The almighty price tag is everywhere – fast food drive-throughs, restaurant fold-out menus, catalogs, grocery aisles, clothes racks, and online product listings.
Price tags come in all shapes, sizes, and colors and influence our shopping behavior in many ways. Similarly, the price tag of your financial freedom should influence the saving and spending decisions in your monthly budget.
With this in mind, today we’re exploring how to check the price tags of the individual items on your financial freedom shopping list.
A Budgeting Recap: Savings Goals
If you’ve been following the Master Your Money series from the beginning, you know that we’re currently working on incorporating savings goals into your monthly budget. Savings goals represent third base in the Financial Freedom Project approach to budgeting.
Recently we’ve explored the importance of calculating the net profit of your current monthly budget and using that net profit to be selfish… with yourself. In the last article, we reviewed an example of how these two concepts can help you achieve a savings goal that can serve as the key to beating Murphy’s Law.
The next step is to identify and make a list of your personal savings goals. To do so, you’ll need to review your future lifestyle goals that have financial implications and check the price tag on each. So without further ado, let’s break out pen and paper and start building your savings goal shopping list!
Make Your Financial Freedom Shopping List
Who hasn’t made a shopping list prior to embarking on a trip to collect the goods? Whether in the form of a full-fledged pen-and-paper masterpiece or a 21st-century electronic compilation, shopping lists keep you focused on what’s important while on the hoof and help you avoid forgetting a critical ingredient or purchase.
Creating a savvy financial plan requires the same type of forethought and planning. So take some time to draw up your financial shopping list when it comes to your ideal future. What are your financial goals? Dream a little! Does your ideal future lifestyle include any of the below?
- Escaping the nightmare of living paycheck-to-paycheck
- Ending the stress of being unprepared for financial emergency
- Paying down student loans
- Paying off the car(s)
- Eliminating credit card debt
- Purchasing a home
- Owning your home mortgage-free
- Starting a family
- Downsizing from a dual income to a single income household
- Taking a lower-paying but more enjoyable job
- Working less hours
- Traveling more
- Affording home renovations or projects
- Giving generously to others
- Starting a business
- Becoming independent of a paycheck
- Saving for children’s college expenses
- Increasing discretionary spending levels (groceries, restaurants, entertainment, etc.)
The above list is by no means all-inclusive. Your financial goals and ideal future lifestyle are just that – YOURS. So think outside the box. Discuss this with your significant other, if you have one. Dream together. How does your ideal financial future look different than your current reality? What does financial freedom look like to you?
Make a list of your financial goals, but don’t worry about prioritizing them just yet.
Checking The Price Tags On Your Savings Goals
Now take this list of hastily-scribbled goals and start checking prices for each item listed and jotting them down. At this point, a rough estimate for each is more than sufficient. Annotate whether the price listed for each goal is total, weekly, monthly, or annual.
For some of your items, the price tag will be prominently displayed and easily spotted. For example, current loan or debt balances can be easily checked by logging in to your Mint account. The current balance of each loan represents the total price tag of purchasing your freedom from it.
Set-Your-Own Savings Goal Prices
Some price tags might be purely nominal, similar to garage sale make-an-offer boxes. Tired of living paycheck-to-paycheck? Then what amount of money in the bank would ease your money stress? Jot that number down as the total price of that particular item.
Want to travel more? How much money do you think you’d need to do the traveling you’d like? Set your own annual price for these types of individual savings goals.
Wish you had more money to spend each month on things like groceries, eating out, or entertainment? Write down the monthly increase you’d like to see in your discretionary spending for each category.
Price Checking Unmarked Savings Goals
Like an unmarked item on the shelf, the price tags of your other savings goals might take a bit of legwork to track down. And you may need to enlist the help of a sales associate named Google to help you identify the final price.
Desire to be able to afford to start a family? Check your medical insurance plan to find out what your deductible, coinsurance, and out-of-pocket maximums are for childbirth services. This number represents the total initial “price” of each child. That is, unless you’re blessed with a buy-one, get-one (BOGO) deal!
Want to save for your children’s college education? Research how much a typical college education costs to set an approximate total savings target.
Calculating Total Cost Of Large Savings Goals
Like calculating sales tax on a large appliance, calculating the total cost of large savings goals may require you to bust out your calculator.
Crave the security and stress-relief of knowing you’re financially prepared the next time you have an unexpected medical, automotive, or home repair expense? Determine the ideal size of your emergency fund using the recipe outlined at the end of the last article.
Want to downsize to a single income, but you’re just scraping by now? Calculate the net annual take-home pay of the job you’d like to give up and set that as the annual price tag for that goal.
Interested in trading a high-stress, high-paying job for something more fulfilling with less compensation? Compare your current gross income with the approximate gross income of the job type you’d like. The difference represents your annual savings target to afford this item.
Driven to start your own business? Estimate the total required seed capital to get your idea off the ground, including any and all time off of or away from your job.
Motivated to retire early, or at least become independent of the need for a paycheck? Use the spending over time charts in Mint Trends to identify your annual spending total. Multiply this by 25 (more on this later). This represents the approximate total price of a sound retirement that would sustain your current spending habits.
Nice work! You’ve taken a big step today by taking your vision of financial freedom and turning it into actionable savings goals. Don’t worry about prioritizing your individual goals, as we’ll get to that soon enough. Your objective for now is simply to create that shopping list so you know what you’re looking for once you make it to the superstore.
Your financial freedom shopping list will give you the direction you need to create a strategic and intentional plan that will act as the ladder you need to reach your ideal future lifestyle.
Alarmed at the total price of all of the savings goals on your list in relation to your current monthly net profit? Don’t be, because in the next article we’ll take a look at how you can grow your monthly net profit quickly by turning your debt into a gold mine.
For those of you who have been following the Master Your Money series from the beginning, below are the next steps on your journey to financial freedom:
- Discuss your ideal future lifestyle with your significant other, if you have one. Dream of what a life of financial freedom looks like to you, and make a list of each financial aspect that differs from your current lifestyle.
- Check the price tags on each of these savings goals, and determine whether each represents a one-time, weekly, monthly, or annual “price”.
- Note the price tag of each of your existing loans and debt.
- Set your own prices for arbitrary goals like a savings cushion or annual travel.
- Research approximate prices for unknowns like medical or college costs.
- Calculate the prices of larger savings goals using best estimates.