Every year Fidelity puts out a study about financial resolutions and almost every year the top three goals are:
- Save more
- Pay down debt
- Spend less
Hitting these goals can definitely help make life easier, but the truth is many families aren’t able to hit their goals for the year.
A big reason they don’t achieve them is that they don’t have a system in place.
Between taking care of the kids, work, and daily stresses, many parents are exhausted at the end of the day. If you’re waiting to take care of finances after putting the kids to bed, it can be inevitably put off.
However, on my podcast, I’ve interviewed couples and families who have been there and have broken through those hurdles with good financial habits.
I’ve talked to people like Andy Hill. He and his wife Nicole are completely debt-free after paying their mortgage off early.
Jamilia and her husband were able to save $80,000 in one year in New York City, one of the most expensive places to live.
The McCurrys, a family here in Raleigh, were able to retire in their thirties – with three kids!
While each of them had their own struggles and journeys, I picked up certain habits, decisions, and conversations that were made by them.
If you’re dreaming about becoming debt-free or you’d like to get to the point of being financially independent, I want to share some of the big choices and the financial habits they created to get there!
1. Set a Defined Goal
Believe it or not, before many of these couples tackled their debt and ran the numbers on how to knock it out, they sat down and discussed why this mattered to them.
Getting out of debt has some obvious benefits. Take a few minutes and think about what your life would be like after it’s paid off. How much money would you have to spend if you had no credit cards, car, or student loans to pay?
Focusing on the lifestyle and options you’d have being debt-free can be a powerful motivator for your family.
2. Keep a Visual Reminder of Your Why
Once they defined why they were doing this, quite a few of these families had some visual ways to keep their goal in front of them.
It sounds a bit cheesy, but it’s normal for us to get discouraged at times. Maybe we had a bad month or the debt we’re trying to tackle is huge. It’s not going away overnight.
When you have those moments, having a reminder of why you’re doing it can get you over those dips.
Hang a picture on the fridge, change your laptop or phone wallpaper – whatever you need to do to remember what you’re working towards, do it.
3. Focus on One Key Step at a Time
I know how easy it is to read how one family was able to drastically change their lives and want to jump in full throttle.
However, if you’re looking for a long term win like being debt-free or financially independent, you can be more effective by working on one piece at a time.
Start off by investing into an emergency fund. That way if an unexpected expense pops up you’ll have some security.
You can then look at tackling your high-interest debts and once those are taken care of, you can talk about your other goals like investing more for retirement.
4. Review Your Accounts
When you have a good idea of where you want to go (and you’re excited about it!), the next step is to get a snapshot of where you are now.
Knowing how much is in your accounts, what your bills are, and what debt you’re carrying can give you two crucial numbers – your net worth and your monthly cash flow.
Your net worth is simply all of your assets like your savings, investments, and checking accounts minus what debts you currently have.
Your monthly cash flow is how much money you have leftover (or are short of) every month. It may sound complicated or intimidating, but it doesn’t have to be.
You can use Mint to easily track all of your accounts so you can quickly see how you’re doing each month.
5. Create a Budget That Reflects Your Goals and Values
By creating a clear idea of what they wanted, why they wanted it and what they had, it became much easier to create a budget. Doing so not only helped them work toward their goals, but also toward what mattered to them.
With the McCurrys they were careful with keeping their lifestyle inflation to a minimum. It was a seemingly small decision, but it had a big impact on their family’s finances.
They prioritized savings and investing, treating them as bills. As they received raises, a good portion went towards increasing their 401(k) contributions.
After becoming parents they didn’t feel the need to upgrade their living with a bigger house. They found inexpensive and often times free ways to entertain and educate their kids.
Now that they are financially independent they can splurge (and still stay on budget) with family trips around the world!
6. Automate Your Finances
With your budget in place, it’s time to make things simple and easy for you by automating your money.
Spend an evening getting your bill pay, transfers, and those extra debt payments set up on a schedule.
Jamila and her husband automated much of their investments. Creating financial habits like this one allows them to hit their goals and spend more time with their kids.
7. Have Regular Check-Ins
With kids, work, and other projects going on, it’s normal to let a few things slide. That’s typically when finances can fall into the cracks.
However, if you have a money date with your significant other, you’ll not only be on top of your finances, you’ll have a fun way to unwind and catch-up.
Andy and Nicole use their ‘budget parties’ to stay in sync with their goals and work out any hiccups.
You Got This
Even if you only pick up one or two of these financial habits, you’ll be doing your family a big favor by getting on the path to financial stability and hopefully down the line, financial freedom and independence.
I’d love to hear from you – which goals are you looking to tackle? Why is it a big deal for your family?