Anyone who’s ever set a goal for themselves knows: Envisioning the end result is the easy part. The actual execution … that can be a little trickier. And when that goal involves anything that has to do with your finances—well, that can prove to be even more daunting.
If you find meeting a money goal intimidating, you can take small comfort in the fact that you’re not alone: According to the American Psychological Association’s 2016 Stress in America report, 67% of respondents cite money as a source of stress.
But that shouldn’t stop you from striving to take control of your finances—and one way to help make that feel a little more manageable is to turn smart financial practices into habits.
Not sure how to start? We’ve got you covered.
We’ve laid out a four-week challenge below that helps break things down into easy-to-do tasks, with just one task per week that you can ease into. By turning the occasional good choice into your new norm, smart money moves can soon feel like second nature.
Week 1: Save by Starting Small
Your morning cup of coffee, after-work drinks with coworkers, ordering takeout for the third night this week—if you think these little expenses don’t add up to anything, think again. This week, we challenge you to give up one of your small, seemingly inconsequential purchases to kickstart some savings.
Maybe you start by brewing your own coffee in the morning instead of running to the local cafe. If this feels too difficult, just remember—it’s only for seven days. If you simply can’t live without your daily joe, then next week bring the barista back and find something else you can do without. Maybe that’s swapping a boutique fitness class for a free way to break a sweat or hitting up your local market so you can brown bag your lunches for the week. If you’re feeling really ambitious, add a new cost-saving cut each week while maintaining the old ones and see how that feels.
Keep track of your weekly savings and tally up the total at the end of the month; then transfer that amount to a savings account. Chances are, you’ll be surprised by what you were able to save. And by taking a break from some of these previously routine purchases, you may find you’re ready to cut ties with one or two permanently—meaning extra savings for you in the long term.
Week 2: Put Away the Plastic
When’s the last time you used cold, hard cash for a purchase? Bet you had to think about that. Nowadays, you can just swipe a card or even tap your phone. Convenient? Yes. The best way to stay mindful of your purchases? Maybe not.
This week’s challenge is to bring back the cash and try using it exclusively for all non-essential buys. To start, calculate your flexible spending budget for the week so you know how much cash to have on hand. In short, this means taking your monthly take-home pay and subtracting your fixed costs, financial goal contributions and non-monthly expenses, leaving you with your leftover “fun money.” Finally, divide that amount by 4.3 to adjust for the number of weeks in an average month.
Now that you know how much you can spend in a week, consider how it feels each time you reach into your wallet and see that stash dwindle. As the money physically leaves your hands, you may start to realize how quickly you burn through your funds—and reconsider whether some of those purchases are really worth it. Make this mindfulness a habit, and you may be able to banish those impulse buys even after you ease your way back into the plastic.
Week 3: Dip Your Toes Into Investing
If just thinking about the stock market fills you with anxiety, this is the challenge for you. Don’t worry, you won’t actually have to invest any of your money—but you will develop a better understanding of the market by setting up a mock investment portfolio.
This exercise can help you gain experience without actually putting money on the line. That way, if you do decide to invest for real, you’ll have a better idea of what to do.
To start, choose some stocks or funds you would theoretically like to buy, and then keep track of how they do for the next few months. During this time, you can pretend to buy more, sell some or keep them the same—the goal is just to get a feel for how the market works so you can eventually consider making it a part of your financial routine.
Investing could have big benefits for your net worth, and by taking the fear of the unknown out of the equation, you’ll hopefully be able to ease into setting up an actual portfolio that could grow over time to help you fund a big future financial goal.
Week 4: Schedule a Check-in on Your Net Worth
You’re in the home stretch, and it’s time to take a look at the big picture. In financial terms, that means your net worth—or the difference between your assets (what you own) and your liabilities (what you owe). Knowing this number helps give you an overarching snapshot of your financial health.
To determine your net worth, add up the value of everything you own, including checking and savings accounts; brokerage and retirement balances; and substantial assets, like real estate, cars and jewelry. From that number, subtract all of the money you owe, whether from credit card debt, student loans or a mortgage. The resulting number is your net worth.
If this number is negative or smaller than you were hoping, don’t panic. Now, you can devise an action plan to grow that number while also establishing future goals you want to save toward, like a wedding or a down payment on a house. Schedule regular check-ins to gauge your progress—perhaps it’s once a quarter or twice a year—so you can keep an eye on how your needle is moving. Knowing where your net worth and financial goals stand can provide motivation for sticking to a saving and spending plan for the long haul.
LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies. LearnVest, Inc., is wholly owned by NM Planning, LLC, a subsidiary of The Northwestern Mutual Life Insurance Company.