Your Financial Roadmap

One of the most common things that I hear my clients say is that they want to start taking a more active role in their personal finances, but they have no idea where to start.

And as a financial counselor, I believe a huge reason for this lack of clarity around money is the fact that our society has ingrained in us that money is a super taboo topic. People are oftentimes avoid discussing money along with other topics like sex, religion, and politics.

So what ends up happening for a lot of people? We don't talk about it.

And because it's not talked about, people don't learn about it.

And then all of a sudden, you reach adulthood and have no idea what the heck is going on with your money.

What you do know that you feel stressed, frustrated and overwhelmed with your personal finances, and you want to take more action and control over them. But you don't know what steps to take first.

And that's why I wanted one of the first episodes of this podcast to be about a general roadmap that you can follow when first getting started on your financial journey. Feel free to tweak these steps as needed to fit your values, goals and financial situation.

Here are seven steps that you can take on your financial roadmap.

Step 1: Money Mindset Check

Your money mindset is essentially the beliefs and attitudes that you have around money, which have a really big impact on the decisions that you make about your money each day. This is why, money mindset is a topic that I always touch base on with my clients.

Checking in on your money mindset is important because if we don't think that something is possible for us, why would we take the steps to work for it? Like most other people, if I didn't believe that I could do something, I wouldn't put in the work to do it.

And this actually took shape in my financial life a couple of years ago, when I had first started teaching and I didn't have a very big income at all. During this time, I didn't believe it was possible for me to save money.

What did I do instead? I spent my money going shopping every weekend, which further perpetuated the belief that it wasn’t possible for me to save.

And I see negative money beliefs like this taking shape in other people's lives as well, which is why it's so important to check in and see where your money mindset is.

If you find that you're holding on to some negative beliefs about money, then get that gives you some real clarity of “okay, here is how I am feeling… what steps can I take to make the adjustments that I would like to see for myself with these beliefs?”

A lot of times, people don’t even realize that they’re holing onto negative money beliefs. So to start your money mindset check in, grab a journal and reflect on these three questions:

What do you believe is the purpose of money?
What is money is role in your life? What does it do for you? How does it serve you? And why is it important in your life?
How does money make you feel?
How do you feel when you think about money right now at this very second? How would you like money to make you feel? How would you want to feel about money in the future?
If you felt completely confident and comfortable with money, what would you do?
What would you buy? What would you donate? Or what would you save for what experiences what you have and think about what would your life look like if you felt totally confident and comfortable with money?

Once you’ve completed your mindset check, you’re all set to move on to point number two, which is to take stock of your financial situation.

Step 3: Take Stock of Your Financial Situation

Let's just be honest, money can be a very emotionally driven topic, which is why we started off this post by talking about money mindset and money.

In fact, I would argue that money has an impact on almost every single aspect of our lives. Because if we're feeling stressed about money that can impact how we go about our day, it can have a negative impact on our relationships (did you know that money is one of the top three leading causes of divorce in the United States?) which means that taking stock of your financial situation is really important.

Because money is such an emotionally driven topic, tackling your money head on can be an intimidating thing to do. But one of the most important things is to just start and begin by taking stock of your financial situation.

That's the hardest part.

(By listening to this podcast, you're already taking the steps to do that!)

The first thing that I want you to begin with here is to calculate your net worth. Your net worth is your assets minus your liabilities, or whatever you have that’s of value (savings, investments, vehicles, etc.) minus your debts. You can calculate this number with a pen and paper, an app, in a spreadsheet, or whatever makes the most sense and feels best for you.

Calculating your net worth is is important because you can’t get to where you’re going if you don’t know where you’re starting from.

For example, let's say I'm on a road trip. If I don't know where I'm starting that road trip from, how am I going to figure out where where I need to be, or how I need to get to where I want to go?

The same is true with your money.

If you don't know where you're starting from, it's going to be really hard to work towards those goals, and take those action steps that you need to get there.

Step 3: Set Financial Goals

I teach my clients what's called the values based goal setting theory. This is essentially creating goals through the lens of your values, or the things that are most important to you in life.

There is often so much noise about the things that we “should” be doing and working towards with our personal finances.

In reality, everybody is different—which is why it’s important to set goals through the lens of your values and financial situation.

What works for Person A might not work for Person B because they're totally different people and they have completely different values.

After you've finished your mindset check and calculated your net worth, start brainstorming what is most important to you in life. This could be family, adventure, personal growth, the pursuit of knowledge or generosity, etc. Next, start identifying the goals you would like to set for your life, why those goals are important to you (according to your values) and the financial implication of those goals.

