Defining Money Goals & Budgeting

In this episode of Money Moxie, we talk about setting specific and actionable financial goals and creating a budget that aligns to those goals. We’ll review my easy and flexible budgeting method which allows you to enjoy life while also building wealth and security.  We focus on setting 3-5 specific, action-oriented goals with deadlines and discuss the concepts of Intentional Spending and Rules for Enjoyment as key elements to finding balance and being able to enjoy your hard earned money while you work toward your short and long term goals.  I also share the launch of my new one-on-one program 'Emergency Proof Your Money', aimed at helping individuals gain confidence in their finances and establish a path to sustained financial security and wealth building.

00:01 Introduction to Money Moxie Podcast

01:14 Setting Money Goals and Creating a Budget

04:15 The Importance of Specific Goals

08:13 Creating a Simple and Flexible Budget

14:07 Spending with Intention: Rules for Enjoyment

19:49 The Flexibility of the Budgeting Method

21:24 Summary and Conclusion

22:11 Announcement of New Program: Emergency Proof Your Money

23:02 Closing Remarks and Invitation for Feedback

Emergency Proof Your Money Program - Work with Elizabeth to review your finances, define your money goals, and setup an easy to follow and flexible budget that is in alignment with your values and goals. Schedule a 1:1 with Elizabeth or reach out via email (elizabeth@elizabethmchelle.com) for more information.

Connect with Elizabeth:
Instagram: @elizabeth_mchelle
Schedule a free 1:1 consultation: https://calendly.com/elizabethmichelle/free-consultation

Transcript

Elizabeth: 0:01

Welcome to Money Moxie, the podcast that's all about taking control of your financial destiny. I'm your host, Elizabeth Michel, and I'm here to help you on your journey to financial empowerment. In each episode, we'll dive into personal finance, wealth building strategies, and mindset shifts that will help you master your money. Whether you are just starting on your financial journey, Or looking to level up your money management skills. Money Moxie is here to provide you with the knowledge, inspiration, and motivation to help you thrive. Are you ready to unleash your inner financial powerhouse, improve your money mindset, and make savvy money decisions so you can secure your financial future? Then you're in the right place. Let's get started.

