Always Have A Strategy

One of the reasons managing the family finances gets tricky is that the only constant in life is change. Just like with parenting, once you get a handle on something, it changes and you’re into a new unfamiliar phase.

Our finances are much the same. If you think back over the last 5, 10, or 25 years, how many different levels of income, bills, and debt have you had? If you’re anything like us, it’s probably been all over the map.

Any adult has likely experienced a range of financial realities. Some seasons are tight, impossible even. Other seasons, there’s more space.

And that’s because different life seasons bring different life circumstances, earning potential, expenses, and more.

The challenge in this constantly changing reality is to always have a strategy for managing the next financial change.

You probably think I’m talking more about financial challenges, problems, emergencies. But actually I think the more ignored side of this coin is when changes bring about more financial space.

When you have an increase in income, perhaps through a raise or promotion, annual cost-of-living adjustments, or you or a spouse increasing your work hours, how do you use that increase?

When you receive an unexpected bonus, reimbursement, gift, or other small or large windfall, where does it go?

When you finally pay off those student loans, the car, or your youngest graduates from college, where do those payments go next?

Much of what makes someone financially savvy is having an intentional plan when greater financial means are on the horizon.

The impulse is to finally indulge in something you’ve wanted but delayed because of cost. Finally getting the kitchen remodeled, a newer car, or just shopping without a budget.

But how much more impactful can those positive shifts be if you take a beat to consider bigger possibilities? Perhaps you attack a longer-term debt like your mortgage so you’ll have a much bigger cashflow payday in another 5-10 years.

Perhaps you could add freed-up cashflow to your retirement investment account.

Or perhaps you simply build your monthly savings rate each time you can until it’s big enough to compensate for cutting back to part-time work or even retiring early.

Your future self would thank you for any of those options.

Even without a specific goal in mind, building your monthly savings rate is always a great strategy because it opens the doors to more possibilities as time goes on.

That’s why I tend to advise anyone without a better specific plan to, as a rule, put all windfalls immediately into savings, and add any freed-up monthly cashflow (from a paid-off loan or income increase) automatically to savings.

From there you can take your time to think strategically. To make wise investments. To keep your money aligned with your values and priorities.

Once you spend, all other options close.

And that positive change disappears into the ether. You look back in 10 years and wonder where it all went.

So next time you anticipate a change in your finances, be sure you have a strategy. Give yourself the gift of intentional decisions with every new opportunity.

Let your future self look back and be grateful.