This month I’m not posting a video or question/answer — just an article I think is important!
It took me longer than you’d think to come up with the tagline for my financial planning business: “Plan a Richer Life.” When it finally came to me, though, I knew it perfectly captured my mission.
There are two key components of my tagline. The first is plan. Planning is key, as opposed to living and spending haphazardly. Though living a spontaneous, plan-free life can be fun for a while, it rarely gets you where you want to go. For example, I am not that great of a planner when it comes to my social life, and I sometimes find myself wishing I had given more thought to my weekend.
The second piece of my tagline is a richer life. Contrary to popular belief, living a rich life does not necessarily have anything to do with financial wealth. It means creating a life that is full of things that bring you joy. This task may seem daunting, but these four steps will put you on track to living your rich life.
Step 1: Inventory Your Priorities
If you are going to fill your life with things that bring you joy, you need to first identify what these things are! Sit down and inventory your priorities, and assess what makes your life enjoyable. I encourage my clients to create a list to help them do this. Part one of this list should include the things that you enjoy in your day-to-day life. Part two should include long-term goals and bucket list items. Here’s an abbreviated example:
Eating good food at restaurants
Spending time with family and friends
Get out of debt
Travel to Africa
Have a $20,000 emergency fund
Step 2: Identify Costs
Once you’ve made a list, put a dollar sign next to every item that has a cost to it. If your list is like mine, you’ll have some priorities on your list that have a cost, and some that don’t.
Here, I’ve identified some life joys that have hard costs:
Eating good food at restaurants $
Spending time with family and friends
Long Term Goals
Get out of debt $
Go to Africa $
Have a $20,000 emergency fund $
Step 3: Scale Back Where You Can
The next step is to go through the items with a cost and see if there’s any way to reduce or eliminate that cost. Think logically, creatively, and realistically about where you can cut costs while still keeping your priorities in your life. For example:
Reading $ — Use the library instead of buying books; do a book exchange; buy used books.
Yoga $ — Do yoga with friends; buy a class pass instead of paying the drop-in price; get a video (buy or use the library); do it on my own.
Step 4: Budget and Track Spending
Now that you have identified components that make up your best life, which ones have a cost, and which costs can be reduced, the next step is the actual planning. I recommend using the budgeting software called You Need a Budget. This software gives you tools to allocate the right funds toward your prioritized items and goals, so you can make them happen more easily. Take everything on your list that has a dollar sign, and assign it a category in You Need a Budget.
Once you start tracking, you may find (or maybe you already know) that you are spending too much on some of your lower-priority items and not enough on higher-priority items. The software lets you see your spending visually so you can make different choices if necessary.
My friend and You Need a Budget mentor Elizabeth Starr Harden likes to say, “You can have anything you want but you can’t have everything.” About 99 percent of us are living with finite resources, so it’s important to give attention to what brings you joy, and then plan accordingly.
Living a richer life involves both knowing your values and priorities and planning to fit them in. If funds are limited, spend extra time researching how to reduce costs. At least to some extent, you get to choose where your money goes.
If you don’t know where your money is going, you probably feel frustrated, confused, and guilty in a chronic way. If you need some help planning your richer life, consider hiring a financial planner like me who works on cash flow planning. An hour or two with an expert can forever change your life.