How Not to Let Perfect Be the Enemy of the Good
Remembering not to let perfect be the enemy of the good can give you the space you need to make small positive steps with your money.
For this post I want to discuss why you might not be feeling the best you can with regards to managing your money. And I think that I found a reason why: Since you don’t feel like you are an expert around money management a fear of failure keeps you from doing anything.
I think that this may be a common feeling, and a real reason why people don’t want to deal with their finances. This feeling could come from many places, from your early money memories or your discomfort with math or your belief that in order to succeed you need to follow a restrictive budget that will take all of the joy out of your life.
I want say that there are basic steps that you can take that will give you more confidence around handling your money. Will it be perfect? No. Will it be good? Yes. And good is good. Let’s begin:
Your household spending is the first place where you can make some tweaks. Will it to be perfect? No. Will it be good? Yes. Track your spending for a week. Heck, track your spending for a day. Write down every purchase in a notebook or type it in a file on your phone. Or if it is easier grab your bank account and credit card statements and study each one of your transactions.
Go through each transaction and ask yourself why you made that purchase or payment. If the purchase or payment wasn’t in relation to your financial stability (think housing, utilities, grocery staples, etc.) think: How did you feel at the moment? Did the purchase align with your values and goals? Or was it a short-term fix to solve an unrelated feeling (boredom, sadness, fatigue, etc.)?
There may be room in your spending to make some adjustments. Maybe your insurance payments feel high. Call your insurance provider to discuss your policy and see if you can change your policy leading to lower premiums. Or maybe you have recurring charges or subscriptions on your accounts that you haven’t taken the time to cancel. Take five minutes to call the vendors and let those subscriptions go.
Or maybe you notice that there are charges on your accounts that coincide with times when you are tired, frazzled or bored. How can you restructure those time periods so that you are practicing self-care that does not involve retail therapy?
The financial experts out there will tell you that you need 3-6 months of expenses saved in an emergency fund. But even I, a personal finance expert, need to ask some questions about that: Why 3-6 months? Which expenses should be counted? If you are not currently tracking your expenses you might not even know what the magic number is.
My thoughts around building an emergency fund are a bit different. First, think about an expense that would rock your finances in a bad way – would it be a car repair that would keep you from getting to work? An illness or injury that your health insurance does not cover in full? Think about a financial disaster where a specific price tag would keep you up at night. That is your saving goal.
Next give yourself a realistic plan to save for that amount. Will it be perfect? No. Will it be good? Yes. Since you have just taken a hard look at your spending did you close up any spending leaks? What is the reduction in your monthly spending as a result?
Take some or all of that amount and set up a regular automatic transfer from your checking to savings account. Keep making those automatic transfers until your self-determined emergency fund is filled. Then identify another savings goal and start working on that.
When I worked at a non-profit human service organization I became the defacto retirement plan educator. Why? I didn’t work in HR, so why were they coming to me? My colleagues came and slumped down in the chair in my office because they would receive their 403(b) paperwork and not know how to invest their retirement savings.
Have you ever felt that way? There is a way to take small steps to begin to invest for your retirement. Will it be perfect? No. Will it be good? Yes.
When you are feeling well-rested and ready for a challenge, sit down with your retirement enrollment form. Read the instructions and the descriptions of the various plans that are offered. Think about yourself – do you consider yourself to be a risk-taker, a security-seeker or somewhere in between?
After you have considered your risk tolerance look at the broad options of funds available. The least expensive funds available today tend to be index funds. Index funds are designed to track various financial indices using algorithms rather that a human manager and therefore are cheaper that actively managed funds. You can read more about index funds here.
Another way to invest for retirement is through target date funds. These funds are designed to be used by your retirement date (aka the “target date”) and contain a mix of stocks and bonds that changes over time, with an overall investment strategy that gets more conservative as you near the target date. You can read more about target date funds here.
Take a look at these three areas of your financial life – your spending, your saving and your investing – and make some tweaks. They will help you get on the road toward achieving your bigger financial goals. Will it be perfect? No, and it doesn’t have to be. Will it be good? Yes, and that will feel great!