For the past year, I’ve been saving an average of 31% of my income each month, and dividing that between my goal to max out my TFSA and trying to contribute just enough to my RRSP to counter having to pay income tax on my freelance income. At this point, those are my only long-term financial goals, which ultimately fall under my “retirement” plan (although I’m sure I’ll use some of what’s in my TFSA for a down payment one day). But I have lots of short-term financial goals that I try to tackle each year, too, and I’m constantly adjusting my budget to make them happen.
One of the questions I’ve been asked a lot lately is how I stay motivated to tackle so many financial goals at once – i.e. how do I save for retirement, travel as much as I do and still have fun. The short answer is: I’m on a shopping ban. No, I’m just teasing! (Although, it obviously helps.) The longer version of that answer is I set aside time every few months to outline what my goals are, and figure out how my budget needs to be adjusted in order to tackle them.
When I put together the Mindful Budgeting Program, I was so focused on just helping you start tracking your spending and getting into the swing of this budgeting thing, I didn’t think to include anything on how to decide what your goals are and figure out how to adjust your monthly budget accordingly – so, here’s an extra template to help you do just that!
You can download this worksheet for free.
How to Align Your Budget With Your Goals
Step 1: Set a Timer and Write
The first step is my favourite, because it takes the shortest amount of time and is actually fun! Print off this template or grab a piece of paper, then set a timer for 2 minutes and write down all of the top priorities in your life right now. You don’t need to focus on what your financial goals – think about the most important people in your life, the places you want to go and things you want to do. Just write write write until your timer tells you to stop.
Step 2: Set Your Goals
When you’re done, take a few minutes to look at your list and start to think about how some of these things could be turned into financial goals – both big and small. For example, maybe you want to treat your family to a nice meal out soon, or you and your partner want to go to Europe in 1 year’s time. Make a list of up to 5 goals that need to be incorporated into your budget, and be as specific as possible, so you can move onto Step 3.
Step 3: Analyze Your Spending
Now that you know what your financial goals are, look at your last 3 monthly budgets (or at least log into your online banking and analyze your spending) and write down how much you’ve allocated to those goals recently. Sometimes, you might think you know what your goals are, but your spending will show you what your priorities have really been lately… and it might not add up to what you want to be working towards. So, have you been allocating enough money to them? Be honest with yourself.
It took months of analyzing my spending for me to finally see my savings goals were going nowhere, because I was spending too much at restaurants or on books and random “things” for my home, which ultimately led to my decision to do this shopping ban!
Step 4: Make a Plan
Finally, since you just finished analyzing your spending, it should be (at least somewhat) obvious where you could cut back, in order to make your new financial goals a top priority in your budget. For example, if you’ve been spending $30/week on takeout coffee but still haven’t started putting even $100/month aside for retirement, maybe you can start there. Cut out takeout coffee for 3 months and setup an automatic withdrawal to your savings account, so you don’t even miss the money!
The next monthly budget you write should include amounts for all of your goals, even if it means you have to sacrifice something you were spending money on before. And if you don’t want to sacrifice anything, you may need to bring in more money to do everything you want (which could be one of your goals). Make sure you do this exercise every few months, so you can see how you’re progressing, and figure out if you need to readjust your budget for any new goals you have.
Want to see it in action? I printed off a copy and did this exercise last night…
Step 1: My People/Places/Things
The first step was fun because it showed me where my heart is right now: in Victoria, surrounded by the people I love most (no surprises there!). My niece’s 6th birthday is coming up in a few weeks, and I’ve been trying to think of something we could do together vs. just buy her a gift. And I still want to pick up a used paddleboard, but found out most won’t go on sale until late September/early October, so that’s sort of on hold.
I also wrote down a few business/financial goals. I’m travelling to North Carolina for a conference in September, and it won’t be as cheap as many of the other trips I’ve been on recently, so I’ve been thinking about that a lot lately. I want to finish up my book proposal this fall, and get it into the hands of my agent. I want to finish two courses I’m currently enrolled in, one of which will help me invest more. And then I need to send a new product to the print shop next month…
Step 2: My Financial Goals
Obviously, not everything I wrote down in Step 1 could be turned into a financial goal – but from that list, I was able to pick out 5 things I need/want to spend money on in the next couple of months:
- I want to take my niece out for a day of birthday fun (maybe swimming, lunch and mini golf?).
- I’ve paid for my flight to Charlotte but I still need to pay for my hotel + food costs.
- I want to buy a used paddleboard + roof rack for my car.
- I want to (finally!) open a Questrade account and dive deeper into investing.
- I need to send my next product to the print shop by mid-September.
Step 3: My Spending
Since most of my goals are short-term, I can already tell you I haven’t been “saving” for them all, in the past 3 months… but here’s what I have been doing:
- I don’t expect this day to cost more than $60, so it will just be part of my regular budget.
- I already have $300 set aside for the hotel, so that’s covered. Now, I just need money for food!
- I’ll be pulling money from my shopping ban account for this. :)
- I still have ~$5,000 in cash just sitting in a regular TFSA that I’ve been wanting to invest, so I think I’ll start by pulling $1,000 from that and going from there.
- I’ve saved all the money (-35% for taxes) I’ve made from product sales, so I can pay for this.
Step 4: My Plan
Since I’m already doing a shopping + takeout coffee ban, there’s nowhere I can really cut back per se; that means I need to make more money (which I want to do, anyway). I also want to sell a few pieces of furniture I brought over from Vancouver I’ve decided I don’t need. And then I want to get better at meal planning so I can eat out a bit less (I used to be so good at it, but my new routine has thrown me off).
And I didn’t write this down, because it’s technically not a financial goal, but I want to finish Bridget’s investing course, Master Class Money, so I can learn more before I dive into the world of Questrade!
So, that’s that – all the goals that will be squeezed into my budget over the next few months. Print off the worksheet, do the exercise for yourself and let me know what some of yours are!