Beautifully Frugal: New Year's Edition
Could you have used an extra $5,000 this year? To break it down for you, spending $13.69/day is all it takes to spend $5,000 in 12 months. That is easily a trip to the gas station or running to the coffee shop before work. Small purchases like this add up over time, and without a plan, it’s easy to let your hard-working dollars go to waste. Luckily, with a new year comes the opportunity for all kinds of growth. Start creating a plan for your money and begin budgeting toward financial stability.
Create a Vision
When researching the definition of success I came across, "the accomplishment of an aim or purpose." To have success in achieving a financial goal, you must first have direction on how to achieve it. Once you have this vision, you can create a concrete plan of how to get there.
One of my college professors loved to challenge his students to always think about the better version of themselves. I took my professor's words and put them into action by envisioning where I want to be in the future and what goals I must set for myself to get there.
For example, if I want to become a leader someday, I must be present and readily available for my team now, while also soaking up any wisdom from current leaders around me. If I want to have a life where money is never a subject to fret over, then I must develop a budget, and plan, and start surrounding myself with people who are also financially successful.
There is a saying that goes, "you become who you hang out with," and I couldn't agree more. We tend to fall into the same habits as those around us, which can be a struggle when you're trying to save money around the person who always wants to spend it. Surround yourself with people who you aspire to be like, and this will push you to reach your goals and become the future self you want to be.
Start Utilizing Sinking Funds
A sinking fund is a strategic way to save money for a specific purchase by setting aside a little bit each month. This is a great way to start saving for expenses you know are coming up for the year. You can create a sinking fund by putting cash into an envelope or putting money into a separate sub-savings account via your financial institution. For example, our family has a separate checking account called “Christmas.” Even though the holidays have come and gone, your January budget is the perfect time to start a line item for the next holiday season! Even putting away $100/ month gives you $1,200 of stress-free spending during the crazy holiday season. And let’s be honest, shopping during the holidays is much more peaceful and fun when you already planned for it financially.
Other items to consider a sinking fund for could be car maintenance, vacation, or an emergency fund. Putting money aside for these situations is much simpler than having to fork out hundreds of dollars from one of your paychecks when something goes wrong or scrambling at the end of the month to pay off a large credit card bill. Everyone’s financial situation is different, and even if you are only able to contribute a small amount each month to these funds, that’s okay. I guarantee you will look back and be grateful for your contributions.
Be conscious of these expenses and start planning now! Regardless if you have upcoming expenses or not, saving for the future using a sinking fund is a stress-free and smart way to save. Plus, sinking funds encourage you to pay cash, which is a great habit to avoid taking on more debt.
No-Spend Months
Now, $13.69/day doesn’t seem like much, yet it adds up by the end of the year.
I am a spender. and I enjoy grabbing a coffee or other small knick-knack while running errands, but I quickly realized all these small purchases are really only satisfying me in the short-term and doing harm to my long-term goals. To help me reach my long-term goals, I go through what I like to call, “No-Spend Months.” This is where I commit to not spending money on small things I want (and don’t need), and the saved money from those skipped expenses goes toward my financial goals. This may seem drastic, which is why I don’t do this for the entire year—although I would love to try for this long. I choose a month when I start to feel I am overspending, and then I hunker down and commit to only spending for necessities like groceries, bills, gas, and other essentials. You can do anything for a short amount of time, right?
Let me give demonstrate what this looks like: I’m out running errands and really want to splurge on a latte and breakfast sandwich. I stop, remember I’m in a “No-Spend Month,” and instead of spending that $13, I open my bank account app and move $13 to my Roth IRA (or whatever current goal I am saving for). In my mind, I already justified spending the $13, so now instead of getting a coffee, that money is going toward my long-term financial goals. If I did this every day for the year, I could almost fully fund my Roth IRA just by changing my habits and eliminating small everyday purchases. Of course, this is not to say you shouldn’t ever treat yourself to a small item—commit to a definition of "no spending” that is realistic for you and your family.
Challenge Yourself!
If you struggle with budgeting, try doing so in small increments. You can start a coin jar at home and, throughout the year, you can throw in all the coins you have in your wallet or purse to then cash out at the end of the year. You could try a no-spend week or a no-spend month on material things such as clothing, take-out, or entertainment. You’d be impressed how small things like this add up over time. Continue to challenge yourself by committing to small goals first – maybe that no-spend month turns into two months, or even three. We cannot be good in everything we do right away, yet with time, effort, and practice, we can achieve anything!
Celebrate your Progress
If you have hit any of your financial goals throughout the year make sure you celebrate them! Obviously, keep your celebration within your budget, but while we are accomplishing our goals we are allowed to have fun, too! Our journey to financial freedom should always still be enjoyable. I remember the day we paid off our car, my husband and I decided we were going to take our daughters for an overnight trip to a hotel with a pool. Although it was a small expense, it was a fun little getaway to celebrate accomplishing a goal and our commitment to this journey as a family. While we were in the thick of our strict budget days, it took an entire family effort of supporting one another to stay on track—and that deserved to be celebrated!
If you’re ready to financially succeed in 2023, our team at KerberRose Wealth Management is ready to help you achieve your goals. Whether you are looking to budget, save, or invest, we are here and ready to help.
Next month’s Beautifully Frugal blog will dive deep into getting to know one of our own advisors on the Wealth Team, Mike Rudolf. So stay tuned, and Happy New Year!
About Alex
Alex is one of our financial wellness advocates on our Wealth Management team. She is a mom of four, and her passion is sharing her own personal finance journey from living paycheck to paycheck and drowning in debt to finding financial peace. Alex's unique experience has given her the ability to help families take control of their own personal finances - all while still enjoying what life has to offer.
Contact: alex.miller@kerberrose.com