64: New Year New Routine: Your 2024 Financial Health Checkup

You're listening to Elevate your Paycheck, the podcast that is dedicated to transforming your financial journey. I'm Carolyn, your host and money coach, that will guide you out of that paycheck to paycheck cycle and on to a path towards financial independence. Are you ready? Let's do this. Hey guys, welcome back to the show. I'm Carolyn, your money coach, so I hope you have had a restful holiday and, if you are back into the swing of things, I hope it wasn't too much to overcome heading back into the daily routines of life. But there's something about January. It seems to have this, you know, ability to give us that fresh start. We talked last week about resolutions and making goals and creating a strategic plan and how to do that. I hope you guys listen to that episode. If not, then head back and definitely check that out. But the new year kind of gives us a fresh look at what we're currently doing and how can we change to improve. So, once we have our plan kind of in place, what do we do? How do we take the next step to improving our financial health? You know, when it comes to our health, we automatically book these routine checkups with our physicians just to make sure that everything is still a okay, whether it's blood work or x-rays or different things that they do. It's a way to monitor to ensure that you're instilling good health and there's no concerns. Well, why don't we schedule a financial checkup? Money is the number one stressor for most people, and it is so important to really kind of assess how our money situation is so we know where we are currently and where needs improvement or where is a red flag and we need to kind of watch out for it. Or when do we need to bring in the professionals? Right, there's all these things that are very so closely tied to our physical health. I recently was putting together a vision board, and one of the sayings that I have on my vision board says health is wealth, because health is so important. Right, we can't have wealth, we can't have the things that we want in life if we're not healthy, and that includes financial health. So let's look at some of the common mistakes that people make that kind of lead them into financial trouble. The first one is really neglecting to regularly review your financial position and your credit reports. When I say financial position, it means your overall financial health. Now, there is a formula that you can use that will determine what your overall financial health is, and that's called your net worth. What it's doing is it's looking at your assets versus your liabilities and telling you. You know what. This is where your position is, and that number can be recorded from year to year and used as a comparison to see if you're improving, your net worth is going up or your net worth is going down and you're building too many liabilities. So think of this as the blood work test, right, your doctor takes some blood and they do all these measurements to see is your cholesterol high? How is your blood sugar? You know there's so many things that they kind of take out from that one sample of blood. Well, the same goes for your finances. You take this one formula and you can measure it over and over again to see what your position is and if you're improving or not. And then there's your credit report. This is what the banks use to kind of judge you. Right, they are looking at that score and they're saying, okay, how trustworthy are they? Now, another common mistake that a lot of people have is really failing to adjust their financial plans. Now, what I mean by that is there are so many things in life that change, right. Perhaps our employment can change, the economy can change. I think that's what we're experiencing right now, which is increased prices. Your debt load can change. You may have some family changes, like perhaps having children or taking care of an elderly parent. There are so many things that can change in life and one of the biggest mistakes that people make is that they don't adjust their financial plan or position to accommodate for these new things. So I'm just going to take the example of the higher grocery prices and the cost of living. We can't spend the same way we used to. We just can't. If your budget is, let's say, $400 for groceries for the month, you can't keep it the same. Right? If inflation has happened and they're more expensive, then your grocery budget either needs to increase or you need to spend less. And it's not likely that you're going to spend less because you're in a habit, right? These are the things that you buy on a regular basis and it's very difficult to really scale down on a grocery budget. Take out, that's another story, but groceries, it's kind of essential. So that grocery budget needs to be expanded to, let's say, for 50 or 500 dollars, depending on the situation. Right, if your income hasn't increased, then there's a disparity, there's a shortfall in the amount of money that you have, and what can happen is that money ends up being turned into debt. You use credit to kind of get you through because things are more expensive and you don't have any more cash available. Now the extreme example was the one where you know you've lost an income. Now that in itself, sometimes people don't make those adjustments three months in, right, because they just figure oh you know what, we're gonna find another job or it's gonna work out, and they just keep spending the way they're normally spend, and all of a sudden the debt load just keeps getting higher and higher and higher. And in the example of having a family change, babies cost money. We love them, they're super cute and you know we wouldn't trade the world for them, but they cost