0:55

Hello everyone and welcome back. I hope all of you are enjoying your holiday season. I cannot believe it is December already and we're almost done with 2023. The time flies so crazy fast. So today I want to talk about setting money goals and creating a budget. In my last episode, I talked about the money, roadmap, and priority list that I follow and this really helps me with managing my finances, setting my goals, and then feeds into creating a budget that is easy to follow. I really think that goals and budget go hand in hand. Goals give your budget a priority and a direction. And I know what you may be thinking. Budgeting sounds boring or too hard or like a lot of work, but I promise you, my budgeting method is so easy. It does not involve spreadsheets. No knocking to a spreadsheet, because if you're anything like me, I love a good spreadsheet. I can get down with creating a pretty detailed spreadsheet with all the macros, pivot tables, and all that fun stuff. And I know I'm sounding very nerdy right now because I do think spreadsheets are fun. But, don't worry, this is not that. No need for money, apps, or any other fancy tools, or anything that requires a lot of manually tracking and updating. Best of all, my process for budgeting allows you to still enjoy your life and it is flexible. Our lives and needs change all the time. For example, like this month, I may be really good about cooking at home instead of eating out. Next month, I may be so busy with holiday commitments and going out with friends and family that I end up ordering delivery and more or going out to eat more. My budget process allows for this, so let's get into it. Like I mentioned in the last episode, I outlined my financial priority guidelines, my money priority list. You can check out that episode for more details, but as a quick refresher, those priorities are in the description. Number one, take care of your necessities, your basic living expenses first. Number two, build an emergency fund. Cannot emphasize how important that is for making sure you have security to always take care of your basic living necessities. Number three, Pay off your high interest rate debt and then number four, put money towards your short and long term financial goals. When you're covered on the first three priorities, you can continue to move forward with allocating money towards your goals. So let's talk about setting goals. I suggest setting three to five money goals at a time. And I say three to five because I think that's a manageable number. It's not so small that you're missing out on some other money goals you could be tackling. And it's not so big that it feels too overwhelming to manage. And when you set goals, make sure you are making them as specific as possible. And you can use the following structure. First, like I said, be specific. Make the goal something that leaves no room for interpretation. In other words, there should be no question as to whether or not you achieved your goal when you look at the results. So make sure when you're defining it that it's very easy to say, yes or no, I have achieved this goal. Make the goal something you can take action on and that can easily be broken down into actionable steps. And give yourself a deadline. fOr example, traveling and going on a dream vacation may be one of the things that you enjoy doing. I know it's definitely on my regular financial goal list. But saying, I wanna travel, is too broad. It doesn't answer some very important questions, like, Well, where do you want to go? Do you just want to take a weekend road trip, or do you want to go to Europe? When do you want to go? Do you want to go next month, or is this a big vacation that you want to take in a year? How long do you want to be there? That will dictate where you stay, how long you stay, your travel plans, all of that. Do you want to go on tours and excursions? Or do you just want something that's low key? Instead of saying, I just want to travel, let's look at a better way to define that goal. Instead, we could say something like, I want to go to Madrid, Spain for a week for my birthday next year. I want to be able to stay in a nice hotel. I want to do some shopping and also have some spending money for anything else that I want to do on my trip. Let's take a look at this goal. So one, it's specific because we're defining exactly where we want to go and what we want to do when we get there. The results are clear. When you're able to pay for and go on this trip, there's no question that you achieved your goal. You can also take action on your goal. Well, since you have a specific goal defined, you've got your destination, you've got when you want to go, you can determine how much you need to save for that goal. Those are your action steps. So like in this example, maybe we've determined that the cost for this trip would be around 5, 000. And you've given yourself a deadline because you say you want to be able to go on your birthday next year. Let's say that gives you 6 to 12 months roughly to save for this goal and that really depends on when you start booking your flights, your hotels, your tours, etc. You can now set up, now this is your action step, so you can now set up an automatic deposit on a monthly basis to your travel fund, which should be in your high yield savings account so you can save for this goal. In this case, let's say you have six months, that means you're saving a little shy of 850 a month for a 5, 000 trip. And yes, it's, it'll be less than that if you have more time to save. So now that we've defined our top goals, I said three to five, let's talk about creating a budget. As I mentioned at the beginning of the episode, my budgeting process is simple and flexible. It's not about adding to your to do list or taking away your time. We all have very busy lives, and I am a huge advocate of making things as easy and efficient as possible. I don't want to sit down doing another manual task and updating things manually on a daily basis. That would get boring, and I'd rather be doing something else than I'm sure you would too. I think a sustainable budget should fit within your life and still allow you to enjoy your hard earned money. So here it is. Your budget only needs three categories. That's it. They are Your living necessities and commitments, your goals, and your enjoy life. That's it. So here are some steps for setting up your budget and honestly I love how easy this is. It's so simple and I really hope you think that way too. So make sure that before you do anything in your budget, you know what your income is so any money that you have coming in make sure you understand what that looks like on a monthly basis. That way you know how much you can allocate to each of your three budget buckets. And this would be your income you have left after you've had your taxes deducted, insurance, and any other deductions from your paycheck. Step one, calculate your necessity expenses. So this is things like your mortgage, your rents, utilities, all the things that you need to live. Once you have this number, this is how much you should keep in a designated account. Really it should go in a checking account and this should be deposited into that account on a monthly basis. All of your necessity expenses will be paid from this account. So a tip here is the best way to fund this account is just to have your paycheck direct deposited into this account on a monthly basis. I've talked about automation before and this is one way you can automate. Employers usually have a process for setting this up. iF you work with your HR department or your service department to set up your paycheck just to be automatically deposited in this account. If you work for yourself, you should also have any money you have coming in with whatever method you're using to go to this specific designated account on an automatic basis. We know how much income we have on a monthly basis, we've calculated our necessity expenses, and have that money going into a designated checking account on a monthly basis. Step two, automate all of your monthly bills. You know how much your necessity expenses are, and you have a designated account for these expenses, now you want to set up automatic bill payments to be paid from that designated account. automatically on a monthly basis. Most services providers will allow you to set this up online or when you contact customer service. A lot of banks also have automatic bill pay services or check writing services that you can use. So contact customer service if you need help setting this up. And then you can repeat. These steps one and two for the goals category of your budget. Again, you calculate how much you want to allocate towards your goals and you automate all of those payments or deposits to go towards your designated accounts for those goals. Goals that are short term, usually around zero to five years, those should go in a high yield savings account. Longer term goals, like saving for retirement, can be invested, and automate your deposits for these accounts as well. Like I mentioned