What Is Your Financial Fact Pattern?
Two exercises will help to establish your full financial fact pattern. First, create either a conceptual map or a series of columns with the suggested major groups: income, savings, housing, utilities, food, transportation, insurance, debt, education, personal, people, and fun. Branch into more specific sub-themes as appropriate. Second, research your financial accounts for the previous six months. Pull your bank, credit card, and income statements and assign each credit and debit to a subtheme. Whether you do these activities concurrently or sequentially, melded or separate, you should do both thoroughly.
What Are the Financial Issues You Seek to Solve?
With the facts now in front of you, start spotting the issues. Beyond concretizing, an important but often overlooked financial issue is your own emotions. Money is often associated with negative emotions like fear, guilt, shame, envy, and embarrassment. Furthermore, individuals who experience high stress tend to spend money excessively. If your financial situation is a source of anxiety, critically analyze your fact pattern as a reasonable third party. What trends are apparent? What worries you the most?
Consider the key parties, including yourself. Assign “liability” for the income and expenses: where is the money going and why? What events triggered expenditures? Every identified issue is an opportunity to improve your financial outlook. Prioritize the issues you’ve written down and focus on one to start.
What Financial Rules Apply?
Clearly state the rules limiting your financial control and contributing to your spending. Formal obligations include minimum monthly payment amounts, late fees, and interest rates, while informal financial expectations are contributions to family, civic organizations, or faith tithes.
What implicit social expectations affect you financially? Are you in a practice area where the appearance of wealth is important? Does driving between multiple courts increase your car expenses? Financial peer pressure, masked as the “cost of doing business,” can quickly balloon expenses.
What Is the Analysis of Your Financial Situation?
Thus far, you’ve connected the facts to the issues and controlling rules. Your next goal is to research the advantages of different models like 50%30%20%, zero-based, cash-only, snowball, reverse, traditional, pay-yourself-first, values-based, continuous, or priorities-based budgeting.
These techniques can help you decrease spending, repay debt, or increase savings. However, the elements of each budget style vary greatly. Some styles are highly time- and effort-intensive, while others are simple divisions of cost. Are you looking to change some bad habits or your whole lifestyle? Your analysis should match your financial reality with future goals.
What Is Your Budget Conclusion?
State your budget conclusion for each issue. There is no right or wrong answer.
If the issue is unnecessary expenses, evidenced by multiple late fees and high interest under the credit card policy, you may conclude that priority-based budgeting is ideal. On the other hand, snowball budgeting may be best if the issue includes multiple credit card balances.
Perhaps you’re anxious about anemic savings and no rainy-day fund. If the facts indicate multiple video streaming services and frequent dinners out, you may choose the 50%/30%/20% or the pay-yourself-first model to prioritize your savings before spending.
Do you manage your money, or does your money manage you? Financial self-awareness is an iterative and recursive process that takes time and revision. Start with one issue but invest in the process as you reframe your thinking. You’re not cutting out fun; you’re behaving smarter as you spend, save, borrow, and plan your financial well-being.