Live the life you want: Tips from a financial coach

If the thought of creating a budget or just looking at your monthly expenses in detail makes you cringe, this is for you! I reached out to financial coach Monica Scudieri, author of Grab Your Slice of Financial Independence, to find out how to make budgeting less intimidating. She shares her advice in this three-part series.

In part 1, we looked at your goals and defining how you want to live your life and your definition of financial independence. Then, we looked at calculating your net worth, pulling your credit score and credit history and recording cash flow.

Tara: Monica, we did a lot of information gathering to start. This is going to help us decide how to get where we want to go right?

Monica: Absolutely. Now we are going to focus on your cashflow, and from it, build a budget that supports the lifestyle you are striving to move towards.

Tara: What do we need to keep in mind before creating a budget?

Monica: Look at your actual spending habits and the story it tells. Does your spending align with what is important to you? Things like having more time with their kids, family, and friends, take a vacation or to retire (one day).

Categories

First, look at our current categories of spending and income. Some are easy to define, for example,
mortgage/rent, auto loan, gas, and utilities. Other categories are squishier, like Target, Walmart, and
Amazon. Do you give these stores each their own line or break up the spending into different categories
to give you a better picture of spending? The answer depends on what information you are trying to get
to. Try giving each of these stores their own line item. If it doesn’t tell you anything, then break up the spending into the appropriate categories.

Spending

Now let's look at your spending. Are there any surprises? According to my clients, the biggest category
surprises are dining out, groceries and discretionary spending. Take restaurants for example, do you
remember every meal? Are you a foodie where dining out brings you joy? If so, then maybe the
spending in this category is justified. Look at each spend (category) by month and ask yourself, did this
spend make my life easier, happier? Could I have used that money in a different category that would
make more of a positive impact in my life?

Tara: I love that! Last fall was so busy with my photography season. Being able to pick up all three kids from school and daycare and then cook dinner and get to other activities was really stressful. I had to decide if I should cut back on work, or find a solution for meals that would save time and was worth the money. I did start to spend more for pre-made lunches because otherwise I would sit at my computer all day and not eat. And nobody wants a hangry mom in the car pool line.

Monica: It's important to consider what makes life easier and adds enjoyment. That will be different for each person and family. No one category is going to be "good" or "bad."

The Fat

Now, let's look at "the fat". Every cash flow map has it. Where are you spending money that does not
align with what is important in your life? Let me give you examples of what I mean.

I had a client, Jim, who would stop at Starbucks every morning on this way to work. He is a huge
Starbucks fan, so much so that his day is not right without it. Sometimes he would stop in after lunch for
a pick-me-up. This was a $5-$7 expense every morning, five days a week. In a month, that roughly
comes out to between $150-$210, and that is just for breakfast. For Jim, this was an important part of
his day that brought him joy. So, when we looked at this budget, we made sure to add in money for this
special treat.

Another client, Mary, had three gym memberships. One a block from her home, one near her office and
one near a good friend of hers to go to the gym together. The three gym memberships cost her about
$270 a month. When I asked if this brought her joy she said no and canceling one (or two) was long
overdue.

Every month when we review our spending, there are always ways to trim fat. And if you get good at it,
that fat can turn into a monthly raise to save and invest. No more living paycheck to paycheck! But I am
skipping a few steps before we get to the juicy part.

Each of us will have cash flow that tells a story. What is yours?

Tara: Now that we have looked at our cash flow and goals, now this is where we dig in to create a budget, right?

Monica: Yes! Let's talk about the easiest way to build and maintain a budget.

Tools to tame the Big B

There are lots of great tools out there. Some cost money, some are free.

The best budgeting tool is the one you like using and will use consistently. It should support your
lifestyle and give you the information you need, namely, where is my money going and does the spend
support what is important to me.

Take your time and try out different tools. I started with Excel and still use it today because I know it
very well. The drawback is it is very manual, but I am more than ok with that because what I get in
return is a lot of flexibility. I know many who love YNAB and others who record everything on Notepad.

Once you have picked a budgeting tool, we can start doing some measuring. When measuring your
monthly spending against your budgeted spend, keep in mind a few things.

1. Overspending in a category: Is this a one-time overspend, if so, why? Have you consistently overspent, do you need to adjust your monthly amount?

2. Underspending in a category: Is this a one-time under spend? Are you consistently underspending?

3. Category adjustment: Does this category tell me what I need to know? Do I need to split it up or
consolidate categories?

The only time you need to have a critical eye on your budget is when 1) you are getting started in setting
up your budget or 2) when there is a life change, i.e., married/divorced, growing family/empty nester,
rent/buy.

As you can see, budgeting by first recording cashflow and understanding where your money is going,
gives you the power to create a custom budget that reflects your life and tells a story. By trimming the
budget fat, you can give yourself a nice raise (every month) and break the cycle of living paycheck to
paycheck.

Tara: Monica, that sounds like a lot of work. Does it always require a deep dive every month?

Monica: In the beginning, it takes effort to get it set up. If it were easy, everyone would be doing it. Remember, anything worth having is worth fighting for. And you, are worth every effort to get that life you dream of.

Keep recording, keep refining. You will find that not only will you give yourself a raise month over month
but this practice of mindful spending, saving, and investing will have a direct impact on your net worth,
credit history and credit score which in turn will give you access to better loan interest rates. It is a
positive domino effect.

One last thing, there is no downside to trying this method out. I mean what do you have to lose? Or you
can continue going the way you are. Only you can decide.

In part three, we will talk about how to live for today while planning for tomorrow.

Tara Lynn is a former WRAL reporter and anchor. She lends her 15-plus years in journalism to tell visual stories through love-filled photography for families of all kinds. The mother of three little humans and one senior rescue dog believes in celebrating magic in the little things, the big loves, and the imperfect moments that make the most remarkable memories. Her vision is to help families celebrate and share their love through photography and curated album artwork that become timeless keepsakes connecting multiple generations...because moments often pass in the blink of an eye, and the photographs we take connect us to our memories and our great loves, forever.

You can find Tara Lynn on Instagram at @TaraLynn_andCo and TaraLynnAndCo.com. Learn more about her photography at TaraLynnAndCoPhoto.com.