexpected expense. Whether it was when we joined the military, got married, had children or life event we hadn’t anticipated we had to adjust to each situation and learn new skills to deal with these new financial demands. And it wasn’t easy.
But I know that the sooner we were able to make the adjustments my life became a lot less stressed. So whatever the case may be, there are some specific action steps that you can take so you can re-tool your finances, understand the foundation you are working from and create a solid financial plan. Re-tooling your finances is key to calming the chaos that often goes along with military life!
1. Do a financial Check-up
Like going to the doctor, having regular check-ups for your finances helps you keep things functioning properly. It is important to lay out what is going on so that you can have a realistic view of where your money is going. Trust me, like with any illness, early identification of future problems allows you to treat and take care of them before they get out of control. And that is what a financial check-up is all about.
It isn’t to feel bad or beat yourself up if the diagnosis isn’t pretty, it’s about looking at your income and expenses and finding out where you are right now in this moment. This process is an important part of identifying what is working and what isn’t. And the benefit is that it allows you to see your financial life in a neutral way providing you a basis from which to work.
2. Understand your relationship with money
As with all relationships, money is no different; there are those of us that have a healthy relationship with it while others are dysfunctional. So I ask you, what is your relationship with money like? Do you hate money, resent it or stress over it, or do you have a respect and appreciation for it? Are you an impulsive spender or a budgeter? Neither is right or wrong, but if you don’t understand how you relate and interact with money, you can’t have a relationship with your finances and you can’t be stress free in your life.
The ability to have a balanced and healthy relationship with money is very similar to our ability to have a healthy personal relationship. In order for it to work, there needs to be open communication, honesty and focused attention even when things aren’t going well. Take the time to look into how you relate to money. Determine if you are committed to a lasting relationship that is in your highest good, or if you need to step it up a notch and work on repairing what is broken.
3. Identify your spending habits
What kind of spender are you? Do your spending habits work for you or are they in need of some TLC? Do you purchase based on your needs or your wants? To find out a little more about your spending habits, pull out a few of your credit card or bank statements. Highlight the items that were necessities and underline those that you just wanted or bought impulsively. What do you see?
Did you cover all of your needs or spend irresponsibly? Learning how & why you spend and planning out a budget that takes that into account will not only support you in meeting your long term financial goals, but it will help you adjust to any new situation that comes up in your life.
4. Educate yourself about money and finances
Learning new skills and techniques is an ongoing process, and as you are faced with new events in your life you will also need to educate yourself on new financial matters. A young couple may not think of life insurance until they have children, a service member doesn’t think about retirement until their ETS date is on the horizon. We all have different needs, but the commonality is that we need to educate ourselves as much as possible.
Some people get the most from reading a book, while others need to listen to a tape, attend a lecture or work with a financial counselor. No matter what your style, it is important to educate yourself and learn the new skills to adjust to the changes in the demands on your income and make plans to prepare for the future. It’s for these reasons that it is critical that we align ourselves with the right people and companies that can educate us and keep us informed. It’s one of the reasons I love AAFMAA and their staff – they identify my needs and goals and help me understand how to best set my family up for long term success. Definitely the first call to make as you move on to step 5!
5. Make a plan
For many people this is the difficult part, and if you are like I am I hate living on a budget or making a plan. However making a plan and sticking to it is key to making your finances work for you and if you look at your finances realistically there really is nothing to hate. By using the information you have collected in the previous steps, you can create a spending plan that is designed to work in your life. No stress, no anger just a plan you can follow. The best financial plans will include a working budget, savings goals for the short and long term, investments, insurance, charity contributions and anything else you choose. It’s not about how much is in each category. The important thing is that you have a balanced plan developed out of your real life situations.
6. Review and make adjustments regularly
Once you create a plan, like most things in life, that plan may need to change if it is something you want to stick with. So many times when we think of budgeting we forget that we are the ones in control, not our cash (or lack of it). The most important thing you can do is to be flexible, evaluate regularly and adjust where it makes sense.
No matter what stage you are at in your life, developing a healthy relationship with your finances is critical to a life that is stress free. And a healthy relationship begins with education, understanding and planning and ends with peace of mind, balance and stability. By taking the time to retool your finances you can enhance your life and live the life you dream of.
About the Author
The Direction Diva is a motivational speaker, blogger, and author who is the expert in helping Military Spouses move Beyond Logistics toward a better life.