The Place to Start with Monthly Money Management You Will Love
November 14, 2022
My audacious claim: there is an approach to money management that everyone can love and everyone starts in the same place. And it's not by immediately setting up a budget. Intrigued? Good!
Let’s start with 3 scenarios:
7+ years ago, I had ~$1100 in monthly debt payments. Unexpected emergencies and "emergencies" cropped up frequently. And since I was living paycheck to paycheck, they “had to” get floated on the credit card. Money always felt stressful and change felt hopeless.
I worked with a client who spent more than $60,000 per month on life. This client also made plenty of money, but his spending weighed on him. He wasn’t sure he could actually afford all of it and wanted to feel like a better steward of his resources.
Another client made less than $30,000 per year. This client came to me feeling overwhelmed, and like she was barely scraping by. Her plan was to trim her expenses even further (I didn't see how) since making more money felt out of reach.
You might ask how three different scenarios could be solved from the same approach. And how all three people could experience the same results of happier spending and clarity.
Would you be relieved to know that the solution in every one of these cases was not more money. Not initially. That nearly always comes, but it’s not where you start.
You also don't start by trimming expenses or cutting out everything that brings you joy.
You don’t also start with a budget. More on this later.
The starting place for each situation, including yours?
Figure out—and accept—exactly how much your life costs you right now.
All the parts of it. Include routine annual expenses (memberships, etc) and divide by 12 to see their monthly impact. Take a guess at how much you'll need for car repairs, vacations, and emergencies. These infrequent larger purchases do so much to derail your monthly finances!
Easy access to credit has helped all of us obscure our actual cost of living. Think about it: an annual expense you forgot about hits. You don't have the money in checking to cover it.
So you put it on the card and start paying a small monthly payment to reduce it. This is exactly how I accumulated in the neighborhood of $18,000 in credit card debt at my peak.
If you go through life thinking you’re a shoe size 8, but are really a size 9, every pair of size 8 shoes is going to be really uncomfortable. When you find out and accept that you’re a 9, you can stop feeling so squished.
The difference between this and your money is pretty cool. When you figure out exactly how much life costs you, you can actually do something about it.
And when you see this number, and know that it includes all the parts of your life—the annual stuff and the fun stuff—it becomes a very simple math problem.
- Life costs $X per month.
- You make $X per month. If you are not salary, what is your average monthly income for the past 12 months?
- The difference between the two is $X (positive or negative).
- If you don’t want to continue to accumulate debt, you decide what you are going to do to improve that difference.
Major bonus: when/if you do make changes to expenses or income, you know they are made with full representation of your current life. That all your Needs and Wants have all had their chance to speak.
It gives you critical information to make decisions with.
When presented like this instead of from a perspective of “you need to cut everything you enjoy” I find nearly everyone is willing to give it a shot.
And from there, a budget is just a tool you use to keep your money organized.
Your Wants and Needs—including those that previously sabotaged you—get met within your monthly income. You start to make headway toward the possibilities in life that felt impossible. Turns out they’ve been waiting on the other side of your money ambiguity.