Many people bury their heads in the sand when it comes to finances. Over time, this creates a constant state of anxiety, frustration, and embarrassment.
Gently start here….
The first step on your financial wellness journey is to take stock of what you do know and have financially.
If this in itself makes you recoil in fear, then let’s break it down. There are only 4 main areas of money management – Earning, Spending, Saving & Investing. Choose one of these areas to work on to start with. Ignore the rest for now and as you build a consistent awareness of where you are in this area, you can select another and gradually build towards looking at all four areas.
The Money Wheel
In my Money Wheel, you’ll see I’ve created “areas” of financial wellness. The first four are related to money management. Then we look at protecting our assets and looking towards the future; what assets will we have when it comes time to retire.
Legacy is about what you want to leave in this world annually and at the end of your life – not necessarily related to money. You can also have monthly Legacy goals. This space on the wheel is reserved for chunkier more esoteric elements.
Finally, we have work-life harmony which is about integrating your financial wellness in all areas of your life.
Starting off easy – On a scale of 1 to 10 (ten being everything running as it should, smoothly and with effect) where do you think you are in terms of managing your money? Please do not overthink – what’s your first number that comes to mind?
If your spending, savings or earnings are on the lower end, it is also likely the other areas will also be low. As mentioned previously, pick one area and concentrate your financial focus there.
Then think of THE one thing that will bring your number up one level. Can you complete this one thing or do you need to do something else first? Is this one thing achievable? Do you have to give up anything to get this one thing completed? By when can you complete this one thing? Share with someone this one thing that you are going to do by when. Then move onto the next notch. Repeat.
Budgeting your Spending: It’s really in this category where budgeting exists in personal finances. Unless you have a small hobby business or side hustle, your earnings will be fairly easy to predict especially if you are employed on a fixed annual salary paid monthly. Think about whether you consistently have more month than money. That just means your salary runs out before your next pay day. Think about your fixed monthly costs such as mortgage, heat & light, Wifi, etc…These are usually on direct debit. Your food, dining out, etc…are more fluid which means they will vary month to month. You may need to look up these costs to get an average of what you are spending. But for the wheel, have a best guess/gut feel for where you are with Spending.
Savings: If you have more month than money, then you are not likely to have any savings, unless you are consciously saving, and your spending has run away a little bit. But let’s say in this category you are actively accumulating funds for future use. Think short term cash flow emergencies, building up savings to get to a certain level that then spills into investing or reducing a mortgage or buying a home, new car, etc…
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