The Money Plan: first 90-day check-in of 2018
If you decided to take control of your financial life in 2018 by following The Money Plan from January, then we’re heading to our first 90-day check-in of the year as we reach the end of March.
How’s it working out for you? Are you on track for your goals and doing what you want to do, or are you playing catch up? Perhaps you joined the programme partway through, but either way it’s a good time to review where you’re up to.
The first thing to remember is: be kind to yourself. If you’re not fulfilling what you set out to do at the beginning of your plan, then remember you’re only human and you didn’t learn to walk in a day! It took you a good few months to do that, and it may well take a good few months to change your habits when it comes to your money.
And remember that it’s our habits that make us and our habits that break us. Our outcome is to instil good habits, and our first 90-day check in is to help us try and build and sustain those good habits.
So let’s review what you hopefully covered in your first 90 days with The Money Plan:
Moving towards, not standing still
Step 1: Your Compelling Vision
You’ve got to know what you want your future looks like; where you’re living, who you’re living with, what kind of work you’re doing and so on. What’s important to you in life, about money and relationships? This is your compelling vision. Read your vision every day in the morning and before you go to bed, really engrain it in your thoughts so it’s compelling and exciting.
The question of what’s important is a fantastic one, you should ask it over and over to integrate it into your value sets. When you’re living in harmony with your values, you’re going to be on the road to success and happiness.
Know your goals
Look at your 10-year+ vision and bring it backwards to five-year, three-year and one-year goals. Remember that like New Year’s resolutions, it’s all too easy to think about a one-year goal on 1 January and then quickly forget it until 1 January the following year.
That’s why we have these 90-day check ins, to assess where you’re going to be in three months as you move towards your 12-month goal of what you’re looking to achieve financially, emotionally and spiritually. Think about one or two goals in each area of your career or business, your health and your lifestyle, and don’t overthink it – the fewer goals you set, the more likely you are to achieve them. All you need to do is think about what you need to do over the next 90 days to move towards your one-year goal, step by step.
Next: what daily actions and rituals are you going to take on board to do just that? Habits make us, habits break us. I personally do this through daily meditation and journaling, thinking in the morning about three things I want to achieve that day, reviewing how my previous day went, and remembering three things I’m grateful for.
You can find help with all these things in the free resources section of the site, from the compelling vision to your goals and check ins and daily actions. It’s all covered in my new book The Money Plan which should be published in the next month or so – one of my personal goals in time for my birthday, which would be the best present to myself!
Step 2: Get organised – know your numbers
Once we’ve looked at the psychology of where we’re going, what we want to achieve and what’s important in life, we need to get organised and work on what our numbers look like. At the end of 90 days, you should be aware of…
What’s coming in. What money comes into the household? Earnings, salary, any interest or benefits you might receive, loan payments or grants that you’re owed.
What’s going out. Go through all your monthly expenses with a fine toothcomb and ask yourself: do you need it in your life, do you want it in your life, can you get the same experience cheaper somewhere else? You’re most likely to get quick wins on your expenditure on things like your utilities, TV packages, credit card rates and so on. Perhaps even look at fixing your interest rates now as they’re likely to go up in the future. You might have to make some sacrifices, but once you increase your income later in the plan, you can decide whether to reintroduce these things.
Remember too that you don’t need to get everything done in the next 90 days, pick a couple of expenses each month and focus on how you might reduce them. What you do need to do is take action, move towards reducing your expenses and get organised.
What do you own? Think about the value of any property you own; online portals can give you a good indication of this. Also include bank accounts, pension funds, ISAs, premium bonds and anything you’re owed by other people.
What do you owe? Credit cards, overdrafts, loans and mortgages – and find out what the interest rates are on those items, you may be able to reduce them which saves money without changing anything in your life. There are some great comparison sites out there but just by following The Money Plan, you’re getting yourself financially organised, which is the whole point.
Go to my free resources page to use the same worksheet I use with my clients.
Automate your finances
Put the Bank Account System in place. That gives you control of your bills, your WAM (walkabout money) and your overall finances, and it takes the emotion out of your decisions – take a little time to read the full details on what to do and how to do it. I use it, I know millionaires that use it, it works. Look at it now if you haven’t already.
For my WAM spending, my wife and I use Monzo Bank. We find the app brilliant, I get instant receipts on my phone and when we travel we have zero fees and excellent exchange rates.
The other account you’ll have is your emergency reserve, which you should initially be aiming to build towards £1,000 – more on this below.
Finally, check in on your children’s pocket money if you’re a parent to youngsters. Is it automated and organised like this? Make sure your children understand the system, know what’s going on and comprehend that their money is earned and related to chores, for example.