money, right. There's diapers, there's education, there's so many things that come up when having a child. So it's something that you have to accommodate for it, definitely. And the same goes for an aging parent. Maybe the parent didn't provide for themselves while they were working and so now the burden is on the child to take care of that parent, and that can become a financial burden as well. So I'm just saying there are so many things that can change within a span of a year that the biggest mistake that people make is failing to adjust their financial situation and plan. Now, the other thing that kind of comes up are fears. Right Now, let's go back to our doctor example of our checkup. Now, how many of you have feared making that appointment for the regular checkup? I know I have, and that is only because maybe you weren't following exactly what the doctor has said all along. And now you know, perhaps your blood pressure is a little bit higher or your sugar lovers are higher, definitely after the holidays, right? So you have a little bit of fear and anxiety about actually doing the checkup in the first place, which is kind of silly because it's really just a pinpoint of where you're at in time. And the same goes with your finances. Ignoring your problems, ignoring credit card statements, ignoring the bills that are coming in, leaving them unopened, it just leads to more additional problems and it's that downward cycle of just creating more debt, feeling more anxious and afraid about your financial situation, and it goes on and on and on. So what do people really want? Honestly, it's really the desire to have an understanding of their financial health and to be able to make informed decisions. That is what people want. They want clarity, they want the freedom to be able to make that decision based on the knowledge of where they're at. And that's one of the reasons why I am so passionate about this, because just being informed, improving your financial literacy, doing the work to make sure that you're in a sound position to make clear decisions, is really more than just about finances. It's really about your health. Okay, so how do we do it? What do we do Now? I mentioned before that there are some tools, obviously, that you can use the formulas of checking your net worth, checking your credit score, understanding what that means. But you also want to assess your current situation. And how do you do that? Well, you need to leave everything on the table, and that means all your debts. So pull out those credit card statements. Understand what the interest is that you're paying on the credit cards. Pull out the line of credit. Make sure you understand what those interest rates are. Your mortgage understanding when it's up for renewal, what are the rates that you're now going to be charged? Because I can guarantee you that they are not going to be the same as when you first negotiated that mortgage. And so what's that going to look like? How's that going to change your financial position? And then, when you've looked at all your liabilities now, let's take a look at some of your assets, right? What's the value of your house right now? Or your property? How much savings do you really have? Do you have an emergency savings fund? What level is it at? Are you prepared if you were to lose your job, let's say, or something were to happen with your property? Do you have the funds readily available? And then there's your investments as well. If you are closer to retirement age I would even say between the ages of 45 to 55, you need to start thinking about retirement and what that's going to look like. You may think you can work forever, but is that the reality, right? And do you have enough saved in investments or in RSPs, in different things, in a pension that's going to be able to provide for you after you're, after you're no longer working? So, once a year, I highly recommend that this is something that you do is review everything. So that's your debt, your assets, your income, your savings and your investments. Okay, now you're saying but Carolyn, we, you know, I have all this on the table. I already know all of this. Well, have you identified any red flags? So we're going to go back to our doctorate example. They've taken the blood work, they've done the tests and now we're going to see whether or not there's something that needs to change. Do you need to go on medication? Do you need to do an exercise? You know what is the story. That is what you're looking for Any signs of red flags or financial trouble. So, again, looking at that credit, the credit is a big one. I know a lot of people they are living with this burden of debt and there is a big reliance on credit cards to kind of be part of the income right, and help them along when there's things that happen. So that number one is a big red flag If you are unable to save, if there's an inability to save because there's just nothing left over at the end of the day, there is another red flag, right. So these are the signs that say you know what? Something is wrong. We need to take assessment of what's going on and we have to make change. I titled this podcast Elevate your Paycheck, because I wanna make sure that the money that you're bringing in is really working for you, and if you're living paycheck to paycheck, then that's not the case. And I know that there is a lot of anxiety around this and a lot of fear, because, for some reason, talking about money is very difficult for most people. It's difficult to share with their loved ones, it's difficult to talk to financial institutions, it's difficult to reach out for help when they're in a position where they don't know what to do. And I don't know really why that is about money because, again, we have physicians, we have