Finding Financial Confidence in the Journey, Not the Destination

There was one single thing that surprised me more than anything else when I finally decided to get my financial life in order. After I put together a detailed financial plan and took just a few small steps forward, I immediately felt many of the benefits of financial independence. It didn’t even take reaching a specific dollar milestone or accomplishing a single one of those financial goals.

The confidence from having a plan that I knew was achievable and would lead to the life I really wanted relieved any concerns I had about money, despite the fact that our financial situation hadn’t really changed at all (yet!). Simply working toward the plan meant that I no longer needed to worry about whether we were going to have “enough”. Enough for retirement, for the kids’ college, for that emergency lurking around the corner. I had defined what it mean to me to have “enough” and I knew the path that would get me there.

Confidence in my ability to achieve clear financial goals was the key turning point, not the achievement of any set amount of wealth.

A Financial Plan = Increased Happiness

You don’t have to be debt-free, a high-income earner, or fabulously wealthy to have this financial confidence. But you do need to determine the right path and have an assurance that you are on it.

A recent study shows a clear link between levels of happiness and working with a financial advisor. This study was based on four predictors of happiness: gratefulness, impact, intention and fulfillment.

I would be willing to bet that a study of those with financial plans-and not just with financial advisors-would yield similar, but even more pronounced results.

So, what can you do to gain this financial confidence that brings more happiness into your life?

Get Super Clear About Where You Currently Are

You can’t create your financial plan without knowing exactly where you are right now. It’s like when you’re in the middle of a big zoo and want to make a plan to see the elephants (my favorite!). The first thing you’ll do when you look at the map, is to find the red dot that says “You Are Here”. Then, once you know where you are right now, you can plan out your route.

Knowing where you’re at requires you to determine:

  • your net worth (simply what you own minus what you owe, or in accounting terms – assets minus liabilities)
  • your cash flow (the gap between your income and expenses will determine your ability to save for the future)

Set Clear Financial Goals

I’ve put the obligatory word “financial” in front of goals here, but really the best way to start is to determine your most important goals of any kind. Money virtually always has an impact on achieving goals, whether it’s a direct need for financial resources or the ability to have more time by working less. Instead of thinking about goals, you can instead think “what do I want my life to look like in the future?

Don’t let uncertainty keep you from creating financial goals. You can (and will!) change to adapt to your current circumstances, and that’s okay!

To plan your route, you’ll need to have a specific destination in mind. Add some milestones along the way so that you can celebrate your progress and ensure that you’re still on the right path.

For example, if your goal is to pay for your child’s college expenses in full, you might also have the following related goals and milestones:

  • Pay for a tutor to assist child with getting good grades and to prepare for the SAT/ACT
  • Plan to visit colleges during junior and senior years (might have to replace some vacation costs in the budget!)
  • Apply for as many applicable scholarships as possible to help mitigate costs
  • Have $50,000 saved by the start of college, assuming that a part of the costs will be covered by scholarships

Prioritize Your Cash Flow

Cash flow is the foundation of your financial plan. If you don’t know exactly what you’re earning, spending and saving each year, it’s time to start tracking your cash flow in detail.

The purpose of this step isn’t to see what you can cut and you don’t even have to make a budget! The focus here is to simply identify areas where you can realign your spending to better match your goals and values. This may be a shift from spending on something that you don’t value to something that would provide additional happiness in your life. Or, it could be a shift where you do need to spend less in certain areas to enable you to save for a future that’s more important to you. Sometimes (and we don’t talk about this enough!), it could even be saving less to be able to put money toward living your fullest life now.

Income taxes are a key piece of your cash flow. Even if your tax bill is entirely covered through your payroll withholdings, it’s not an expense to ignore. Proper tax planning can help you keep more money in your pocket—now and/or in the long-term—to help fund your goals.

When you determine what you have to spend, do it guilt-free. Keep an eye on it and monitor it so lifestyle inflation doesn’t creep up, but don’t agonize over it. I love Ramit Sethi’s concept of living a rich life:

Being able to spend without guilt has possibly been the biggest contributor to my happiness in my own financial journey.

Manage Your Biggest Risks

Even the most solid financial plan can be quickly derailed by a law suit, car accident, disability or other financial catastrophe.