Once you have an idea of what that goal will cost or what you need to save in order to make that goal a reality, reverse engineer the action steps that you need to take to get there.

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Step 4: Track Your Spending

Set the habit of tracking your spending and seeing where your money is going on a regular basis.

Now that you've identified your values and set financial goals are, you can start determine if how you're spending your money currently is in alignment with the things that are actually important to you.

One thing I never tell my clients is something like “you shouldn't spend money on XYZ” they're a totally different person than me. Because we are different people, we probably value different things, which is totally okay. So I never teach a super intense, frugal, restrictive perspective on money and budgeting because, at the end of the day, I want people to spend in alignment with their values and get really clear on what those things are.

The best way to see if you’re spending in alignment with your values is to track your spending. I love to walk clients through a 30 day spending audit, which is essentially where you write down everything you've spent money on for the last 30 days (checking accounts, credit accounts, transfers to savings, debt repayments, investment contributions, etc.) and see if there's any spending areas that are out of alignment with the things that are actually important to you.

Step 5: Build An Emergency Fund

This is like the first major financial goal that I want everyone to set for themselves.

An emergency fund is basically three to six months worth of expenses saved (you could save a little bit more if that feels better to you, or—if you're feeling risky—you could save a little bit less) but I always recommend having at least three months worth of expenses saved.

Why? Because when an emergency comes up, you have a security layer to financial cover that emergency without feeling additional financial stress or using debt to cover the payment.

Keep in mind that this money is for emergencies only. An emergency in this sense could be a car accident, getting sick and having to take extended time off of work, losing a job, etc.

When you have that emergency fund in place, you’re giving yourself flexibility and the ability to take a really refreshing breath of “I know that if anything bad happens, I can take care of myself in this situation without having to fall on debt.”

Step 6: Pay Off High Interest Debt

High interest debts are typically credit cards, personal loans, payday loans, and some private student loans. Typically speaking, a high interest debt has an interest rate above 7.5%

Once you’ve identified your high interest debts, pick a debt repayment strategy. This could be the Debt Snowball, which is when you're paying off debts in the order of lowest to highest highest balance, or the Debt Avalanche, which is when you're paying off debts in the order of highest to lowest interest rate.

I always tell my clients that I really don't mind which debt repayment strategy that they choose, as long as it's the one that feels best for them.

Do you feel more motivated by quick wins and paying off those low balance debts as quickly as possible? Then pick the Debt Snowball. Are you more motivated by potentially saving more money and interest? Then pick the Debt Avalanche.

At the end of the day, what's most important to me as a financial counselor is that you take the steps and the actions that are aligned with your values, allow you to sleep well at night, and that you will be motivated and inspired to stick to.

Step 7: Build Wealth

The last step on the roadmap is to take action towards building wealth.

There is a lot of information out there about wealth building. I mean, that's one of the reasons why I started the Wealth Building Bootcamp, which is my 12 week group coaching program. But essentially, wealth building boils down to three things:

Increasing your income, which is one of your biggest wealth building tools. And there are two primary types of income. There is earned income, which is what you do for work each day (like your 9-5 job) and passive income, which is income that takes little to no maintenance and could come from a couple of different sources. Most frequently, you'll hear people talk about passive income through investments, but it could also be selling digital courses or products, self publishing a book, renting out your home car, tools, whatever. There are so many passive income streams out there. And there's just not enough time for me to talk about it today. But I will talk about passive income in a future episode.
Increase your savings rate, which is essentially the money not spent each month. To calculate your savings rate, take your income minus your expenses, and the money leftover is how much you are saving. Growing your income and spending intentionally are really great ways to increase your savings rate.
Take advantage of compound interest through investing, which essentially allows your money to work for you. Compound interest is basically just interest being on top added on top of the principal balance or interest being added on top of interest. The beautiful thing about compound interest, which Albert Einstein called the eighth wonder of the world, is that time is really the most effective here. It's not necessarily about how much you save or invest. It's how soon you start. Even if there's only a couple dollars available to start investing, getting started is important so that you have time on your side for your money to start growing.

Summary

To summarize, the seven steps on your financial roadmap are:

Check in with your money mindset
Take stock of your financial situation by calculating your Net Worth
Determine your values based financial goals
Track your spending to
Build an emergency fund with three to six months worth of expenses saved
Pay off high interest debt which is typically debt
Build wealth and utilize compound interest so that your money is able to grow for you and work for you.

Work With Charlotte

Are you ready to take your personal finances to the next level? Do you want to feel empowered, inspired, and motivated by your financial decisions?

The Wealth Building Bootcamp might be the financial education program for you! Follow the link below to learn more and join the waitlist for the next round of the program.