This week, my friend, Kim, over at Eyes on the Dollar has been focusing on the money excuses we make and invited us to write about some of the excuses we regularly hear. Ironically on Monday, I already debunked a popular excuse/myth that teaching kids about money ruins their childhood. It doesn’t. If anything, it makes their childhood better. Since money excuses hold so many people back from living the life they want, I wanted to share some tips on how to go from cannot to can do on two common money excuses.
When I ask people why they don’t follow a budget, this is the most common response. Can I let you in on a little secret? Budgets are only as complicated as you make them. They don’t need to be difficult or require a PhD to be effective. The best budget is the one that keeps you honest (i.e. not spending more money than you have) and will follow. The truth often lurking behind this excuse is that you don’t want to live within your means because it means saying “no” to the fun stuff. Or so you think.
Once upon a time, it was much harder to live beyond your means, but today credit cards make it very easy for us to extend our lifestyle. Even though a small part of us may recognize we shouldn’t do this, most of us don’t worry if we can’t pay off our credit card bill each month. And for a time, everything probably seems to be okay. But as that debt creeps up, so does the risk we place on our family’s financial security. You really aren’t free to live the life you want on your terms, even though you may have ironically gone into debt, believing your credit cards gave you freedom.
Go from a cannot budget mindset to a cannot live beyond my means mindset.
I say this all the time and it often startles people because this is not how they naturally think about budgeting. We tend to view them as being restrictive or placing a limitation on what we can do, which is true to an extent. Money is finite. However, we do have a choice on how we use the money we do have. By following a budget, I know exactly where my money goes and prioritize it appropriately. Bills and goals (this include savings and investments) come first, then I can choose guilt-free how I want to use my remaining money.
Start by figuring out how much comes in each month and how much goes out. Trim the fat, prioritize your bills and goals, pay down any consumer debt and enjoy spending any extra money on what matters most to you and your family.
This is another popular excuse/misperception about investing. There is a prevalent belief that you must be rich in order to invest. While the affluent most likely are investors, it doesn’t mean you have to live in the 90210 zip code to be an investor. The average person is unlikely to win the lottery, so if you want to earn the money you need for your goals and retirement, then you need to start investing. Don’t wait until the amount you set aside monthly is “big enough”. It will never seem “big enough”. Invest what you can now and increase your investment/goal savings as your income increases.
A lot of people make the mistake of putting off investing because they don’t know what they are saving for. I realize some people believe once goals are set that they are hammered in stone. They are not. While you do want to set goals that matter right now, it’s likely your goals will evolve over time too. And that’s okay. But you need to set goals to keep you motivated and allow your money plenty of time to grow. You can adjust your goals as needed.
List everything you want to do and have—big and small—and narrow down the list to ones that matter most. These are your goals for now. If you’re married, be sure to do this together so you’re both on the same page. It’s okay to have personal goals, but make sure you have agreed upon shared goals as well.
This is the second mistake people make. They finally set goals, but then don’t figure out how much they need to save/invest in order to achieve their goal within their set timeframe. And don’t just calculate the total sum of your goals. Your goals most likely have different achievement dates from one another, so be sure to take that into consideration as well.
Now that you have your list of goals, prioritize them and set dates of when you would ideally like to achieve them by. Save/invest the appropriate amount and regularly review your progress to make sure you’re still on track and your goals haven’t changed.
Yes, it is that simple. I know investing can seem scary and overwhelming, but it doesn’t need to be. If your employer offers a 401k with a company match, then that may be a good place to start. You don’t want to miss out on free money from your company! Plus, this will get your feet wet and give you time to start learning about investments. There are thousands of books and websites dedicated to helping you understand how investments work, and there are also thousands of professionals who can help create a plan with you. Please read what a financial advisor can offer you and how to find the right financial advisor before beginning your search.
They are not the enemy, I promise. If you’re not already investing, make the commitment to start. To be blunt, the amount of interest you’re earning on your savings account is not going to be enough to fund most people’s dreams and goals. You are going to need to invest. Increase your investment knowledge and comfort through books, blogs and/or professional assistance, then start investing.
We have all made excuses one time or another. Don’t let money excuses keep you from taking action and the steps you need to take to create your best life.
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SHANNON RYAN, CFP®
I also thought investing was complicated or that I didn't have enough money to invest, but that quickly changed after reading a few books.
In reality I was just uninformed and/or uneducated about the subject.