Insurance is there to help mitigate financial risks that are beyond your ability to take on. When it comes to property insurance (i.e. home, auto, boat, etc.), the liability portion is the most essential. The loss of property is only limited to the cost to repurchase/rebuild (and of course for a home, that’s a lot of money!), but a lawsuit could completely wipe out your current assets, as well as some of your future wages.

And speaking of protecting future income, life and disability insurance policies are additional guardrails that will keep you on the right path, even when the road gets tough. Most people tend to think that life insurance is the most important, however the financial impact of the main breadwinner becoming disabled is far more significant. Not only is there a loss of income, but also increased expenses for caretaking, medical bills and more.

Now that we’re addressing morbid topics anyway, let’s address the risk of death. While you simply won’t have to worry about finances anymore if you were to die, giving your loved ones that rely on you the ease and piece of mind that comes with prior estate planning is absolutely invaluable. It can be hard to think about, but this is one of the most frequently procrastinated or missed pieces, especially among those that don’t have a financial advisor.

As boring as it sounds (ahem, actually is…) to go through your insurance policies and create estate planning documents, these are absolutely essential confidence-building pieces of your financial plan.

Make a Get Out of Debt Plan

The truth is: debt is not a dirty word. We need to stop with the stigma of labeling all debt as being “bad.”

I don’t know many people that could afford to buy a home without a mortgage or that would have been able to attend college without student loans. A car is necessary for most people to be able to work and the opportunity cost of those interest payments aren’t likely to be higher than limiting your employment opportunities to those within walking distance. Credit card debt could simply mean that you utilized a tool available to you to pay for necessities during an extended job loss or an otherwise difficult period in your life that you’re proud to have made it through! Give yourself some grace and ignore anyone that won’t.

That being said, having debt—especially credit card debt and other consumer debt—is generally stressful for most people and the higher your income going to debt, the more of a burden it will seem.

Your debt goals should make sense with your personal situation and even simply getting clear on how much debt you have is a great first step. Generally, most people should consider paying off their credit card debt first, then other consumer debt (such as personal loans, auto loans, etc.), then student loans and last low-interest rate mortgages.

Determine Your “Enough” Numbers

Everything we’ve discussed so far has helped us to arrive at some of the key pieces of a financial plan: determining how much is “enough” for your biggest future financial goals:

  • Saving for college expenses for dependents (either in full or partially covering)
  • Funding adequate retirement accounts to ensure you can keep the same lifestyle

For both of these large goals, you’ll take the following steps:

    • Step 1: Identify the need in today’s dollars.
    • Step 2: Convert the amount to a future lump sum amount based on expected inflation rates (education expenses have generally been rising at a rate higher than overall inflation)
    • Step 3: Determine the amount you need to contribute each month to investments for it to grow to this goal amount by the specified date (this will be based on the expected return on your investments and depend on your personal asset allocation)

My (free) financial goal workbook can help you to calculate these pieces, and there are also many other great online calculators that can help with these steps!

These “enough” numbers allow you to then go back to your cash flow analysis to determine whether your current contributions are sufficient. It may take some time to adequately adjust to new goals, but knowledge is power. Whether you find that you’re over-saving and can live it up a little more now, or that you’re under-saving and need to make some sacrifices now for your future self, this can be the catalyst you need for making some changes sooner rather than later.

Final Note

Once all of the pieces of your financial plan are in place, it’s just a matter of monitoring your plan and making the appropriate pivots. There will be many times you need to reflect, review and redirect.

A financial plan isn’t a static document that collects dust on your shelf, it’s dynamic and can (and should!) change as often as you do. So, if you decide you don’t want to see the elephants at the zoo, but instead want to see the giraffes, you can pause to look at the map again, and create a new path.

When you focus on creating more clarity and intention in your financial life, you’ll find that while the numbers are important, the confidence gained along the way is even that much more impactful in your financial life.

If you’re interested, you can check out the tool that I’m using personally to create a financial life I love for myself: Personal Finance Bundle.


One Response

  1. Great Post Kathryn, unfortunately due to high costs of everything my ‘enough’ number keeps on changing. Nevertheless, I’m planning to work a few more years in the corporate world then go on my own to manage my rentals and help others manage theirs!
    Thanks for sharing!


I’m Kathryn Hanna-wife, mother of 3 and a Certified Public Accountant. I love to budget (really, I do!) , build spreadsheets and spend money on travel, sewing supplies and good chocolate.


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