Updated: Mar 4
Here is your guide on all things budgeting and financial planning. Helping you become more financially independent! 💰
What is a financial plan?
At Untangle Money, our financial plans look at how much money you might need in the future, and describe how you're going to get there. Along the way it outlines your other financial goals.
Financial plans work to set your expectations and reduce anxiety that you have around money. It helps you answer the questions, "What can I afford?", and "Will I be ok in the future?".
A financial plan looks at where you currently are, and where you want to go (your Future Money). It outlines your financial goals and what you need to do to reach them. Financial planning is an ongoing process that can help reduce your financial stress; support your needs today with your Now Money; and help you meet your long-term goals for your Future Money, like retirement or buying a house.
Financial plans are important to have because they allow you to make the most of the money you have now, and help ensure you meet your future financial goals.
Financial planning isn't just for the wealthy either. Creating a roadmap and strategy for your Future Money is for everyone. You can start by making a financial plan on your own, or you can get help from a financial planning professional or service. At Untangle Money, getting assistance with financial planning is both more affordable, and more accessible than ever.
The first part of a financial plan is a budget.
Do I really need a budget?
It can be super helpful to have a budget and financial plan! A budget is a tool that will help you spend your money intentionally so that you can make sure you're leaving room to buy the things you want for yourself.
A budget can help you to keep track of your spending habits, savings, debt payments, and more! Keeping track of these metrics will give you more control over where your money is going, and visualize the flow of your income and expenses. 📈
What are some of the benefits of having a budget? A budget will help you to...
Track your savings,
Track your progress towards your financial goals,
Make financial decisions with more ease and less stress,
And allocate resources to things that matter most to you.
Most people find that without a budget and plan, money tends to get spent on whichever priority seems important now - without a visual of an overall set of priorities. This is the personal finance version of 'the squeaky wheel gets the oil'.
Are budgets restrictive?
Not necessarily! The point of having a budget and plan is to make sure you're spending your money intentionally by tracking your income and expenses. And while it can sometimes feel like you're on a financial diet, we have found that often, without a plan, money can flow through your fingers like a sieve.
Restrictions and limitations will differ person to person depending on your spending habits and what you can to achieve for yourself with your money. Overtime your budget will change and need adjustments as your income and your expenses fluctuate.
Basically, you could say these "restrictions" are actually short-term pains for long-term gains. You're choosing a version of the future where you have something that you really want, and it is worth giving up spending the money today on something less important.
What is a budget?
At Untangle Money, the first thing we like about making a budget is that it sets your expectations. And we've been on both ends of the spectrum: we have had periods in our lives where we were broke students, and other periods where we were in the seemingly better of DINK situation (Double Income No Kids). We can promise you that no matter your situation, it hardly ever feels like there is enough money.
A budget will help to make sure that you are keeping track of what is important you, so that you can reach your goals. This gets easier with practice.
We don't judge what you want to spend your money on, but most clients we work with realize that they have to make some trade-offs and decide what is more important to them. Sometimes this comes with difficult choices.
Making a budget will likely involve the following steps (remember, you can use the Untangle Mini to help you build your own custom budget at any time):
Do your research: there are lots of budgeting tips and tricks, as well as apps* or templates you can use - make sure to take your time and find what works best for your ideal budget. If you like a lot of detail, Excel might be a good choice for you. *Warning: In Canada, linking your banking information to any 3rd party, voids your fraud protection.
Now go back and do a review of your monthly income, monthly expenses and investments (if you have any). The gold standard is to look at everything for the last 12 months so you don't miss annual costs - but if that seems like too much, you can start with the last 3 months.
Then analyze your spending and saving habits. Think critically here - what expenses bring up negative emotions? if you need to cut something in one place so you can add money to another place, these are the first spending habits we recommend cutting. This is the best, and most intuitive way to determine what habits you want to keep, and what habits you want to throw away
Make sure you have some money on hand for things that you've forgotten you need to spend. Most people call this an emergency fund, but it isn't just for emergencies - this financial cushion keeps you out of debt. Determine your minimum debt payments. This is the smallest amount you have to pay each month to avoid going into further debt.
Figure out how much you need to save for retirement - it is WAY more expensive than anyone tells you. Women are more at risk for entering poverty in retirement, so you should make sure to understand how much it could cost you, and how much you're willing to put away for Future you. If you can look at a picture of yourself that has been aged - studies show you'll put 10% more money away for retirement.
Now look at what money you have left over. This is the money you get to live off of, and the money you use to put towards the financial goals you want for yourself.
Draft your budget. Create a budget that works best for you, but don't worry if its not perfect - it will take time to get it just right.
Bonus step: create a financial plan! Set additional financial goals that are within your means - remember, debt and retirement savings come first. We suggest you think about what you are looking to achieve financially and how you will get there.
It's important to remember that your budget will most likely change and need tweaks over time (unfortunately life changes and unexpected expenses will come up 😒). To get the most out of it, you should monitor your budget and make adjustments as needed. In the beginning you may want to check it more often. Once you've settled into a rhythm, check your numbers every few months to make sure you're on track.
Generally speaking, the closer you stick to your budget, the more progress you will make with your financial goals.
So why do I need a financial plan?
You probably have financial goals for yourself and your future. But with any goals in life, you need a plan to be able to achieve them! This is where having a financial plan comes in handy.
A financial plan will help you to...
Plan out your Future money (this could include things like buying a house, business ventures, starting a family, your retirement plan, etc.)
Live comfortably both now and in the future, knowing you will be financially secure (what a relief!)
Turn your financial goals into your reality (your dreams can come true)
A financial plan from Untangle Money consists of a series of phases that are mapped to YOU as an individual. We'll take your financial goals, including debt, retirement and other things like buying a house or a car, and organize them in a way that will help you make the most out of your money.
Why is important for women to have a financial plan?
In our first blog post, Untangling Our Story, we discussed how women's financial lives are significantly different than men's. In fact, traditional financial products don't present an accurate picture of a woman's finances over the course of her lifetime. Factors such as the wage gap, the wealth gap, Pink Tax, financial advisor's unconscious bias, and breaks from careers (for childcare, elder-care, etc), among many others, are all more likely to impact women and need to be taken into account when looking at your financial path.
That is why it is so important to create a budget and financial plan that works for you to reach your financial goals while also factoring these things in. And it's never too early or too late to start! Having a budget and financial plan can help alleviate the side effects of the factors mentioned above, setting them up for financial success and financial independence.
Financial independence is a huge part of being a strong, independent woman, it is our mission to help women successfully set themselves up financially.
At Untangle Money we help women understand their (real!) financial picture, and obtain financial guidance from people that actually, really, get it. We would love to help you, too. Join the community of hundreds of other women looking to strengthen their financial well-being. Get in touch here for a free consultation!