Lesson 27: Revisiting Your Goals and Priorities
Here we are, six months through the revolution. As you go through your Saving Revolution you may find yourself revising your spending goals and priorities. There is nothing wrong with that, it's a part of having a Spending Plan. We each have a set income, it's our dreams, desires and needs that change and so our spending has to change too.
Pretend for a moment that your current goals are to:
Save a deposit for a house in six months
Buy new furniture when you move into your new house
Build your emergency fund (essential now you have a mortgage) to equal six months' worth of income.
With your current Spending Plan you spend every cent you have coming in, there is nothing left to save for these things.
In order to save the $10,000 (you're pretending, I know it will be a lot more you need) you need for the deposit on your house you need to save $1,500 a month for the six months. The new furniture you've been eyeing off is going to cost you $500 a month for six months and building your emergency fund to six months income will cost you $900 a month for two years. Wow! That's a total of $2,900 a month.
Unless you are living a very extravagant lifestyle saving $2,900 in your current Spending Plan is, well, it's just not going to happen.
So you have two choices:
1. You can find a way to make more money. You could get a second job, do freelance work, start your own part-time business, work lots of overtime, start selling off your unwanted belongings (this is a temporary fix) or find a better paying job.
Keep in mind that if you do choose to work more, it is a trade-off. You'll be giving up things that may be very important to you, spare time being the first and most important sacrifice. If you can spare the time and are prepared to make this extra work a temporary solution to your money problems, and you can do it without damaging your health or your family, then go ahead. But, if it's going to be a long-term situation think carefully. You may find the sacrifices outweigh the benefits if you have to do this for 2, 5 or even 10 years.
2. The other option is to go back and review your Spending Plan, your goals and your priorities. Even if you think you have cut your expenses as much as you can, go back and look again. You may find there are still expenses you can trim.
You may have both a landline and a mobile phone for instance. You may feel that keeping the landline is important so you can stay in touch with family and friends and they can easily keep in touch with you in an emergency. But do you really need to be paying line rental and call charges for a landline you hardly use? Could you not use your computer to make and receive calls? Can your mobile plan be switched to one that offers better value? You may find that your financial goals are more important to you than your landline and happily ditch it for the saving even if it has been a high priority in the past.
Or you may decide to re-evaluate your Spending Plan and financial goals and look for changes you can make. Perhaps you decide to buy your house in three years rather than six months. You have a lot longer to save the deposit required. And you could change your mind about buying new furniture and instead renovate and restore the furniture you already have. You can still work towards saving six months of income but stretch it out to 5 years instead of two.
As you revise your Spending Plan use a pencil because you'll most likely need to go over it a few times. Keep going until you get your Spending Plan is balanced and you can live with it.
Never forget you are going to live with your Spending Plan every hour of every day until you reach your financial goals. If you don't think you can do that then revise it. It's not set in concrete and it is meant to be a fluid, changeable thing.
Looking closely at your Spending Plan helps you think through expenses you can trim even further so you can reach your goals.
Pretend for a moment that your current goals are to:
Save a deposit for a house in six months
Buy new furniture when you move into your new house
Build your emergency fund (essential now you have a mortgage) to equal six months' worth of income.
With your current Spending Plan you spend every cent you have coming in, there is nothing left to save for these things.
In order to save the $10,000 (you're pretending, I know it will be a lot more you need) you need for the deposit on your house you need to save $1,500 a month for the six months. The new furniture you've been eyeing off is going to cost you $500 a month for six months and building your emergency fund to six months income will cost you $900 a month for two years. Wow! That's a total of $2,900 a month.
Unless you are living a very extravagant lifestyle saving $2,900 in your current Spending Plan is, well, it's just not going to happen.
So you have two choices:
1. You can find a way to make more money. You could get a second job, do freelance work, start your own part-time business, work lots of overtime, start selling off your unwanted belongings (this is a temporary fix) or find a better paying job.
Keep in mind that if you do choose to work more, it is a trade-off. You'll be giving up things that may be very important to you, spare time being the first and most important sacrifice. If you can spare the time and are prepared to make this extra work a temporary solution to your money problems, and you can do it without damaging your health or your family, then go ahead. But, if it's going to be a long-term situation think carefully. You may find the sacrifices outweigh the benefits if you have to do this for 2, 5 or even 10 years.
2. The other option is to go back and review your Spending Plan, your goals and your priorities. Even if you think you have cut your expenses as much as you can, go back and look again. You may find there are still expenses you can trim.
You may have both a landline and a mobile phone for instance. You may feel that keeping the landline is important so you can stay in touch with family and friends and they can easily keep in touch with you in an emergency. But do you really need to be paying line rental and call charges for a landline you hardly use? Could you not use your computer to make and receive calls? Can your mobile plan be switched to one that offers better value? You may find that your financial goals are more important to you than your landline and happily ditch it for the saving even if it has been a high priority in the past.
Or you may decide to re-evaluate your Spending Plan and financial goals and look for changes you can make. Perhaps you decide to buy your house in three years rather than six months. You have a lot longer to save the deposit required. And you could change your mind about buying new furniture and instead renovate and restore the furniture you already have. You can still work towards saving six months of income but stretch it out to 5 years instead of two.
As you revise your Spending Plan use a pencil because you'll most likely need to go over it a few times. Keep going until you get your Spending Plan is balanced and you can live with it.
Never forget you are going to live with your Spending Plan every hour of every day until you reach your financial goals. If you don't think you can do that then revise it. It's not set in concrete and it is meant to be a fluid, changeable thing.
Looking closely at your Spending Plan helps you think through expenses you can trim even further so you can reach your goals.