When I started this blog in 2011, I had only one goal: to get out of debt. For the first time in my life, I started tracking my spending, so I could see where my money was going. After a few months, I taught myself how to budget, so I could have a better understanding of what my overall spending added up to. As time went on, I naturally became more frugal and put every extra penny I could towards my debt. In the end, I paid off close to $30,000 and reached my goal in two years. That was nearly four years ago, and I haven’t had any big financial goals since. I repeat: I haven’t had any big financial goals in four years.
Of course, I have set some goals here and there. I did a two-year shopping ban to prove I could save more money and discovered I could live on half my income. I also saved a $10,000 emergency fund before I quit my job, and have maintained that savings + built up a large buffer in my chequing account since then. So, it’s not like I’ve been doing terrible things with my money or throwing it all away. I’m still debt-free, my net worth is currently $110,000 CAD (~$84,000 USD today) and I’m happy! But I haven’t been working towards anything for a while…
Part of the problem is that I haven’t had many of the traditional goals you “should” have at this stage in life. Homeownership is extremely expensive where I live, so I used to assume I would never buy (or at least wouldn’t buy until I had a partner to share that cost with) and therefore didn’t stress about saving for a down payment right away. I already own a car outright, so didn’t need to save for that either. And I have no desire to ever have/pay for a big wedding. Be with someone for life – sure. Have a big wedding – no, thank you. (And I would prioritize buying a home over having a wedding any day of the week.)
Another part of the problem is that I didn’t get to do the one thing I really wanted (travel) until I was in my late twenties. Before that, I had always been in debt. I have no one to blame except myself, for that. But once I became debt-free, I wanted to go wherever my budget allowed. Yet another part of the problem is that becoming self-employed changed all my strategies, and especially changed how I felt about money. Yes, whether we like to admit it or not, money is super emotional. And even though I’ve made a good income every year, I haven’t felt great about money (and will talk more about why below).
But one of the biggest underlying problems I have personally been dealing with has been the blasé attitude I’ve had about money since embracing minimalism. The first year of the shopping ban taught me so many lessons, one of which was that I didn’t need to earn as much money as I thought I did. I will forever be grateful for this lesson, as it helped me escape the rat race of thinking I needed to earn more money simply so I could buy more stuff and live a “bigger and better” life. It turns out, when you want less stuff, you need less money. This statement rang true for me then and is still true for me today.
However, there are also a lot of posts in the minimalism space that reflect another statement: money doesn’t matter. This message is at the core of posts that discuss why money shouldn’t be the focus of people’s lives, and why we shouldn’t tie our happiness to how much we earn or how much is in our bank accounts. Again, I agree with some of the sentiments in that statement: life is certainly about more than money, and there are far greater priorities and purposes than chasing dollars. But money DOES matter, friends. And it’s important to understand the role it plays in your life.
In the past few years, I feel as though I lost sight of this fact. I stopped budgeting, and instead only tracked my spending monthly. And because I was still able to have all the things I wanted, I thought this was ok. What I have realized is that the only people who don’t have to budget are people who have a lot of money. And it may look like I’m “living the dream” sometimes, but I am self-employed – not retired at 31. If I want to live and eat and have any fun, I have to work. And if I want to retire comfortably one day, I have to set financial goals and work towards those too. It’s not an option, it’s a fact.
So, while I still don’t have grand plans to buy a home or another car or pay for a big wedding, there are two financial goals I want to work on this year. Both will allow me to live the life I want today, while saving for the life I want in the future.
Goal #1: Cut Back on Expenses and Run a Lean Business
At the end of every month, I have a calendar event pop-up that reminds me to update my invoices and expenses in FreshBooks. Throughout the year, I also review various invoice and expense reports, and check my profit and loss statement to make sure things look ok. In 2016, I felt good about my numbers each month, until I got to the end of year and looked at the total amount I had spent on my business. My expenses added up to exactly $14,000 – that’s $1,166/month (which is more than my rent). The number shocked me, but it also didn’t surprise me…
The largest expenses were: printing and shipping of Mindful Budgeting 2017 Planners, hiring freelancers, travel and a long list of monthly services. I also discovered that the same way friends who love to shop will happily convince you to shop with them, business owners who believe every dollar spent on your business is an investment will help you justify expenses. I don’t necessarily regret any of the money I spent last year, but that also doesn’t mean I want to spend that amount every year going forward. Yes, expenses can be written off on your taxes, but you still need to spend that money first!
My goal for 2017 is to cut my business expenses in half. I’m not entirely sure it’s doable, because I don’t know what the second half of the year is going to look like yet. But I’m going to start by auditing my expenses and cutting out anything I don’t absolutely need. My travel budget is being slashed (only going to FinCon). I have also cancelled subscriptions to a few monthly services. And I’m not buying any online courses, until I complete all the ones I have paid for in the past. You could say my business is on a shopping ban. If I need something, I will pay for it. If I don’t, it’s cut.