doctors, we have professionals in so many other aspects of our lives, but when it comes to money, there's real shame. That our judgment, that people feel when they are in a difficult situation. So I wanna be clear when I say this, and I hope that this resonates with all of you that there is no shame. It's funny, because I always say this to my clients, that you've done the hardest part. The hardest part is actually just reaching out for help Right, acknowledging that there's a problem, but yet they found the courage to stand up and reach out and try and find the solution that's gonna work for them. So if this is you, I want you to at least download the free toolkit that I talked about last week. That toolkit contains a video recording of me talking about how to create a financial goal. So that's the first step really just understanding what your goals are and it has a worksheet that you can fill in and complete. It makes it easy because it asks you several questions and then it also has a habit tracker, right. So this is something that you're gonna look at daily. You're gonna say did I do this, this and this and this? Because this is the route, this is the method to get to where I wanna go. We oftentimes have routines for so many different things. We get up in the morning, we brush our teeth, we put our clothes on, we go to work or whatever it is. So, whatever your routine is in the morning and you don't think about it, it's second nature, it just happens and that is how we wanna treat our finances Doing these financial checkups, reviewing our situation and really putting in place the routines that are going to get us to those goals. One thing that I talk about a lot is to create money dates. Let me just kind of go over how to set something like this up. The first step is to actually schedule the date. What you want is a regular time and place that's relaxing and free of distractions. Really, it doesn't have to be weekly. This can be something that happens bi-weekly or even monthly. It really just depends on your financial situation if it needs review or not. What you want to do is actually treat it like a real date. You want a comfortable spot at home, or you want to go to a cafe or anywhere where you're going to have a positive tone or a positive feeling going into the meeting. The second thing I need you to do is to prepare in advance Gather all your financial documents like bank statements, bills, your budget, any kind of tracking tool that you perhaps use. You should come prepared with these things and maybe questions or topics that you want to discuss on that particular date. You don't have to address everything in one date. You kind of want to create a topic, create something that is specific to that particular date that you're going to address. By doing that, you can set a goal. You can have a little agenda. You can start by reviewing the finances, reviewing your position, review any upcoming expenses, what your savings are looking like, what your RSPs are looking like, and kind of track things from week to week, from month to month. How is it improving, or do you need to give something a little bit more attention? Once you're prepared with everything, now you can go ahead and discuss. You want to discuss your budget. You want to look at your spending, where you did a great job and where you overspent. I just want to preface this by saying that you don't have to have a partner or spouse to go over these kinds of things or have money dates. You can either do them on your own just as a simple review, or you can actually bring in your BFF or someone that you trust to do this kind of exercise with. You just want someone that's going to hold you accountable. Oh, and this is also a good time to talk about the unexpected. Maybe something's come up since the last time you had a meeting. Having those discussions early on can prevent the blame that can come, with one person making a decision and not discussing it with their partner. And I did talk about making it in a safe space where it is a positive tone. People are not accusing one another. It's really a time to just discuss and plan for the future. An easy way of making that happen is to tie something enjoyable along with the money date. This keeps it up with a positive tone. Maybe it's going for dinner or a walk in the park. This really does help to associate the money dates with something that's positive and enjoyable. And then, finally, you want to end with some action steps. Right, each money date should come with some clear takeaways that you're going to do, and you can even assign responsibilities to the other person. You do this, I do this, and you come together the next time and see how that has worked out. This process is really going to get you to the next level. Discussion, open communication is going to take away the blame, it's going to take away the fear and it's going to make managing your money something that is an enjoyable process and it's going to keep you on track. So I hope this has been helpful. I'd love to hear your feedback on this. If you want to send me a message through Instagram, or even just an email message, I'm happy to discuss anything with you. Please feel free to do so. Take care, and I hope you have a great week. Thanks for listening to the Elevate your Paycheck podcast. If you love this episode and need deeper support, head to thefinancialmomentcom backslash support to see how we can support you, no matter where you are at. Today. We help our clients organize their finances, create savings, eliminate debt and create a roadmap to their financial goals which makes them more in control than they've ever dreamed possible. So head to thefinancialmomentcom, backslash, support and make this the next step in your financial journey.