Okay, now we get to the fun stuff. And by “fun”, I mean “the part where you actually have to face your realities and how that may or may not be in line with what you think.” Don’t be afraid; I’m here to hold your hand, and I promise I’ve heard it all before. Or worse.
Sit down with your tracking method of choice. Start to categorize them into large groups. As I said last week, don’t get too worked up about breaking up a grocery bill into food vs. drinks vs. household supplies. There’s plenty of time to do that if you get some energy behind this process and start doing this full-time.
Got everything grouped? Now add up all the money that left your hands in the past week. (Include any money that was transferred into savings accounts, to pay off loans, or retirement accounts, even if it technically didn’t “leave your hands”.) Look at the categories and assign them a percentage of the total (i.e. “dining out” is 10% of the money I spent this week).
Pull out your priorities from the first week, and ask yourself this question.
Are my personal finances aligned with my life values?
If so, congratulations! You obviously have a mature relationship with money and understand how it can promote your life goals. If you have some work to do, congratulations! You’re a perfectly normal person.
One common misconception of this exercise is that it requires you to change your spending. It doesn’t! In many cases, you might see that you really value your time going out with friends. But you don’t have recreation and friendship on your life values. So maybe it requires you to amend your life values, not your spending.
However, say that getting out of debt is a very big priority for you, but you notice that you’re spending every dollar that you take in. Then what to do?
Look for the low-hanging fruit (in food terms, “empty calories”). Were there late fees because you overlooked a bill? Were there foreign ATM fees or bank charges that could have been avoided with more planning? Are you stopping every morning for coffee when you could save $20 a week by making coffee at home? Are you impulse shopping to make yourself feel better after a stressful day? Are your $1 iTunes song purchases adding up to a decent amount?
If you’ve eliminated all the “empty calories” and you’re still not aligned, you may have some bigger work to do. Are there opportunities for refinancing debt? Can you cut out cable, or Netflix, or cancel that gym membership that you say you use but really you just pay for because it makes you feel better? (Before you come to my house and murder me, remember—this is about short-term sacrifice for long-term peace of mind! It may not be easy, but it will be worth it.) Do you need to take on a second job for a time? Or (perhaps scarier) ask for what you’re worth at your workplace?
Now is the time to make a list of actions. What specific, measurable things can you do over the next week, month, or three months to get in line with your values? (I’m talking really specific. Like, instead of “cancel cable”, try “avoid watching cable for one week, to see if this is doable.”) Put the deadlines on your calendar.
Next week, we’ll talk about the follow-up. How do you keep living this process as your values change?