Create a Get-Ahead Tab in Your Budget to Get Ahead
I know it feels counter-intuitive to plan for extra money right now; that’s why it works.
I’m going to keep this one short and sweet.
If you don’t have a budget, I will save the lecture, even though WTF?
And don’t tell me you don’t make enough to track it, don’t tell me you will create a budget when your situation is more stable, don’t say everything is automated, and you already know where your money goes — to bills.
They work because you can spend in alignment with your values, you can see your debt shrink, your assets grow, your net worth increase, and budgets add a level of accountability and intention to your financial equation.
A simple excel spreadsheet will do. Create tabs or worksheets for each half-year. Then set a goal to track your spending, expenses, income, savings, and investments for five years. Yes, it can be that easy. You’ll keep going.
One of the most powerful aspects of this exercise is seeing how much of your money goes out to pay for monthly recurring expenses — tolls, subscriptions, payment plans, utilities, etc. — You get a sense of why it’s not snowballing in your favor.
On the flip side, when you look back Y-O-Y and see the number of line items decrease (because you paid off auto loans, mortgages, credit cards, etc.) and the ones left have a direct benefit to your life and/or are an investment, it starts to feel really good like you are on your way.
But enough about all that. That’s the basics. You are ready for the enhancements.
Here it is: Add a tab to your workbook and call it Get Ahead. Go on. I’ll wait. Then, I want you and your spouse to spend 10–20 minutes brainstorming how you would spend an unexpected windfall, from the obvious to the absurd, from a little unexpected cash to a jaw-dropping sum, then list the line items and the actual amounts that correspond.
Did you see my piece on wishlists? It’s a similar idea. When we open the door to the possibility of a better future, it doesn’t mean it will happen, but it does mean that it’s more likely to happen.
And, it’s the perfect time to do it, before the holidays, so you don’t get caught up in charging excessively between now and the new year.
A guy I was dating before I met my husband went to the ATM one day to withdraw cash for the weekend. When he checked his available balance, he saw about six extra zeroes. Imagine that.
He freaked and assumed it was an error. It turns out, when his grandfather passed, it automatically triggered a trust deposit into his account.
The crazy part was, he wasn’t expecting it, and even his parents had no idea it was coming. It was an endowment set up long ago and meant to be a very generous incredible surprise gift.
I think my friend bought a downtown loft that used to be a library; it had an old gigantic historic fireplace if I’m remembering it right.
I don’t know if he had his eye on that place before or if it seemed like a good investment. It’s not the point. The point is when we complete the exercise of envisioning a better financial future, paying off credit cards, for instance, by identifying the exact amounts required to make it happen, or estimating the cost of an old library turned loft, three things happen.
One, our mind starts to fill in the gaps to the equation. If you are making X and the loft is wildly out of reach, your mind adjusts accordingly. It looks for opportunities to make more money. It looks for opportunities to save more money. It looks for opportunities to improve your financial acumen. It doesn’t mean a wealthy grandparent will surprise you, but anything can happen.
Two, when we know what we want in precise terms, we can better evaluate opportunity cost. How’s that $20 cocktail look when you know you’d rather buy a gallon of paint for your office? Maybe you still order it, but instead of ordering 10, picking up the round for you and friends, you have one, swing by Lowe’s on the way home, and before you start painting, you order a pair of $120 boots you’ve been coveting.
It doesn’t seem possible that one night out is the equivalent of boots that you’ll wear for a few seasons, plus a dramatic change in your new home office, but that’s the power of seeing it outlined in excel — We can more clearly identify what we want and what it costs relative to what else we want. Consciously and subconsciously, your choices begin to shift to align with your priorities and overarching goals.
Three, when you uncover a little extra money here or there — a bonus, a gift, a raise, or a refund — you can capitalize. Using the extra money toward your Get-Ahead list moves you a little closer to your goals and improves your overall picture, which is much more beneficial than watching it get swallowed it into the abyss that is your checking account.
Maybe it doesn’t move the needle much, perhaps you feel as if you’ll never get there, but one day, you’ll see, not only did you reverse the avalanche of spending, your nest egg has grown.
Your net worth will increase, and this time, the snowballing will be in your favor. When you log on to update your workbook weekly or bi-weekly, it’s good news. You don’t dread the process or procrastinate; you face it head-on and anticipate more good news.
Don’t underestimate how motivating and meaningful small and steady financial wins can be. It’s a powerful way to create a better future.