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Blog: Minimizing Financial Clutter
 Help! I Just Opened My Investment Statement and I Can't Get Up!
It's all you see and hear about in the news lately. Former Wall Street giants, now slain. Bank failures. Our 401(k)s becoming 201(k)s. The financial world seems to be spinning out of control in spite of the government bailout. Talk about "financial clutter"!
Ugghh. Let's not.
Let's talk about some things over which we do have some control. Let's pull ourselves up from the floor (or off of the window ledge) and see just where we are today. It is what it is, so we might as well face it and figure out where we go from here.
The Serenity Prayer
God grant me the serenity
to accept the things I cannot change;
courage to change the things I can;
and wisdom to know the difference.
Reinhold Niebuhr (1892-1971)
WHAT WE CAN'T CHANGE
If you haven't opened those 3rd quarter investment statements or your monthly statements, it's time to do so. Then, make a list of the value of your accounts. I know. It's ugly. But remember that knowledge is power. We may not be able to stop the declining value of our investments right now, but we can face the situation and make choices for the future.
WHAT WE CAN CHANGE
We can set our own priorities. I don't necessarily mean that you should change your priorities. I just mean that we each need to evaluate our saving and spending habits in light of our goals. When we consciously examine the things, people, and activities that are most valuable to us, we are defining how we want to use our financial resources. We need to do this on a regular basis, regardless of the current state of the financial markets.
We can plan. Armed with our goals and with the knowledge of our current financial reality, we can make intelligent choices about how we will save and spend our money. We can decide what's most important to us, and put our money where our mouths are. The "B-Word" (budget) is not a dirty word. Instead, it is a way for us to put our plan into practice.
Today I used a simple budget worksheet to help my client, "Sally", understand her current net spendable income and how she is currently spending her money. (http://www.betterbudgeting.com/budgetformsfree-basicbudgeting.htm) It was an eye-opening exercise for her. One of Sally's stated goals was to increase her savings for retirement. When we completed the worksheet, however, she was dismayed to see that she had only $41 per month left over after her mandatory and current discretionary expenses. The act of viewing her spending habits on paper made it easy for Sally to spot where she could painlessly cut back on some of her expenses in order to meet her savings goal.
We can track our spending. Do you think you're too busy to keep track of every penny you spend and compare it to your budget? Tracking your spending doesn't have to be so time-consuming. Many of your expenses will be fixed and mandatory, such as your housing, car, and debt expenses. You only need to remember to pay them!
Let's face it … it's our spending in the so-called "Miscellaneous" category that gets us into trouble! THAT'S the spending we need to track. When we reviewed her "Miscellaneous" expenses, Sally saw 4 areas she needed to track more closely: Groceries, Entertainment, Clothing, & Gifts. We created an extremely low-tech system for Sally to track her purchases in those 4 categories, using a variation of the old "money in envelopes" technique our parents used back in the day. Using a lowly Post-it Note, we created a grid to stick in Sally's checkbook:
Groceries Entertainment Clothing Gifts
Available to Spend $400 $100 $50 $50
Spending -$75 = $325 -$25 = $75 -$40 = $10 -$15 = $35
-$25 = $300
The numbers in bold represent Sally's monthly budgeted amount for each spending category. When she pays for a purchase (the numbers in red), she simply records it in the appropriate column and subtracts it from the remaining balance. She can easily see how much money is "left" to spend in each category.
(Sally pays for everything with cash or a check. You could attach the Post-it Note to your credit card if that is your preferred payment method.)
Know what you can change, and change wisely.
posted on: 10/12/2008 11:30:00 AM by Katherine Trezise
category: Finances
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Minimizing Financial Clutter
by Katherine Trezise
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About Katherine:
Katherine Trezise is president of Absolutely Organized, based in Baltimore, MD. She is president-elect of the National Study Group on Chronic Disorganization. Katherine holds a masters degree in business administration, is a Certified Professional Organizer® and a Certified Professional Organizer in Chronic Disorganization®. Absolutely Organized specializes in helping people organize their homes, paperwork and financial records to make room in their lives for the things, people and activities that are most important to them.
Katherine's Website:
www.absolutely-organized.com
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