Who doesn’t enjoy getting lost in a good fantasy? It’s a fun and relaxing mental vacation, and can even serve as a motivator to go after long-desired goals. The problem arises when women confuse fantasy for reality, and end up either accidentally or (sadly) deliberately sabotaging their lives. The financial ruin that can result from living in a fantasy world is particularly difficult to come back from, especially when the underlying cause is not acknowledged or even recognized.
So, how can you tell whether your financial expectations are realistic? Here are some key points to consider to determine whether you’re walking the line between living in reality vs. fantasy.
Read Your Financial Barometer
Women who have been accustomed to a comfortable lifestyle may find it difficult to adjust to a more spartan existence when it’s called for. Expenses that were viewed as trivial before suddenly have a greater impact on the budget. Getting a weekly mani-pedi, picking up that adorable designer dress on a whim or dashing off for a weekend getaway might have been routine and not worth consulting the checkbook. Such actions under a tightened budget, however, could empty the piggy bank in a hurry.
On the flip side, even women who have long lived frugally may not be making wise financial decisions, either. Choices such as buying the smaller package of coffee because its price is lower than the larger package doesn’t make sense if buying the larger package is cheaper per ounce. It’s just as easy to be fooled by the fantasy of savings if you don’t do your homework and just go on what a “Sale!” sign declares.
Keeping Up Appearances
The mani-pedi and designer dress examples reflect a major factor that encourages living in fantasy. Commercials on TV and online, print ads in magazines and billboards and even chatty competitive shrews within the PTA all encourage women to feel they’re not beautiful or stylish enough unless they have the latest greatest. But of course, believing that it’s imperative to “keep up” with other women is all a ruse, and the biggest fantasy of all…one that far too many women fall for and suffer from as a result.
Claim Responsibility and Accountability
A major hurdle to overcome from the start is the practice of budgeting, itself. Some women never had to concern themselves with limiting their expenses; others never bothered consulting budgets since they weren’t the breadwinners or managers of the household, and therefore never felt it necessary to track all those nickels and dimes. It’s funny that some women who would never dream of dieting without tracking every single calorie have no qualms in spending without tracking their expenditures. And women of little means often mete out their conservative funds in ways that they think (fantasize) will meet their needs, when in reality, by paying some debts and ignoring others, they are only prolonging their financial struggle.
Pare expenses to a comfortably–not barely! –manageable level. Suggested approximate levels to aim for include the following:
- 5-10% for savings: set it aside, and don’t touch it. At some point, you will need it.
- 30-35% for housing, including utilities and furniture (in the past, 25% was recommended, and is still an ideal to shoot for, if attainable–but take care to be realistic about your expectations)
- 20% on food, including dining out (tip: cook delicious, healthy meals at home more)
- 20% on transportation
- 5% each on medical, clothing, debt and entertainment costs. And if you’re looking for a place to cut more, remember that reducing entertainment costs doesn’t have to mean reducing entertainment itself–just find less expensive ways to amuse yourself.
Getting your budget in balance not only improves your financial health, but your physical health and beauty, too. Think about it: harnessing your finances and keeping them in check will translate to fewer sleepless nights tossing and turning with the fears that come with financial worries. Getting a realistic handle on your finances might be just as beneficial as a week at the spa!
Reality Rules
The reality is, even the wealthiest of women should have their fingers on the pulse of their financial health at all times. The way to make your money work effectively for you is to know where your money comes from, how much it is, where it is, where it’s going, and what it’s doing for you. Living in financial reality means you rule your finances, not the other way around.
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About Pamela J. Sams, CRPC
Pamela has been helping women and their families improve their personal and financial wealth through good financial planning for the past 15 years. She is a Financial Advisor with Jackson Sams Wealth Strategies and her office is in Herndon, VA. She is an investment advisor representative and offers securities and advisory services through Voya Financial Advisors. Jackson Sams Wealth Strategies is not a subsidiary of, nor controlled by Voya Financial Advisors.
You may contact Pamela at 703-547-8682, online at www.jacksonsams.com or by email: Pamela@JacksonSams.com.