The “why” behind this goal isn’t just about the numbers (though cutting back and saving more is always great) – it’s to press pause and make sure I’m spending money for the right reasons. I don’t want to buy anything if I don’t know when I’ll actually use it. I also want to push myself to do more work, rather than assign it out or assume an online service can take care of everything. If it really can help me create a better system, great. And if I spend more than $7,000 on my business, that’s ok. I simply want to get to the end of the year and feel good about how every dollar was allocated.
Goal #2: Recommit to Budgeting and Saving for Retirement
I think I’ve made it pretty clear already that I’m ready for budgeting to be part of my life again. In 2016, I added up numbers at the end of each month and tracked my net worth, but it just wasn’t the same as setting targets and monitoring my progress. There are some mental hurdles for me to work through, as I still don’t find it easy to budget with irregular income, but that’s a topic for another post. For now, just know that I’m back to tracking my spending every day (for both personal and business expenses) and adding up my numbers every week, and I plan to do this all year.
As part of my budgeting strategy, perhaps the greatest mental hurdle I’ve been trying to work through has been how much to save for retirement. When I had a full-time job, it was so easy. I brought home $4,000/month, invested $800-$1,000 for retirement, then spent/saved/travelled with the rest. Now that I’m self-employed, my income is all over the place. Some months, I collect as little as $1,500. One month last year, I collected over $20,000. When it’s so irregular, how do you project your income and decide how much to invest!? This is something I’ve been battling with since I quit my job in June 2015.
It’s not as simple as coming up with a goal of saving 10% of your gross income. To show you why, I created a spreadsheet with three scenarios, so you can see how much of a difference earning extra money makes. After setting aside 30% of my income for taxes, paying for business stuff, paying for living expenses and travelling (the only number I “inflate” with my income), the amounts leftover that I could invest for retirement change drastically. If I earned $52,000, I could only invest $2,400 – or 4.62% of my income. But if I earned $75,000, I could potentially invest $14,500 – or 19.33% of my income.
Side note: I made $75,000 in 2016 and did not invest $14,500. Remember those big business expenses? Cut the $7,000 I want to save this year and that’s what I invested last year ($7,500 or 10% of gross income).
The biggest problem isn’t just projecting and coming up with the magic number, but feeling comfortable investing when you don’t know how much you’re going to earn in future months. I used to think this was just an issue for me right before tax time, because I often find I hoard money in case I owe more than I expected. But it’s actually an issue for me year-round. I’ve found I’m reluctant to setup automatic savings programs, because I’m always worried I’ll run out of money and will need what I invested. This means I have only been making a few lump sum deposits each year, and I don’t like it.
The obstacle is that I’m stuck in this scarcity mindset of feeling like I’m going to run out of money. It has never happened before. I’ve made $65,000-$75,000/year for the past few years. If history repeats itself, I’ll stay in this income bracket for a while and should be able to save at least 10% of my gross income for retirement, if not more. My goal for this month is to do some projections and run numbers through various retirement calculators. And my goal for the year is to setup an automatic savings program I’m comfortable with, and consistently check-in with it to see if/when I can invest more.
So, the “why” behind this goal isn’t just about the numbers either (though I do want to save a bit more than I have been) – it’s to push past this huge mental block and hopefully embrace an abundance mindset, so I can stop acting out of fear and start believing I’m in control of my future.
Now, I realize setting financial goals doesn’t sound like it lines up with the often peaceful messages of being more present and living an intentional life, but I would argue that being mindful with your money is an important part of the puzzle. That doesn’t mean chasing a higher income or buying bigger homes or better cars or more stuff. But money does matter. It puts a roof over your head, shoes on your feet and food in your stomach. If you earn enough, it also allows you to budget for a few of the things you want. And if you earn more, it gives you the opportunity to set yourself up for a comfortable future.
This month’s slow living experiment is simply meant to serve as another reminder of how important it is to hit pause on what you’re doing and question if it still serves you. If it doesn’t, it’s important to figure out what action will. I won’t attach my self-worth to my salary or my net worth. I refuse to set income goals that serve as vanity metrics, the same way I refuse to perform whatever tactics will get me the most followers on social media. Life is about more than any of those numbers. But money does matter, and I believe there’s a way to set financial goals and still enjoy the journey.
- How I Cut My Business Expenses by Nearly Half – Careful Cents
- Minimalism vs. Earning More Money – The Wild Wong
- Money Doesn’t Buy Happiness, Neither Does Poverty – The Minimalists
- The Minimalist Guide to Saving Money – Rowdy Kittens
- The Minimalists’ Guide to Setting and Achieving Goals – Anuschka Rees