The Sterlings (Part 2): Intentionally Designing Your Finances

(Did you read Part 1 of the Sterling’s story yet? Find it here)

Amy was so excited to enjoy a dinner out with Maureen that she was halfway to the restaurant before she remembered that her wallet was empty. Shoot! Now I’ll have to use the card, and Travis will fuss. A quick glance at the clock told her there wasn’t enough time to go back and grab the cash she’d left on their kitchen table.

 

Let’s review their situation to date:

Amy and Travis Sterling have two kids soon to be heading off to college. Recently tense conversations have arisen about how they were going to afford two college educations. But it shouldn’t have been that way.

They certainly weren’t wanting for anythingtwo stable careers, nice house, and a healthy discretionary income. But over the years extra expenses replaced college savings and, in a short space of time, the missed savings became apparent.

As the kids grew closer to choosing a college, they had to sit down and discuss priorities. And even though she knew Travis was right that they should have been saving all along, it chafed Amy that her spending was more often under the magnifying glass.

 

“You made it! I ordered us a bottle to split. Hope Merlot is ok?” Maureen asked as Amy slid into the corner table after giving her friend a quick squeeze.

“Of course! Dying for a glass.” A tiny voice protested the expense. The same voice, which sounded remarkably like Travis, had been popping into her head a lot lately—at the salon, in the bedding section at Target, and even at the grocery store. Feeling pangs of guilt at every purchase was making her irritable.

“What is up with that look on your face?” Maureen asked as choked back a laugh when Amy glanced at her menu.

“Oh man. That obvious?”

“You’re not even on the page for the entrees!”

“It’s all this penny-pinching! It’s like my brain is constantly launching into negotiation mode at what used to be the most normal decisions.

“Like, after a long, stressful week I’m finally out with a friend for a much-deserved break and the first thing I’m looking at on the menu is prices. We’re at Olive Garden for goodness sake, it’s not like their steak and wine meal is going to break the bank!”

“Wow – you do sound stressed. But what’s the deal, you guys are doing fine, right?”

“Well, that’s exactly it. We are doing fine, and there’s no logical reason why we can’t save month every month. But it seems like every month, something takes priority over those savings and then we don’t have anything left.

“Heck, I’m sticking to a budget! Well, ‘ish.’ But look at me, my highlights are down to half a head. My sweater is washed at home instead of dry-cleaned and I’ve even been painting my own nails. Yet, after a few weeks of cutting costs, we’re still a little under what we’d like to save. Where does it go?”

Intentionally design your finances

Intentionally design your finances by @behaviorgap

 

 

Spending and Saving with a Purpose

Good spending habits aren’t a secret, but they’re not a standalone solution. An effective financial plan takes, well, some planning!

If you’re like Amy and find that—despite your best efforts—some month’s goals go unmet, you might benefit from asking yourself a few questions:

 

  1. What are you saving for? Socking away money without a purpose makes it more tempting to dip into and spend.

 

  1. What are you spending on? Taking a look at your cash flow can help clarify whether or not your hard-earned money is going towards what you value.

 

  1. What goals are your priorities? Sometimes certain things need to fall to the back of the line. Figure out which goals deserve front and center attention.

 

When it comes to having a successful financial life, a budget “rules all”. But the word “budget” doesn’t mean limiting everything you consume – it means planning for the things you want.

 

Save First, Then Spend

If you want to save for college expenses, then figure out how much you want to have by the time your child goes to school. Back that into a monthly savings number and stick to it.

In 10-15 years, you won’t remember all the times you missed splurging on the best steaks, but you will enjoy feeling good about being able to send your child to school with a minimal financial burden.

 

Strip Down (Your Life)

It sounds drastic, right? But think about it – how much value does that extended cable package really bring to your life? Are you using that gym membership as you’d intended?

Review what you spend your money on, and strip out everything unnecessary. While that doesn’t necessarily mean getting rid of cable or the gym membership, approach revolving expenses with a “use it or lose it” mentality. That extra money can be used to save for your goals, simplifying your life (and budget) in the process.

 

Collaborate & Listen

If you’re married, talk to your spouse about what you want your future to look like.

Ask each other how can you turn the left-hand side of the above image to the right-hand side? How can you turn your “best guess” future into an intentionally designed plan? Even those that have the best intentions don’t meet their goals unless they are planned.

 

So how do you achieve an intentionally designed financial life?

  • Decide what to save for and earmark that money first.
  • Live a frugal life with minimal excess (but enjoy it!)
  • Have a step-by-step plan to accomplish your goals, instead of relying on good intentions.

 

And What About Amy?

It’s going to take longer than two weeks for the Sterlings to understand what their budget should look like. Since she and Travis know college should be a priority, they’ll have to learn how to set that money aside first every paycheck.

By actively prioritizing their financial goals, Amy and Travis’ “spending and saving” blocks will start to fall into order—and less-important expenses will fall by the wayside—creating a financial situation they can finally start to feel in control of.

 

Go to Part 3