How can you plan and budget for a year when there are so many things up in the air?
Today we’ll go over how the two of you can create a plan and budget so you can hit your goals while being flexible enough to switch gears if needed!
How to Tackle Your Financial Goals in 2021
This first month of 2021 is just about wrapped up and already it's been an eventful year!
A huge challenge we faced in 2020 and it looks like for a good part of this year, it's going to be creating plans when there's no firm idea of what to expect.
Heard from many of you, the frustration and the stress of having plans started at the beginning of the year, and then getting hit with the pandemic or the financial fallout from it and it throwing everything off.
It's understandable if you are not looking to repeat that in 2021.
While we can't prepare for every single situation and emergency, there are steps we can take to shore up our finances and give us more options. Our goals and our budgets need to have flexibility built in so that we can pivot for whatever comes up.
But how do you do that? How do you plan in budget when you don't know what to expect? That's going to be our focus for today.
We're going to look at the big picture and talk about how to approach your goals for this year and your budget.
We're then going to drill down with a goal that many couples have- paying off their student loans – and coming up with a plan when there's still certain decisions that haven't been made yet.
There was an announcement last week with federal student loans, but are we going to have anything forgiven?
We got a lot to cover, so let's get started!
Resources to Stay on Top of Your Money
If you’re looking to build up your finances, here are some handy resources we mentioned in the episode plus more!
- Best Budget and Money Apps: Personal Capital, Tiller, Mint
- Grow Your Stash Faster: High Yield Savings with CiT Bank
- Jumpstart Your Marriage and Your Money
Thank You to Our Sponsor Coastal Credit Union!
Support for this podcast comes from Coastal Credit Union.
If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today!
2021 Goals and Budgets
Looking back at 2020, one of the realizations I saw in the personal finance space is that being hardcore or following strict rules, isn't the way to handle your finances. You have to have some flexibility.
One of the things I love about our community is how diverse it is. We have family spread out throughout this country and listeners all around the world. And we each have our own unique circumstances.
We have families making 60,000. We have families making 160,000, all the numbers in between and above and below.
Having a one size fits all approach with personal finances and budgets and goals, just isn't going to work. It's not practical.
What I've tried to do with this podcast and on the site is to focus instead on the principles, the conversations, the questions we need to ask each other in our families to make sure that we have what we need to hit our goals, and that fits our current circumstances.
Instead of talking about how much to save per month, I might have as a starting point a percentage. They can give you something to work towards, and then you can adjust those numbers as you see fit.
Last year, I saw a comment about that phrase ‘We're all in the same boat' when it came to the pandemic and everything that fell out from that.
Basically it was saying we're not in the same boat, but we're going through the same storm.
And I think that acknowledges that when you're talking about the pandemic and the financial fallout, some families were in a good position. They're able to ride out the storm much better than a family that maybe was caught in the beginning of their financial journey.
As we were putting together, the episodes, it became obvious that we had to split based on how people were doing financially.
Families that hadn't seen a drop of income needed to follow a different path and a family that had their safety net set up and they were still both working.
If you haven't already, please listen to the episode that fits your situation best for specific advice and steps that can help you with your finances.
Today, I want to take a step back and look at the principles behind setting up goals and a budget that allows you to have more flexibility and be able to adapt when situations come up.
I pulled these from personal experience and speaking with other families to see what commonalities were there that could be helpful for families looking for a much more adaptable way to plan and budget.
Define The Goals That Matter to You
The first one is, even before you talk about the numbers, it's absolutely key that you clearly define what your goal is and your why.
It's easy to go through life, almost like a checklist as you hit these milestones, but some of these goals may not really fit what you want to do with your lives.
One of the commonalities I saw was that they had a purpose and the reason behind it.
It wasn't just that they wanted to travel. Their motivation is they wanted to have more time as a family and meaningful conversation.
Families that wanted to retire early. It wasn't just about escaping a job they didn't like. They wanted to be fully present as parents.
One of the best things you can do is look long-term with your goals. What kind of life is your family trying to build and what's your reason behind it?
The second is they had a financial system, whether they called it a budget or not, that hit the three main goals.
They're able to take care of their bills. They're able to build financial stability and eventually wealth, and then they had money to enjoy.
