You are meeting me at a very interesting point in my professional life. I have taken on some independent contractor work, am looking at a lot of different options for the fall, and am starting a master’s program this summer. All of this has made me spend a lot of time rethinking my personal priorities and, ultimately, how they affect my financial decisions (and stress level).
After some intense personal discovery I have come up with a series of questions I asked myself to help me prioritize my new life so I can prioritize my ever-changing financial situation. These questions come from my educational philosophy of helping people reach a conclusion through self-discovery.
You can use these questions in part or in whole. Think of them as a prompt: use as much as you like to get your wheels turning but don’t be afraid to let your brain runaway with something it finds relevant. I suggest you start with #1 and move on consecutively, but feel free to stop reading when you are inspired towards something particularly helpful to you.
Questions You Need To Ask Yourself
1) In your overall life, what is most important to you?
The purpose of this question is to get your financial brain back in touch with your actual life. Financial decisions should always support your larger goals and priorities; they are meant to facilitate your life, not dictate it. No, this is not permission to make bad decisions in the name of personal whims, but it IS meant as permission to spend time carefully considering how you can adapt your finances to support your larger life goals.
An example of this is how I am seriously considering not holding a day job this summer. Now, this is facilitated because I get part of my teacher salary that caries through the summer; I am NOT choosing to just have zero income. I will be starting a master’s program and want to give school a renewed focus since it is something I am out of practice with. Also, I want to be able to spend more time with my 1 year old son. Now, this would require a huge lifestyle change because it would deflate my already tiny income by a solid 30%. On the other hand I have been offered two positions that I know I would really enjoy that aren’t enormously time consuming and would be good for my overall career. Now I am weighing the trade offs, both monetary and professionally.
Thankfully I have at least a month before I need to decide, because right now I’m too stressed to make that decision. Which brings me to my next question:
2) Do my priorities need to change, or does my financial lifestyle need to change?
We should think of our lives as a dynamic continuum which shifts back and forth between personal priorities and financial priorities. Personal priorities should always come first: If you need to jump on the next plane out of town to be with a friend who was in a car accident you should do that, and if your son broke his friend’s glasses you should replace them (and then of course have him mow lawns to repay you). Friendship, family, kindness, compassion, and gratitude always come first. But, you must balance this against your financial lifestyle so that when these things come up you can take care of them. Therefore, when reflecting on things that need changed in your life you MUST start by insuring that your personal priorities are in place before you can move on to your financial priorities.
I know right now that my priorities are naturally shifting and in need of some intentional revision. I just finished a huge 5-month-marathon of a project that I need some time to recover from and I know that I am in no position to look at my financial situation. I have an emergency fund in place. I have automatic savings and bill pay in place. I am always looking for ways to increase my income and decrease my expenses. In other words, I’ve got the basics covered. But my life is changing a lot right now and I need to make sure that I know what my personal priorities are going to be before I change my financial lifestyle. This ties directly back into my decision to wait before making up my mind about what to do this summer.
3) What do I need to continue making the good financial decisions I have in place?
If you said that your personal priorities need adjusted then this is the most important question you need to answer next. Even if you are making a lot of bad financial decisions somewhere you must be doing something right. If you don’t have time to clip coupons, check the sale ads or shop around for the right price, but you DO always make a grocery list, then keep doing that. Are you only paying $5 above the minimum balance on your credit cards or only putting $5 into a savings account every month? Are you only buying store brand items rather than name brand? Good, don’t stop doing that either.
When you start to feel overwhelmed and feel like you can’t take any steps forward right now, think about the good things you are already doing and how you can continue that. When you are tempted to go to the grocery store without a list because you didn’t have time to make one, sit in your car in the parking lot for 5 minutes and come up with a rough idea of 5 meals you can make this week and then throw a list together. Or give up one latte a week knowing you could add $5 more to your savings.
I am NOT saying you should stop trying to make improvements, but when you find yourself unable to move forward remind yourself that you don’t have to go backwards. For me this means continuing to meticulously budget every month, put any extra in savings (last paycheck it was $7, but that is $7 more than I had before) and continuing to pack my lunch.
4) What can I do to trade in larger expenses for smaller expenses?
Personal finance 101: Increase income, decrease expenses. This is so obvious that sometimes it gets lost in the shuffle of everyday life. Decreasing expenses doesn’t have to always be something monumental. Yes, you can get rid of the gym membership and run in the park. Yes, you can get rid of your cable and use Hulu (the free one) and Netflix ($12 a month rather than $75). Even taking away $5 from your entertainment budget pays for lunch for a day.