Part III
If you’re like many millennials in their 20s and 30s, you want the help of a financial planner but are living paycheck to paycheck as it is and aren’t sure how you can afford it. In order to engage this type of relationship you first need to get your spending plan in order. If you have to charge the monthly fee or otherwise borrow money to cover it, then in my opinion you are not quite ready to move forward just yet. Below are a few tips for managing your cash flow so that you can build this into the plan for yourself when you’re ready.
- Write it Down: the first step to becoming accountable for your spending is to face it and know where your money is going. Whether you use a spreadsheet, an app, or just a sheet of paper, translate the data to something physical so that you are truly aware of where that money’s going. Plan ahead for what you want to spend and then compare it against what you actually do spend. If you overspend, cut back on the next pay period. Be diligent!
- Automate Everything: If you can pay a bill or set up a savings draft on auto-pay, do it! If you can have the money drafted from your account sooner than you can spend it, you’ll be less inclined to spend money that should be earmarked for something else.
- Separate Serious Money from Play Money: Once you’ve allocated the requisite money to your bills and (hopefully) savings accounts, find a way to separate the discretionary (or fun) money so that you only spend what’s left. Either physically withdraw the cash or put it in a separate checking account (but verify with your bank first to confirm they won’t charge you a fee to open a new account – many will let you do this at no extra cost).
- Don’t Charge What You Can’t Afford: If you spend down your discretionary cash flow before your next paycheck comes in, do not charge anything that isn’t an absolute necessity. It takes time to change spending habits and this won’t happen overnight. Be patient with yourself but also be mindful of your spending. Give every dollar a job and stick to it!
- Avoid Putting all DCF Toward CCs: If you’re putting all your discretionary money toward paying off your credit cards, you’ll never get ahead. You’ll be stuck in a loop of paying off some & then racking up the same debt because you just spent all your free cash. Try to leave yourself a set amount per week to spend on fun stuff or unexpected expenses and the rest can be allocated toward debt. It’s a slow process but with continued diligence it can work for you.
- Pinch Pennies on Nights Out: If the things you like to do offer a free or discounted entry a certain time of the week, plan around that. For example in Memphis, Malco offers $5 movies every Tuesday and most museums have free entry on certain mornings or afternoons. Go to brunch when the mimosas are half price or ask for gift cards to your favorite places when your birthday rolls around. You don’t have to live this way forever but in order to effect real change, sacrifices must be made.
- Permit Don’t Restrict: The number one complaint I hear about budgeting is that people hate to restrict themselves and therefore they avoid getting real about their spending. Try to view your spending plan as the amount of money you’re giving yourself permission to spend rather than what you’re not allowed to spend.
Changing your spending habits is not easy. It also may not be fun – at first. Facing bank statements and credit card charges frequently cause anxiety among younger people because they know they’re living beyond their means and don’t want to see it in black and white. Be patient with yourself as you implement these practices into your daily life. It won’t be fast. It won’t be easy. It can, however, be done.
Once you’ve gotten your spending plan under control, feel free to start the search for your CERTIFIED FINANCIAL PLANNER™. This person should be chosen carefully as ideally they will be in your life though all of its major changes and transitions. They will be your coach, your accountability partner, and your motivator in reaching your goals. Student debt does not have to mean disaster for you if you’re willing to put in the work. Control the spending plan. Do the research. Pick your planner. Good luck!
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Fish and Associates is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.