And this may surprise you, but there are very different budget methods that can get you there.
If you love being deep in the weeds and looking at the details, there are a, budget's like every dollar or YNAB allows you to break it down and see every cent of your money and gives you that clarity that you may prefer.
Other families. I talked to like that bucket approach, the 50, 20, 30, or whatever percentage you want to use, where they have a purpose for each of those buckets. And they have an amount or a percentage that they're setting aside.
The reason that works is because that budget aligned with how they naturally saw their finances.
When they spent it was purpose or mission driven, a phrase that's thrown around, but I don't think it's talked enough is conscious spending.
Sometimes you hear in the personal finance space, that spending is bad, you got to save and invest. I do think you need to set that aside for your long-term goals, but it's also about enjoying the life you have now and using your money for your most important resource time.
Learn to Live on One Income (Even If You're Dual Earners)
Another key principal I saw with families is this idea of being able to live on one income and then using that second income for speeding up reaching their long-term goals.
In other words, they created a budget that was self-contained in a sense, they could hit those three main areas, pay their bills, build financial stability and wealth, have some fun with their regular budget.
A huge advantage of having a budget that is able to hit all three of those areas is if you get a windfall, whether that's a bonus, a tax return, a stimulus check, you can use it to hit your financial goals faster.
Many families, especially in this community also use that money to increase their giving. So it's a win for everyone.
Enjoy Money Dates
Another key point I noticed with families is that they have these regular check-ins not just with your finances, but also with your goals.
I love to talk about money dates and how helpful they can be. The benefits go beyond just the numbers. If you were looking at this on a monthly basis, or you're doing these quick weekly, check-ins, it's very easy to bounce back .
If you have a setback or if life happens and you have to make an adjustment. You're less discouraged and you're more likely to hit your goals because you're able to quickly pivot
However you approach the details of your finances, just keep in mind that it is a tool to build a life that you love.
Key Takeaways on Managing your Money in 2021
Before we wrap up, I want to share a few key takeaways I got from preparing this episode.
Take a Long-Term Approach with Your Goals
There's a good chance that you won't quite hit your goals this year and that's okay. So what if you miss your goal for the quarter or you broke your budget one month? You can still pick up where you are. Review what went well, what didn't and then adjust accordingly.
Let's say you're trying to pay down that student loan and you only get to 80% of your goal. You're still that much closer to what you're trying to achieve.
Break Your Goals Down
I understand that you want to hit this big audacious goal, but take it quarter by quarter. That way you can see how has the year going are things going well, then you can continue on the path, maybe ramp up the goal, or if things have changed and it's bit harder, you can adjust accordingly.
You want to be adaptable with your goals and you also want to stay motivated.
Know Your Numbers
The last takeaway is nailed down your numbers. It is so important for you to have a great foundation with your finances. And the first step is awareness.
You can't create a budget that fits you and your goals. If you don't know how your cash flows.
Hopefully you took January's monthly money challenge, which was tracking your finances.
I know it may have sounded a bit too simple to be our first challenge, but with everything that happened in 2020 things, most likely shifted in your budget.
It made sense to one, take a breather and then to get a clear idea of how your cashflow is currently working.
Honing Your Budget This Year
For February, our monthly challenge is honing in on your budget for 2021. We want to make sure that it's a great fit for you.
We're drafting a budget that's going to hit those three main areas:
- your central and day-to-day bills,
- your financial goals and
- having money to enjoy this year.
I want the two of you to have specific numbers for each of these buckets so that you know where your money is going and what it's doing for you.
If you have any questions on how to set things up with your budget, please send them in!
I want this year to be incredible, not just with the finances, but also the two of you working as a team.
Support the Podcast!
Thank you so much for listening to the podcast! If you enjoyed this episode and found it helpful, here are some ways to support it.
- Spread the word! If you enjoyed this episode and think it can help a buddy get on the path to dumping debt and become financially free, please share.
- Leave a review. Honest feedback and reviews make a big difference and gets the word out about the podcast. Leave your rating and review on Apple Podcasts.
- Grab a copy of Jumpstart Your Marriage and Your Money. My book is designed for a busy couple to set up their finances in 4 weeks. Get tips and tools that have worked for other couples on their journey of building their marriage and wealth together!
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