30-Day Money Cleanse – Week 1: Awareness

I’m doing a 30-day money cleanse, because even personal finance bloggers can benefit from revisiting their finances with fresh eyes once in a while! Whether you’re doing the cleanse straight from Personal Capital’s blog, or making it into a game with me on Habitica, I thought it would be fun to compare notes as we go!

Note: The text here differs slightly from what you find in the original 30-Day Money Cleanse on Personal Capital‘s blog. That’s because the text here is the edited version I used in my Habitica challenge. It includes some extra helpful hints I added to the cleanse when making it into a game!

I’ll show you mine…

Day 1 – Track Down Your Money

List all your financial institutions and your username/password to access them. And I mean all. Banks, credit cards, debt, investment accounts, 401k, IRAs, 529s, all of it. You’ll never have a chance at getting your financial life in order – much less improve it – if you don’t know where you are now.

I got to coast along and just check this one right off without lifting a finger. I already have the balances for all of my accounts (all of them) from calculating my net worth each month.

I also already made a document with all of the username/password info, kept in a secure place that only my husband knows about. We did this right before the baby was born, just in case anything happened to me during the delivery. It’s not a happy subject to talk to your partner about, of course. But if you are in a long-term relationship and your partner is even a little reliant on your income, you need to make sure they have access in case you become incapacitated!

Day 2 – Identify Your Financial Goals

Make your goals time-bound and concrete: “I want to pay down all credit card debt within 4 months” or “I want to retire at 50 with $2M saved.” We all have goals and whether you’re paying down debt or saving for a home it’s important to set a date and make a plan. Without clear guidelines forward, it’s far too easy to overspend on discretionary items as well as miss opportunities for wealth creation.

It’s been a while since I revisited my goals (because of the baby), so this is a really good exercise. Back at the end of December, I put forth some things that I’d like to see happen in 2017:

• Get net worth back above $34,293 as quickly as possible. – ACCOMPLISHED!
• Hit $38,901 soon after that. That’s the inverse of my “career low” from September 2009.
• Max out both of our IRAs and HSA for 2017. We have until April of 2018 to do it!

Having already accomplished that first one, I’m pretty happy to turn “B” and “C” into actual goals:

• Hit a net worth of $38,901 by June 2017.
• Max out both IRAs and our HSA for 2017 (by April 15th, 2018). – That’s $11,000 + $6,750 = $17,750 ($1365/month)

These are some hefty stretch goals, considering I’m just now getting back to work after my maternity leave, and trying to work exclusively from home! But since the HSA is a top priority, and the money that goes into the HSA and the IRAs are pre-tax, it may just be do-able.

Day 3 – Use an Aggregator

There’s no need to make things harder for yourself than they need to be. Use Personal Capital or Mint.com to see at a glance your spending by category to identify where you spend the most.

I took this opportunity to sign up for Personal Capital… finally! (I know, I know – what kind of personal finance blogger am I that it took me this long?!?) I’ve been using Mint since 2007, but I kinda missed the boat when Personal Capital first came along. It took less than 10 minutes to sign up and get it set up, thanks to having all of my account info handy (see Day 1 above!). Good thing, too, since the baby woke up from a nap just as I was adding my final account!

Day 4 – Know How Much You Make

When it comes to your money, knowing rough estimates isn’t doing you any favors. Not putting that money to work in investments or your retirement accounts means you’re leaving opportunities to grow your wealth on the table. Check your pay stub and see how much you actually take home after taxes, health insurance, etc.

This one is a little tough, because I’m just now starting to work from home again following my maternity “leave,” and I am partially a W2 employee, partially a freelancer, and my income is always variable month-to-month. However, I have spreadsheets where I keep careful track of my earnings each month. And through doing my taxes, I’ve been spending a lot of time looking at the number for what I earned last year. I’m getting pretty intimate with what I earn right now!

Day 5 – Know How Much You Spend

Automatically bucket expenses into categories (e.g. insurance, debt payments, rent/mortgage, groceries, or discretionary spending like clothing or dining out). It pays to know how much of your money goes where. You might find that dining out is costing you hundreds more dollars a month than you intended.

Hint: Remember, you signed up for an aggregator like Personal Capital or Mint.com back on Day 3 to make this easy!

I spent some time looking through my transactions and reports on Personal Capital and Mint. And it’s a good thing I did! I noticed right away that my dental insurance had double-charged me for the month of February. I called them up and got the second charge refunded – that’s a cool $29.74 back in my pocket!

It’s really good to be looking at my spending right now – we had no idea how much it would change after having the baby. The good news is that it looks like it has gone down (no time to eat out or go do stuff!), even as we’re spending small amounts on things for a whole new person.

Day 6 – Prioritize Your Spending

Rank all of your discretionary items from most to least important – if you’d rather dine out than shop for clothes, your ranking should reflect this.

So “discretionary items” are any non-essentials (meaning I don’t have to include diapers and groceries in there!). I looked at my transactions going back to when the baby was born, and determined what non-essentials we spent money on. Then, I ranked them:

1. Business spending
2. Movies & Netflix
3. Video games
4. Gifts & charity
5. Fast food & snacks
6. Clothes
7. Office supplies
8. Books, toys, etc. for baby
9. Books for the grownups

Honestly it was really hard to do this ranking, and every time I look at it, I want to change it some more. Do I really want to spend on office supplies more than on books for the baby? Except… grandparents can be relied on to buy baby things (whether we want them to or not!), but if we want some new pens, we have to buy those ourselves. Basically, prioritizing is hard.

Day 7 – Calculate Savings

Now that you know how much you bring home after taxes and insurance every month, put that extra capital to work! Subtract your monthly spending from your monthly income. Add that total to any retirement plan contributions (e.g. a 401k) so you see how much you can save. Allocating leftover sums of money over time can turn into traveling during retirement or owning a second home.

Oh, this so doesn’t work for my situation. Instead, we live off of one income (my husband’s) and save the other (mine). So our savings rate is supposed to be “whatever I can earn in a month.” Which is wildly unpredictable right now, since it’s based on “how much the baby sleeps this month” and “how much work is available.” Still, I guess the important thing is that I know that. My savings is just whatever I can manage to earn!

How about you – how’s the money cleanse going for you? Did you find any surprises in your earnings or spending? Are you excited about the goals you’ve set?

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