before, think of this as paying your future self. For example, if saving for a vacation is on your goals list, You can set up automatic deposits to go into your high yield savings account for your vacation fund. Also, a lot of employers will allow you to have multiple direct deposit accounts for your paycheck. So I encourage you to take advantage of this if it's possible so that you can have money from your paycheck going into your designated checking account to cover your necessity expenses, and you can also have money from your paycheck automatically going into your savings account to fund your financial goals. If it's not possible, you can also set up An automatic transfer from your checking account where your paycheck goes to so that it can then be dispersed to The different savings accounts you have designated for your money goals now for my last category Enjoy life. This is my favorite part Once you have budgeted for your necessities and your goals The leftover money is for you to spend on things that bring you joy No need to track every dollar The amount that you have left should go into a separate account that is designated as your Enjoy Life money, and it's for you to spend however you want. Now, I want to emphasize that this should really be intentional spending. And you may be thinking, well, what is intentional spending? And how do I ensure this money is spent with intention? Well, I'm going to tell you. First, The way to spend with intention is to find what is important in your life and what really brings you joy. I call this my rules for enjoyment. So for me, travel, Working out and fitness and home improvement are things that bring me joy. Those are my rules for enjoyment right now. And I have a home improvement on the list, which hasn't always been on my list, but my husband and I just bought a new home and I've been really focused on and excited about redecorating and home improvement projects this year. So those are the things that are important to me. And for you, your list could be different. Maybe you really love live music or you love to read and you want a monthly book club subscription. Whatever it is, these are things or experiences that you value and that bring you joy and fulfillment. And these can change over time. The point is to define what you value and use those to identify your top three rules for enjoyment. These rules can help provide a foundation for how you spend your money intentionally. Second, once you've defined your rules for enjoyment, your spending can align to those. For example, I mentioned one of my rules is working out and fitness. I love studio fitness classes, specifically Pilates and spin. They keep me motivated and consistent. I'Ve gone to the gym as well. But I find that I have to push myself more when I have to go to the gym, and figure out a workout routine on my own, versus going to a Pilates or spin class where I just show up and follow the routine for that day. And also, there's just something about being surrounded by others that brings out my competitive side and pushes me to work out harder. So I spend some of my money on studio fitness classes, which is more expensive than having a gym membership for me. I also love having a cute workout outfit. I'm really obsessed with at leisure clothes. But, when I feel good in what I'm wearing, I'm also more motivated to stay consistent with my fitness routine. The studio classes and the cute workout clothes, those are things that bring me joy, so I spend money on those things. On the other hand, I'm trying to cook more at home, and going out to eat right now is something I can take or leave. It's not necessarily important to me to eat out all the time. Sure, it might be easier some days when I'm feeling more tired, but honestly, when I take the time to cook something healthy at home, I feel so much better. And a lot of times, The food can be so much better than just like picking something quick or random because I don't feel like cooking. So I don't really spend money on eating out much right now. Again, the key here is to follow the rules of enjoyment, which help you to be intentional about your spending and really focus on the things that you value. Why do I say that it's important to spend with intention? Because Transcribed It helps you to avoid spending more than you make because you, you have those roles and can refer back to them so that you can ask yourself, do I really want this right now? Or maybe it's not something I really want right now. You also get to enjoy your hard earned money now. On things that really provide you joy versus something that is just for instant gratification that you may regret later or that don't really provide you lasting joy or value. For example, I talked about how I spend money on my studio fitness classes and workout clothes because working out and feeling good while doing it make me happy. It also gives me sustained joy. Having the nice workout clothes make me feel good and give me the motivation to stay consistent. And my mental and physical health also benefit from having a regular fitness routine. This is different than making it in Paul's Purchase. Um, maybe something like buying a pair of shoes I saw on Instagram that But maybe I'll never wear. Or spending the money on takeout food that is really quick, but maybe it's not really from a place that I really like and I'm only ordering it because I just feel like it. I use the rules of enjoyment as a temperature check on whether or not my spending is aligned with what I value. You may not be able to buy everything you want all at once. But you can really spend on things with intention and not spend on things that don't align with what you value and don't really bring you any kind of sustained joy. And the biggest reason I love the way I budget is the flexibility. You pay yourself first by ensuring you are covering your basic living expenses, so your necessities, and you're putting money towards your short and long term goals. And then, you're also able to enjoy your life now, but the way you spend can change on a monthly basis. You have this spending amount that you can spend on whatever you want each month. All you have to do is stick within that limit. For example, Normally, I don't spend a lot on eating out, like I said, but with the holiday commitments and spending more time meeting up with friends and family, I must spend a little more on eating out this month than I did last month, and that's okay because I'm still spending within my enjoy life limit. And there may be some other areas and part of my budget that have some flexibility. For example, I may not be making it to my fitness classes as much this month because I'm busy with holiday travel or spending time with loved ones, so I'm not spending as much on my studio fitness classes as I usually do. You can also continue to adjust your spending with this budget in each of the three budget categories. Maybe your goals in category two have changed and it frees up some more money you can put into your Enjoy Life category, which is category number three. Or, maybe you got a raise and you can increase the amount of money you're adding towards your financial goals. You already know the amount of money you have allocated for each, and you've automated it as much as possible. Bye for now. So you don't need to manually track every single dollar, and you also have the flexibility to adjust as your life changes. To summarize, we talked about defining our goals, and that they should be specific. They should be defined in a way that leaves no room to question whether or not you achieve the goal. They should be something that you can break down into actionable steps. And they should have a deadline. And we also talked about building a budget based on your goals and creating a budget that includes automation as much as possible. Your budget categories are, number one, your necessities and commitments, number two, your goals, and number three, enjoy life. That's it.

Elizabeth: 22:11

I'm so excited to share that I am launching a new program called Emergency Proof Your Money. I'll be offering one on one sessions inside this program and we'll work together to review your finances, define realistic and actionable money goals, and create an easy to follow and flexible budget that aligns with your goals. I know the topic of money can feel overwhelming, and I really want to support you and help ensure you start 2024 feeling empowered and confident in your finances and put you on a path to sustain financial security and wealth building. If that sounds great to you and you want to learn more, the details to connect with me will be in my show notes. Thank you so much for listening to this episode of Money Moxie. If you found this content valuable and it resonated with you, please subscribe and leave a review. I'd love to hear from you. And if you want help with improving your relationship with money and creating a solid money plan, check out the show notes for more information on how we can work together. I'd love to meet you and help you on your financial journey.