Money Musings 💭 this holds us back from saving 💸
Something I’ve noticed over and over in my own life and with those in my community is that if we don’t pay ourselves first, there will never be any money left at the end of the month to save.
Have you noticed this? 👋
One of the reasons this happens is Parkinson's Law - the idea that things expand to take up as much space as they are given. If we have an hour set aside for a meeting (even if we only have one item on the agenda!), the meeting will take up the entire hour. ⏳ Relatable? How many meetings have ever ended early?!
We see it in our junk drawers that continue to fill up no matter how many times we clean them out. And the same thing happens with our bank accounts. Our expenses fill them (or really, deplete them). A lot of times, down to the cent. Then there’s no money leftover to save. 💸
This continues to happen after we get a raise, a bonus, our tax refund or even a gift from grandma. Our lifestyles continue to expand to fill any extra money coming in.
Why does this happen? I’m rereading a book for managing your business finances called Profit First. The biggest takeaway is that we have to pay ourselves first if we want to pay ourselves at all.
Paying ourselves first applies to our personal saving and investing goals as well.
The author, Mike Michalowisc, talks about “bank balance accounting.” When we login to our bank account and see what’s available, we make decisions based on what’s in there vs. what’s actually available.
We are so much smarter than we give ourselves credit for. We are masters at spending all the money we have. We make subtle (or not so subtle) decisions like whether or not to order takeout again or invest in new headshots based on what’s in our bank account.
What we don’t do is take into account our future expenses, what we want to save or what we expect to earn in the next six months. This gets us in trouble.
How we can solve this, whether we are looking at our business or personal finances (or both), is to take out our profit / savings first. We want to get the money out of our checking account so we don’t make decisions with that money in mind.
This is how we finally start saving, or paying ourselves as business owners. I got the hang of saving but it took me a lot longer to get around to paying myself from my business.
If you run your own business or work as a freelancer, I’m excited to share this free business model template I use in my business and with my clients. It gives so much clarity as far as mapping everything out and making financial decisions. If you are focusing on your personal finances, you can use this budgeting spreadsheet.
I can’t wait to hear what you think.
PS Next week I’m going to be sharing the results of our anonymous spending survey. If you haven’t already, please fill it out! I can’t wait to share how our community is spending money!
PPS Our July Money Parties 🥳 are next week. There’s no better way to spend 1.5 hours than going through this really important financial ritual for building wealth! I take you through step-by-step and I promise it’s even fun! You can register free here:
MONEY MOVE OF THE WEEK
Set yourself up for success for the 2020 tax season. This year, due to the pandemic, the tax filing and payment deadlines were both moved to July 15th (vs. April 15th). If you expected to get a refund, you’ve probably (hopefully!) filed already to get that money. If you expect to owe money, you probably have waited (because what’s the rush?!).
Regardless of when you file your taxes, it’s a great time to set up a system to make next year run as smoothly as possible. As nice as it might be to have it over and done with, while you’re in the groove (i.e. your accounts, logins and tax situation are fresh in your mind) there are things you can do to prepare for the following year, including:
Update your W-4 if you’d like more (or less taxes) to be taken out of your paycheck.
Create a system to track deductible expenses (like charitable contributions, medical expenses and childcare) year-round (so it’s not a scramble at tax time).
Minimize your taxable income throughout the year by contributing to tax advantaged accounts like retirement, HSA and FSA accounts
I highly recommend setting aside a couple of hours to set yourself up for 2020. You.
I’ll end up saving yourself so much time and stress in the long run!
YOU GOTTA SEE THIS
Define MICROAGGRESSIONS. Microaggressions are everyday interactions or behaviors that show bias. They can be intentional or unintentional and just because they have “micro” in the name, doesn’t mean they don’t have a tremendous impact. The difference between a micro and a macroaggression (overt discrimination) is that with a microaggression, the aggressor isn’t aware they are doing it. Aware or not, discrimination is discrimination.
Use it in a sentence - “I noticed multiple microaggressions in a meeting with our team yesterday. I pointed out the impact of each rather than just calling out the microaggression itself.”
For anti-racist allies, here’s a resource on how to respond to microaggressions.