Most of us have a finite amount of money at our disposal. Also? Life is chaos! We all live unpredictable lives, and circumstances often shift overnight. This is what makes planning for the future so darned stressful: Where, how, and in what order are we supposed to divide up the resources we have to cover everything we want to achieve? And even if we’re able to figure that part out, what happens when things inevitably change?
This is why your plan is one of the three key components of financial wellness. It’s your master strategy, on both micro and macro levels, where those best practices you build with your foundation meet real life — your life. Your plan identifies your expenses and what’s important to you, so you can map out your money’s future.
This last piece — let’s call it your plan’s roadmap. Informed by your budget and your core values, your roadmap is a prioritized, long-term guide to how, and in what order, you’re going to tackle your financial goals.
If you’re struggling with making time and space — and, you know, money — for all the things you want to do in life, look no further.
Where your roadmap starts: Your budget and your values
When you’re first embarking on your financial wellness journey, your plan, and thus your roadmap, is going to look a lot like your foundation. That’s because we recommend those basic steps for everyone, to give you a base of financial security to work from. But what you have, what you need, what’s most important to you — these are all unique to you, so after those essentials, your roadmap will start getting ~personal.~ To do that, you’re going to start with two key tools:
1. Your core values
Big, existential question time: what in life is important to you? More to the point: What in life is more important to you than other things? It’s a heavy lift, but luckily there are a lot of ways to frame this question to make it easier to identify exactly what motivates you. (Ellevest members can download our core values journaling worksheet to help nail down this step.) By making your list of life priorities explicit (ie, writing it down), you’re basically figuring out what kind of life you want — and then how you’re going to realign your spending and your goals to reflect that.
2. A realistic budget
Hear that screeching sound? Half the people reading this just slammed on their mental brakes. We get it! Budgeting can feel overwhelming! But making tradeoffs vis-à-vis your spending is a huge part of being financially well. And when we understand the tradeoffs we’re making, they can actually be pretty liberating. The trick: learn how to spend intentionally, to set limits based on what you really want, not what you want to avoid.
There are plenty of healthy budgeting approaches to choose from. The two we recommend the most are the 50/30/20 rule and the one-number approach. If overspending is a problem (relatable!), we’ve also got tips that can help reel it back in. (And if it’s simply too dangerous to go alone, we get that, too. Take this: our Budget How-To workshop or a 1:1 coaching session.)
Note: Building a budget is a big part of escaping the paycheck-to-paycheck cycle, but we also know that many of us are facing lean times, when even that is going to be out of the realm of possibility. If you’re struggling with infrequent or nonexistent income, you may need to pare way back just to make ends meet. And yes, it’s going to be tough. But even an essentials-only budget is going to feel better than spending blind. Being in control — even when most of that control is of the damage variety — will be one less uncertainty in your life until you can get on your feet again.
Now, to identify and prioritize your goals
Once you’ve got a rough budget outlined, you’re going to need that “Future You” Bucket (as it’s called in the 50/30/20 strategy) — the amount you’ve earmarked for your goals once all of your immediate needs and (healthy list of) wants have been accounted for. This is where the fun begins: This money is what you’ll be using to start dreaming and building the life you want!
Write down all of your money goals, big and small. Real, specific ones — not like “win the lottery.” (Although that would definitely be cool.) Just brain-dump that ish.
Now it’s time to sort them. Start by placing each goal into one of two basic categories: must-haves and nice-to-haves. The must-haves will definitely get a place on the roadmap, and the nice-to-haves will get slotted in afterward.
Then you’re going to sort them chronologically — specifically, into short-term and long-term goals. Short-term goals will take two years or less to accomplish. For these — things like paying off that one nasty credit card, or saving for that European vacation once travel opens up again — you’ll be using savings. Anything over two years is a long-term goal, like a down-payment on a house, your child’s college fund, retiring by a certain age, etc. These you’ll be able to tackle more strategically through investing (which is kind of our thing here at Ellevest). If it’ll help, you can even get a little more refined and sort them by deadline.
📣 Bring in the core values! 📣 Now you’re going to use the list you made earlier to rank your goals even further. Goals aligning with your top values get pushed up the list, while nice-to-haves drop down lower. You can also use your values to adjust your goals themselves, too — for example, maybe traveling for your 40th birthday is important, but the destination is up for debate. Aiming for a place closer to home can make that goal a little smaller to make room for others.
A note on flexibility: the goals on your roadmap do not have to be entirely consecutive. You shouldn’t have to forego a vacation if you’re still building up your emergency fund. Some goals will require your full attention, but others can be worked toward simultaneously. For example, even if homeownership is a priority, you might be comfortable extending your down payment timeline if you’re saving up to get married next year. Or, if getting out of debt is a hard-and-fast goal for you, you might opt to take care of that before you start planning a big wedding.
By the end of this, you should have a rough (not ironclad!) sense of how you’re going to be allocating your “Future You” money for the foreseeable future. When a new short-term goal pops up — and it will — you’ll be able to slot it into your roadmap where it feels right.
Having a plan = freedom from unhelpful stress
If you’ve ever closed your eyes and hit “place order” on something you’re not 100% sure you can afford — and who hasn’t? — you know that money anxiety thrives on gray areas. Getting through a pay period by the skin of your teeth may be a rush, but living like this is undermining your ability to thrive long-term. Deciding where you’re going and remembering what’s really important to you are the keys to breaking this cycle.
Over time, you might feel like your roadmap’s black-and-whiteness doesn’t always align with the unpredictable realities of your life. That’s why it’s designed to be tweaked whenever necessary. Your roadmap can change with you — it’s built to provide not set-in-stone rules, but the confidence you need to make spending decisions proactively, rather than out of guilt. Believe it or not, when you’re making choices according to a system that meets your needs, it can feel just as good not to spend that money on impulse buys. Because now you know you’ve got bigger, better plans for it.
If you need a hand (or just a buddy!) to help you get your plan off the ground, Ellevest has you covered, with everything from email courses and tools to live workshops to 1:1 sessions with our coaches.
© 2021 Ellevest, Inc. All Rights Reserved.
All opinions and views expressed by Ellevest are current as of the date of this writing, for informational purposes only, and do not constitute or imply an endorsement of any third party’s products or services.
The information provided does not take into account the specific objectives, financial situation, or particular needs of any specific person.
Information was obtained from third-party sources, which we believe to be reliable but not guaranteed for accuracy or completeness.
The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. Investing entails risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.
Ellevest Membership fees are as follows: Ellevest Essential is $1 per month, Ellevest Plus is $5 per month, and Ellevest Executive is $9. Other fees as described in Ellevest’s Wrap Fee Program Brochure and the Ellevest Membership Terms and Conditions Agreement will continue to apply.