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- I’ve worked with over 100 clients as a money coach, and many face the same problem with budgeting.
- Saving up an emergency fund can take several years. It should be treated as a long-term goal.
- Many of our biggest budget issues are rooted in the complex emotions brought on by stress and anxiety.
As a money coach, I help clients create budgets, create sustainable financial plans to save or pay off debt, and work with clients on their financial relationships.
After working with over 100 clients, there are four hard truths I tell my clients about managing their money.
1. An emergency fund is important, but it takes time for the money to arrive.
Lots of planning advice emergency fund But you rarely hear about a realistic timeline for achieving such goals.
A three-month emergency fund, the minimum recommended by most financial planners, is equal to your minimum essential expenses for that month (housing, utilities, transportation, and food) multiplied by 3. For example, let’s say this is $8,000.
Some of my clients are only able to save $250 a month in their emergency fund, given their income and monthly expenses. Divide $8,000 by $250. 32 months To achieve a full three-month emergency fund.
Next, you might add things like paying off debt or saving for that trip on top of your emergency fund, but realistically this can take several months to several months due to spending and income limitations. It may take years. This is completely fine and normal. The majority of people.
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2. Overspending is usually emotional spending
Many of my clients end up overspending because they have experienced the unpleasant emotions and negative narratives associated with lack of money.
When we’re feeling stressed, overwhelmed, tired, or sad, some people turn to shopping as a quick dopamine hit for comfort.
Some of my clients were unable to buy toys, buy the clothes they wanted, or go out with friends because money was scarce in their childhood.
They didn’t get paid for accomplishing anything. They had to fight and prove that their purchases were worth the money, and often experienced the expense of being lectured by their parents.
Phrases like “No, you can’t do that” and “Why should I spend so much money on you?” These are words that my clients still value when making spending decisions.
As adults, it’s common to distance yourself from feelings of scarcity by spending money on things you enjoy, even if you don’t meet your budget or savings goals.
This doesn’t mean you’re “bad” with money. All you need to do is understand the emotional triggers that lead to overspending.
3. You can’t implement a budget unless you first improve your money avoidance habits
Do you ignore your monthly bank statements, stay silent when discussing money with your partner or friends, or freeze up every time an unexpected expense arises?
Neglecting to manage your finances at all costs because it is too emotionally painful is known as financial avoidance. financial disorder. By avoiding money, people get stuck in a cycle of anxiety and end up doing things with their money that are equally unhelpful.
Many of my clients feel that it is dangerous to handle money. Before you implement a budget or discuss a debt repayment strategy, you need to give them space to reflect and understand why they feel so overwhelmed and afraid to face their finances. .
As a result, they relive painful memories about money, conflicts they witnessed around money, and often grow up analyzing the confusing money behaviors of their caregivers.
Therefore, before you try to implement strategies and new spreadsheets, it is important to recognize what emotional and psychological factors are holding you back from taking action and adhering to your financial plan.
4. No one likes making a budget. Because he always makes two mistakes.
Mistake No. 1: Having trouble estimating exactly how much money you need to live, creating a limited budget that ends up failing you.
To solve this, do a financial audit of your bank and credit card statements every three months to see how much you spend (on average) on things like eating out, groceries, shopping, personal care, and social activities. It’s always a good idea to know exactly what. .
That way, you can base your budget on more realistic numbers so you don’t end up overspending.
The second mistake is not implementing changes outside of your budgeting app or spreadsheet.
Examples of these changes include changing your bank account settings to make budgeting easier (such as creating multiple savings accounts for multiple savings goals) or improving your spending habits to stick to your budget. This includes efforts to do so.
It’s easy to look at the numbers in a budgeting app or spreadsheet, but for it to be successful, you need to take action to make some changes.
