Thursday, September 5, 2013

Makeunder My Finances: Step 3

Hi there! I hope you enjoyed the long holiday weekend. We took some time to do a few projects around the house. Did any of you take a look at your finances as part of the "Makeunder My Finances" refresh? If you're just joining in now, Step 1 is all about creating a vision. Step 2 is taking a closer look at how you're spending your money. After walking through those steps, have you identified spending strengths and weaknesses? I hope so because this week is all about setting specific goals and intentions.

Step 3: Identify Intentions

In the first round of our financial makeunder, John and I were saving money for a down payment on a house. This time around, our larger vision is financial freedom. While we don't spend too much money on shopping or entertainment, we now have a new budget line for baby stuff. We value living simply and spending time with family and friends. 

With your intentions in mind, it's time to create some SMART goals for saving and spending:

■S = Specific
■M = Measurable
■A = Attainable
■R = Realistic
■T = Timely

How much do you need to save? And don't just say "I need to save more." What is "more?" If you don't have a specific amount in mind, how will you know when you get there? You probably have a good idea of the price tag based on your vision.

Dollars are pretty easy to measure, but what happens when your "vision" dollars start to mingle with your "needs" or "wants" dollars? In order to properly measure your savings, it’s best to create a separate savings account. We like to use Capital One 360* (formerly ING Direct). It’s an online bank, so it has a higher interest rate (the good kind). We can automatically transfer money from checking to savings on my schedule and withdrawals take a couple days. That means we're less likely to pull from our savings on a whim. And with automatic transfers, we don’t even miss the money if it’s not available to be spent. You can find other savings accounts and interest rates at

Your monthly savings goal should be reasonable. Set yourself up for success. No need to drive yourself into the poor house trying to save for something enjoyable (i.e. European vacation). To stay motivated, set aside an amount that’s not too far out of reach. We’ve cut out a few extra frills by dining out less frequently and bringing our lunches to work.

At the same time, your goal should be a little bit of a reach so that you’re willing to work towards it. That makes accomplishing the goal even more worthwhile. So set the bar high enough for a satisfying achievement!

Set a timeframe and mark the date on your calendar. Again, be specific, not just "in the next 5 years." And be realistic. Automatic transfers are another way to stay timely. Schedule transfers for once or twice a month so you won't forget to stash the cash.

Inception "Dream A Little Bigger Darling" Print - 8x10"
Print available from Mulberry Press Co.

John and I used Mint's goal tool to track the progress of our down payment. It’s as easy as entering our goal, setting a date, and linking a savings account. We then knew how much we needed to save each month, which is factored into our budget. Mint will email your progress every month and offers savings advice and information about the home buying process.

Now that we're focusing more on financial freedom by paying down our mortgage, increasing savings, and investing; we look at overall trends on Mint, particularly our net worth.

You can obviously track everything in an Excel spreadsheet or on a piece of paper, but I like the convenience of having everything online. That way I can access the information on the go and make changes as necessary.

Don’t be afraid to take ownership of your finances! The best way to become financially independent is to learn about the different resources and tools. And ask questions!

*Affiliate link for Capital One 360.

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