The Sixth Step to Balance: Staying Financially Fit

February, 2014

by Michelle Perry Higgins


active-famNo matter how well you prioritize, no matter how well you juggle your time, no matter how many boundaries you set or how much help you receive, I firmly believe you cannot have true balance without getting your finances in order.

Of course, as a financial planner, I’m somewhat biased. But over the years I’ve seen that having a handle on your financial situation is more important for your peace of mind, your self-respect, and your balance than you might think. Many women delegate all financial matters to their husbands and have no idea how much money is coming in, going out, or even where it’s going. And many single ladies place finances on the back burner because they don’t understand what they should focus on first or who to turn to for help. Is this you?

If so, please let me share a few startling statistics that might make you decide to change your evil . . . er, I mean ostrich ways.

  • Women will control two-thirds of consumer wealth in the U.S. over the next decade.
  • 80 to 90 percent of women will be solely responsible for their finances at some point, mainly due to divorce or outliving their men.
  • Fewer than two in ten women feel very prepared to make wise financial decisions.

To think that soon—women will control a majority of the wealth in America and make a majority of the purchasing decisions without feeling prepared to make the right financial decisions—that is a frightening and unnecessary situation I’d dearly love to change.

Here are my top three tips for bringing your finances and your engagement in your family’s finances into balance.

Tip # 1:  Track Your Living Expenses

The first thing you need to do is gain control over what you are spending each month. For some women, being confronted with accrued numbers they’d rather not know about conjures up real anxiety: the Costco bill, the shopping sprees at the local mall, the large outflow for the kids’ sports programs.

I urge you to step out of your comfort zone and put your spending patterns under the microscope. You will be giving yourself something extremely valuable: the gift of financial empowerment.

Find out if your partner is currently tracking your expenditures. If he is, give him a big kiss and tell him I said thank you! Spend an afternoon reviewing the figures to understand how much it takes to manage your home. Are you surprised?

Have your husband show you exactly how he tracks the figures and where he stores the passwords to all your joint accounts. Have him show you the monthly report so you can reconcile the figures and identify areas that can be reduced, if any.

If no one has been tracking expenditures, give the dog a chew toy, put the kids to bed, tell your hubby to go watch ESPN, and find a quiet space to focus. There are dozens of household budget expense tracking programs and even apps that give you the ability to track your purchases on a continual basis.

Input your expenses daily or weekly instead of letting the data pile up for a month. Once you find your groove with this new practice, it should become as automatic as brushing your teeth. Honest!

Pick a date to get started (the first of the month is recommended) and monitor every future penny moving forward. If you’re good at paying your credit cards in full each month, I recommend putting every expense you can on one card. Although using cash is a little more challenging and requires more planning, you may actually end up spending less. It’s a lot easier to throw down a credit card for those new shoes versus hard-earned cash.

What I don’t recommend is using some cash, some credit or debit, an occasional online check, etc. Do you see how complicated this could become when tracking your expenditures? Best to boil it down to one or two forms of payment.

Once you’ve tracked at least six months of living expenses, you can begin to evaluate your spending patterns. Are there areas you can decrease your expenditures? Did you find you were spending more than you thought? For example, if you spent eight dollars on coffee and a scone four days a week, you’ve paid out approximately $128 a month for that little luxury. How far would that extra $128 go toward paying off your credit card or redirecting it to your retirement savings?

Tip # 2: Build a Financial Plan

The term financial plan should not only be associated with individuals approaching retirement age or with investable assets. Take the time to create a plan that lays out your goals and dreams for today and the next 30 plus years.

A financial planner can help by having you complete an extensive questionnaire covering assets, liabilities, living expenses, tax returns, bank statements, investments, insurance statements, etc. It is important to disclose your desired goals during these planning sessions and anything that may affect your plan.

Here are some of the many questions you will answer during your planning meetings:

  • Are my living expenses reasonable?
  • Should I be saving more and if so, where?
  • How much should I have in emergency reserves?
  • How can I pay off my debt?
  • How much should I save for my child’s college education?
  • Am I adequately insured if I were to pass away?
  • Should I buy a home?
  • How much should I be saving monthly for retirement?
  • How will it be possible to maintain our current lifestyle in retirement?

Once you establish a financial plan, review your progress monthly. This will help you determine if the goals you set were realistic and show you if progress is taking place. If not, you may need to alter your goals. A financial plan is not set in stone. It will change over the years.

 Tip #3: Live Well—Plan Well

If something happened to you today, do you have your finances, estate, and personal affairs organized in one location for your heirs or beneficiaries?

I’ve spent years witnessing the heart-rending chaos that ensues when someone passes without leaving their financial affairs in order, or even where anyone else can find the information. I recommend keeping all your financial and personal information in one place: immediate contacts, insurance, private security access information, income and cash equivalents, document originals, debt, retirement and investments, pet information (vet), business ownership, personal property, funeral arrangements, real estate, and estate planning documents.

This will make life much simpler for your heirs and take a huge load off your mind! I created The Everything Binder for my clients to do just that.

Yes, sticking your nose into your own finances is a lot of work, but who’ll do it if you won’t?

Trust me, you’ll love the balanced feeling of knowing exactly how much you are spending and where you’re spending it. You’ll love knowing you are on track to meeting your goals, and that your future is being thoughtfully taken care of.

Here’s to your continued financial fitness!