Building a Partnership with Your Money
Building a partnership with your money is an important aspect of financial stability. Every day you may spend money without noticing how much you spend, what you spend it on, or when you spend it. Because of this, you may not realize the impact your day-to-day spending decisions can make on your future financial well-being.
In this series you will learn about your spending decisions, your money personality, what things you value the most, and how to set a SMART goal.
Building a Money Partnership Transcript Part 2
Part 2: Building a Partnership with Your MoneyVideo
Idaho Assistive Technology Project (IATP)
In part one of Building a Partnership with your Money you learned about your money personality. In this presentation you will learn about needs and wants and how to create a SMART goal.
Now that you have identified what type of money personality you have, you can determine the things you value the most in your life.
We have talked about your spending habits and your money personality, now we need to think about what you really need to survive. Do you really need something or do you just want it really bad? Think about this for a second.
What do you really need to survive in life? Food, shelter, water, maybe transportation. The things that we think we have to have are very different from the things other people think they need. Now add this to the mix, what would you be willing to give up for these things? We all have different needs and wants according to our values, our environments, our income levels, etc.
You need to think about what is most important to you before you spend your money on everything that you need and want. There is only so much money to go around and there are only two ways to make your money stretch…increase income or decrease expenses. Pretty simple…now let's see what you really need.
In this list, you’ll notice both wants and needs. Do you think taking a vacation is a want or a need? Sometimes it may feel like you need a vacation but if you want to save your money, you do not absolutely need a vacation.
Is a car a want or a need? This becomes a tricky question to answer. If you travel to and from work and public transportation is not an option, a car may be a need for you. But let’s say you didn’t live very far from work; you could purchase a bike instead of a car and save on gas costs and insurance costs. If the answer is yes, a car becomes a want instead of a need.
Another in between item is a cell phone. In this day and age, almost everyone you see has a cell phone, but do you really need one? Instead of having a cell phone, you could consider having a land line in your home instead, which could save you money.
Could you use the public library’s computers instead of purchasing one for yourself?
The last item on this list is food. This is a definite need. Without food you cannot survive. This is an expense that can’t be over looked and must always be taken into account when building a relationship with your money. But remember fast food and dining out is almost always a want, not a need.
As you can tell, a couple of these things can be either way depending on your environment and your day to day activities. Sitting down and thinking about which things are needs and wants in your life will help you with your savings goals because you will be sorting out your money priorities. Now that you’ve seen examples of wants and needs, how do you go about getting those wants and needs? By goal setting.
Consider what you’ve learned so far about needs and wants. It may be helpful to make a list of the things you’ve spent your money on in the past week and then place an “N” or a “W” next to each as a label. Did you spend your money on needs or did you spend it mostly on wants?
Before you can create goals for your wants and needs, you need to think about what your “bucket list” is according to your wants and needs. A bucket list is a list of experiences, achievements, or things a person hopes to have or accomplish in their lifetime.
On a piece of paper, write down three “bucket list” items and rank them in order of importance to you. Keep in mind that the “bucket list” item that you rank as most important will be used as you learn how to set a SMART goal. Decide if your number one "bucket list" item is a need or a want.
Keeping the number one item of your “bucket list” item in mind, we will learn what a SMART goal is and how to set a SMART goal to reach the most important item on your “bucket list.”
Once you’ve determined if your goal is a want or a need and how long you have to work towards it, it’s time to decide if it’s a SMART goal. Having a SMART goal will help you plan the direction of your financial goals, maintain the dream as you work towards it, and reach it when you expect to.
SMART stands for Specific, Measurable, Attainable, Realistic, and Timeline. When making a goal remember to ask yourself, are your goals SMART?
- Do you know exactly what you want or need? Can you define it?
- Do you know how much it will cost? What about the costs associated with having it (for example, the car insurance required when you have a car)?
- Is it affordable and something you can work towards?
