When I was asked if I could write a blog about financials and budgeting for Lumi, I was hesitant. This is because I tend to see my husband as the more financial savvy one – he is definitely not an impulse shopper like I tend to be, and he is way more frugal. But then I thought, maybe this was the little voice in my head telling me I’m not good enough, smart enough, pretty enough…and so I started writing.
I wouldn’t say I’m at expert at ‘how-to’ budgeting and financial planning by any means, but from the time I graduated from Accounting at University (age 21) to getting married (age 33), I had to support myself. And overall, I think I did ok. Through good and bad decisions and some helpful advice, I slowly learned how to budget and save money. I was able to have a decent amount of cash savings, invest a good percentage of my salary into retirement account (similar to super but not mandatory in the US, where I’m from) and managed to be debt free. Currently, my husband handles most of the finances but we both share the responsibility for making wise financial decisions for our household. Right after we got married, we sat down together and determined our household budget and financial goals. So while we may play different roles when it comes to managing our finances, we are equally responsible for our financial goals.
We all have wants, desires, fears and habits that drive much of our decision-making. As women, we tend to be a bit more emotional than men and thus a lot of our financial decisions can end up being emotional decisions. We want to make wise financial decisions but we don’t often spend the time to figure out what our financial priorities or goals are. One of the key things that I’ve learned when it comes to making wise financial decisions is understanding the “why” behind my desires, wants and goals. Is it something that is going to satisfy me momentarily but I can really do without? And if so, can I afford it based on my short-term or long-term priorities that I’ve set for myself? Taking the time to determine your short-term and long-term financial goals can help you make wiser decisions even during those emotional impulse buying times. So here’s how you do it.
The first step is to determine what your financial needs are, develop a budget and short-term goals. The first goal should be to secure emergency savings equivalent to approximately 3-6 months of your monthly salary. In order to achieve this goal, you need to create a budget. Determine what your disposable income is (this is income less necessary living expenses), then budget some spending money for shopping, entertainment, and similar expenses. Trust me, you will want to budget for this, otherwise you will find yourself not sticking to your budget and/or feeling really guilty for buying that cute new outfit or drinking those $3.50 lattes. Let’s face it, coffee is superb but it is pricy! Allowing yourself to budget for some of these “wants” can give you a more realistic idea of your level of savings and how to build-in the fun stuff.
Once you have achieved an emergency fund which you are comfortable with, then you can start working on your bigger financial goals. This can be paying off a loan, saving for a holiday, purchase of a new car, purchase of house, retirement, etc. It is important to determine here: 1) the sum needed for these financial goals; 2) the timeframe in which you want to achieve them and; 3) any liabilities associated with these types of goals, such as a mortgage.
The next step is to evaluate possible investment options so as to meet liabilities and financial goals. It is crucial that you either educate yourself about investing or seek financial advice from an experienced financial planner. There are various investment options such as stocks, mutual funds, national savings certificates, real estate, etc. I must admit I am not the best at investing as I tend to be very risk adverse when it comes to money. I am a ‘keep the money in the bank’ kind of gal. However while this may be lower risk, it’s not necessarily financially smart – as it won’t yield much interest. This is where my husband comes in and looks for investing options for us!
Last but not least, I can’t talk about finances without the topic of giving. This is purely based on my personal beliefs, so feel free to stop reading here if you don’t agree. I believe that everyone has a responsibility to help those that are less fortunate. As we earn more we should consider increasing our standard of giving and not necessarily our standard of living. Easier said than done, I know. We often tend to forget about financial giving but from my experience, helping others is so much more rewarding than buying those super cute stilettos and fabulous purse. Don’t get me wrong; I LOVE to shop. I have been told on several occasions that I have way too many shoes and clothes. Can a girl really have too many shoes? I don’t think so 😉 But exactly for this reason I need to make sure that I account for giving in our budget as a necessary living expense. This has kept me to be more disciplined about continually giving and not count with this portion as disposable income. Of course, not everyone is in a position to give financially. There’s plenty of other ways to give, such as volunteering your time for causes that you believe in. After all, time is more valuable than money.
So whatever your habits, desires, goals and your “why” behind them, I hope you take the time to figure it all out and budget and plan for your financial future. Be well and fabulous!
Odila is an accountant currently working in the Risk Advisory Practice at KPMG. She lives in Melbourne, Australia, but calls Dallas, Texas her home. She is married to the lovely Michael, and they are expecting their first child in the New Year. Her passions include spending time with family & friends, travel, serving, and of course, shoes. 🙂