I use the Osper card for my children. Each month, £2 for each year of their age is automatically transferred from my Bills Account, onto their prepaid Osper card (unless they miss their chores!). My wife Nicky and I buy their needs and we expect them to buy their wants (we of course are still allowed to buy them treats when we want to, not when they expect or ask for it).
If you haven’t started on any of this, then don’t worry. You’ve got 90 days, three months, and that’s quite a bit of time without it needing to dominate all your personal time. Take things one step at a time and work your way through from Step 1 above!
The next 90 days
If you did start The Money Plan in January and you’re on target after the first 90 days of the year: CONGRATULATIONS! Give yourself a pat on the back, you’ve done an amazing job. It’s important to celebrate your wins.
Next up, it’s time to think about what you’re going to move towards over the next 90 days, how you can build on your early momentum. That begins by focusing on your emergency funds.
You should have £1,000 saved up or close to it, and now is the time to build up that money further, to between three and 12 months of your expenditure. There’s quite a large variance between those numbers, and the reason for that is you need to pick the number that suits you.
Three months expenses: if you’ve got a decent, guaranteed income coming in and a stable job, you may prefer or need to only save three months of expenses as your reserve. You’re likely to not have children and you could be single or your partner is also in stable employment.
Six months: for this level you may well have children and want to have more money saved for emergencies to make yourself feel more secure.
Twelve months: typically this level of emergency reserve is for people who are the sole earner in their household, who have others relying on their income as well; or whose income may be more volatile, perhaps commission-based; or those people who simply want a large number behind them because it makes them feel safe and ready for anything that could happen.
The choice of how many months is yours, your emergency reserve is there to cover anything sudden and help you sleep soundly at night.
Save your emergency cash in a high-interest savings account or similar. I use premium bonds for mine, but others (rightly) point out that interest rates there are low. For me it’s not an investment, it’s a security blanket, and here it’s backed and protected by the government as well as being accessible.
Next, we head to the third stage of The Money Plan – great job if you’re getting here in the next few months.
Step 3: Financial Foundations – begin to build your House of Wealth
You’ll find a comprehensive overview of the House of Wealth here. Start with your other essential foundations – a will, which is essential for everyone, and a power of attorney (remember to register them!). Then look at the optional insurances and consider each carefully, choose the ones which are right for you. I’m absolutely not saying that all are required by everyone, they’re not, but you should consider them.
While you’re looking at your House of Wealth, get to know your target numbers for the upper storeys. This isn’t for now, but it’s good to have an idea of them for the future. The Security level is having all your unsecured debts paid off, with a fully-funded reserve, the Bank Account system in place and all the foundations you need and want taken care of. Independence is when you can cover your basic living expenses through a passive income from your investment returns. And Freedom is having that passive income cover your entire lifestyle expenditure, so you’ll never have to work again if you choose.
The next thing to calculate is your ‘Snowball’, your monthly surplus after basic expenses, which is a minimum of 12.5% of your gross income. We use this proportion because in an eight-hour working day, it’s the first hour – you pay yourself first.
Once your emergency reserve is fully funded, you’ve cleared all unsecured debt and you’ve got your foundations in place, you’re going to start putting that away for investing, but that’s for a later time in the year. The important thing now is just to work out what your Snowball number is.
For now, your focus should be on paying off unsecured debt. You should have looked at whether you can reduce any interest rates in your first 90 days, so now it’s time to start chipping away at the debt – hence the Snowball.
Don’t pay off the highest interest first: start with the smallest balance first and clear it as quickly as possible, which builds momentum, gives you wins and keeps you moving towards your goals. You can find out more about the Snowball here, and why it works so well for clearing debt.
Continue to review your numbers
Back to incomings and outgoings. See if there are any ways for you to reduce your expenditure. The outcome isn’t for you to stop enjoying life! That’s really important to say. The aim is for you to only pay for the things you absolutely need and for most people there are things they can change or ways to get them cheaper without affecting the standard of their living.
Also think about creative ways you might increase your income. From promotions to selling items online or even taking a part-time second job or changing career, consider everything. I cover this quite a bit in The Money Plan, so do take a look when it comes out.
And that’s it for the next 90 days! Hopefully very manageable, again the idea is to get organised, not to take the fun out of life.
If you didn’t start in January then no problem, don’t try to play catch-up, just stick to the programme of your first 90 days and check back in when you’re ready to tackle the second 90. Squashing everything into a month will be overwhelming, and that’s the opposite of what we’re looking for.
Good luck for the next 90 days and let me know how you’re getting on!