- Is it a reasonable purchase that will fit easily into your life?
- Can you realistically save for it in the time you’ve allowed?
If you answered yes to all five of these questions, you have a SMART goal.
A SMART goal can be used to set any goal that you would like to achieve no matter how big or small. Putting all of these parts of SMART together can help you create a strong goal that keeps you on track for the things you find most important in your life.
This information can be a lot to think about at one time and may be confusing at first, but with practice, you will achieve solid results.
Here is an example of what a SMART goal could look like.
SMART Goal: I will cut extra spending on my daily coffee to save $2 per day to add to my savings account for an emergency fund. In one year I will have saved $730 for my emergency expense fund. Remember saving your emergency expense fund was a bucket list item.
Specific: This is a specific goal because I've identified how much I want to save and why it's important that I save $2 per day.
Measurable: I will have known that I've succeeded when I can stop going to a local coffee stand each day. I will have saved that $2 each day and can see my savings account grow.
Attainable: This goal is attainable because it is not too far out of my reach. If I am determined, I can stop purchasing coffee from a stand, which is a "want" purchase, and will be able to save my money instead.
Relevant: This goal is relevant because I need to build up an emergency fund in case something happens that is unexpected and is out of my control.
Timeline: This goal is set on a timeline because I have set a date of when I would like to accomplish this goal, which is in one year, from today.
Now that you’ve seen an example of a SMART goal, it’s your turn to set your own SMART goal using the “bucket list” item you selected as most important to you.
When you set your SMART goal, remember exactly what needs to be accomplished, how much change needs to happen for you to accomplish your goal, the possibility of reaching your goal and what resources you need to reach it, your commitment to achieving your goal, and when you would like to see your goal accomplished.
Once you have your SMART goal finished, print it out and keep it close. Think about it each day to remind you of how important it is to you. Whenever you are tempted to spend your money on something that is not part of your goal, consider saving it for your next priority. By using this idea with all of your purchases, you could save a lot of money.
SMART goals can help you achieve your big dreams—buying a home, purchasing a car, taking a vacation. Think about what you've learned about SMART goals. How can you apply this idea to the other items on your bucket list?
Another great way to build a partnership with your money is by creating a Money Contract. The next few slides will show you a few different benefits of using a Money Contract and will give you a chance to fill one out for yourself.
Throughout this module you have identified your various spending decisions. You have determined your money personality type and what you value most in your life. You have also learned how to set your own SMART goals based on your wants and needs.
Next, we are going to put these things together. Why is it important to have a good relationship with your money? By knowing where your money is, you can create a spending and savings plan. With a plan you will be able to stretch your dollars and get more for you money, make your money last longer than the month, pay your bills on time, set aside money each month for savings and emergencies, and, most importantly, a plan will let you have peace of mind knowing that you and your family are financially secure.
A savings and spending plan will give you more control of your money. A savings and spending plan will help you pay your existing day-to-day expenses and also help you achieve your big goals and dreams.
To help you achieve your goals and dreams, you need a Money Contract. This contract is an agreement between you and your money. Think about how you can make your money work for you.
At the end of this module you can go to the additional resources page and print out this Money Contract and fill in the blanks. Once you have filled it out, keep it to remind you of the great partnership you are building with your money.
Throughout this module you have identified your various spending decisions. You have determined what your money personality type is and what you value the most in your life. You have also learned how to set your own SMART goal based on your wants and needs and have made a money contract with yourself to hold yourself accountable for a stronger partnership with your money. Together, these activities can help you build a stronger, more solid partnership with your money. Considering all you have learned, do you think you have a better idea of how you spend your money, what’s important to you, and how you can create a plan that will help you to achieve your goals and dreams?
Thank you for taking the time to complete Modules 1 and 2, Building a Partnership with Your Money. We hope that you have found the information relevant and helpful to your life!
A special thanks to the University of Idaho Extension Office for their content expertise.