ABCs of budgeting # 2 (and no, ‘Budget’ is STILL not a swear word)

budgeting

I am so glad you haven’t run for the hills! Before we roll up our sleeves and get into this second of this series of three blogs, let’s do a quick review of the journey we have started.

  • You do not have to like or be good at numbers to succeed at budgeting, but you do need to be an adult about it
  • Though life cannot be reduced to numbers, keeping record of yours is necessary to keep you from spending money without thinking
  • Your subconscious biases, fears and needs to self-soothe are often stronger than you suspect
  • You did not die from exploring your spending habits

Monetary Manifesto! All Power to Me!

First things first. Where are we going?

Every political party needs an election manifesto! How else would you know what the party stands for, what it promises and how it says it is going to do what it says it is going to do? What can make or break your Monetary Manifesto is the language used. It needs to be clear, positive, descriptive, brief and easy to understand and remember.

In this instance, your Monetary Manifesto will describe your financial vision and will outline the steps you plan to take in order to turn your vision into a reality.

If you are new to budgeting or have let it slide for a while and now need to pick things up again, you are going to have to convince yourself of staying the course. Remember, Homo Sapiens makes a sport out of resisting change! If you want to change the way your life is being governed, you are going to have to be elected as the leader. Confused?

We carry with us many memories, experiences and personality traits that influence how we make monetary decisions. I like to think of them as your Inner Constituents. There might be your Mother, your Inner Rebel, your First Economics Teacher, your Inner Geek, your Inner Child, your Spiritual Leader, your Inner Grumpy Teenager, your Inner Worry Pot, or your Inner TV Guru.

In order to get constituents to vote for them, party leaders have to convince their electorate that they are the best candidates for the job. How do they do this?

  1. Meeting and greeting their constituents

    You need to know and acknowledge ‘your’ people if you want to build loyalty amongst your followers. Who are the characters in your head that influence financial decisions? As mentioned, these may be the voices of the past or present. They may also be parts of your personality.

    Before you write your Monetary Manifesto, spend some time ‘interviewing’ your most influential constituents. On a piece of paper, write them down, given them names even. What are their concerns? What are their priorities, functions and responsibilities? Their needs? Are they worth listening to in the current moment? How, if not looked after or listened to, could they sabotage you?

    Your Inner Child may tend to derail your budgeting attempts, by giving you sudden urges to buy sugary treats when you are feeling upset but you won’t admit it. Maybe you are bored, but are feeling that work needs all your attention right now. This is the time when that Inner Good Food Snob can suddenly make you crave interesting new dishes from that bustling Indian Restaurant on the Corner you’ve been eyeing.
  2. Being clear about what is ‘in it’ for the constituents

    There is a reason why Life Coaches say you need to not just ‘think it’ but also ‘ink it’. Our daily lives have evolved into an endless stream of high speed, complex information processing experiences. We can easily get lost in the detail. We need concrete reminders (experts in psychology say written notes are best) and we have to read it, often.

    Having clear goals is really important, but you also need to remind your constituents WHY you have these goals, in order to strengthen morale and bolster motivation. As this is a democracy, you write the rules, but please be brief, or your audience will fall asleep. A good rule of thumb, the experts say, is to keep to-do lists down to the length of your thumb! (For most people this means no more than five items).

    Here are some of the things you could think about:
    1. Core Beliefs, Norms and/or Values

      Here you can consider things like:
      • What have I learnt about money that I want to hold onto?
      • How would the Best Version of Myself handle money?
      • What do I believe about money and Significant Others?
    2. Vision

      What would you like your world to look like? (Think long-term here and try to capture the big picture)
      • Do you want to make sure you will stay financially independent throughout your life?
      • Do you want to make sure your children will not have to worry about money?
      • Do you want to increase your wealth so that you can look forward to amazing Golden Years full of adventures?
      When you are done, rewrite them in order of importance to you.

    3. Mission

      Here you want to investigate the vision in terms of what it look and feel will and smell and taste like. You want to tell yourself what your world will look like, once you have succeeded in implementing your vision. For example:

      Vision statement:

      I will make sure my children will have enough money to get on their feet

      Mission: I will set up a fund for each child to secure their education and make it possible for them to start their own ventures when they graduate.
    4. Road Map

      Here you break down the statements you made above even further. You want to establish for yourself what the five most important milestones would be along the journey of realizing your mission. For example:

      Vision statement: I will make sure my children will have enough money to get on their feet

      Mission: I will set up a fund for each child to secure their education and make it possible for them to start their own ventures when they graduate.

      Road Map:
      1. Set up a schedule of regular appointments with my Financial Advisor to discuss investment possibilities
      2. Write and add clauses to my Will regarding expectations of the children and how and when the monies is to be made available to the children
      3. Have formal conversations with the children before each transition period (like High School) to give feedback on investments and discuss the next set of goals for both them and myself/the investment
      4. Review saving and investment goals annually with the help of my Financial Advisor
      5. Celebrate each major achievement of a goal by the children on their educational and vocational path with a trip to a destination of their choice


      When you are done, read through the whole document and sign and date it. You may want to run the document past your Financial Advisor, as there may be investment and tax implications for you.
  3. Building a good track record

    You may feel deeply inspired right now to invest 70% of your income, cycle to work and live off Salticrax for the next ten years. The first principle of building a good track record is this: don’t make promises you cannot keep. Sustainable change does not happen overnight. There is a lot of living that needs to be done in between your earnings, savings and investments!

    Your Financial Advisor can help you set up an emergency fund for life’s famous curve balls. They can also give you insight into the factors outside of your control that may influence your plans, such as new taxation rules, changes in investment legislation, economic, social and political trends, and new investment possibilities.

    As you implement steps towards your goals, you will find your own motivation to stick to your goals increase. Your confidence will grow and you will build financial literacy. This will be your track record!

Good leaders don’t know everything but they know good people

Good leaders don’t profess to know everything, but they surround themselves with good people who know stuff. One of those that should be on your winning team is a Financial Advisor who can be your sounding board, your coach and your accountability partner. At NFS we want you to not only win the election, but learn to govern well and prosper.

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