First, let me apologise for the delay in this post - I’m sorry! I blame my ambitious decision to wake up at 6 a.m. yesterday. Normally, I write my posts in the evening, but my brain was so foggy that all I could muster up was a ramble about early mornings and caffeine. But now that I’m back on track, let’s dive into today’s topic: how truly understanding your money can transform not only your finances but also your peace of mind.

Over the past few Saturdays, I’ve been guiding you through a process of becoming more aware of your money. This means pulling your head out of the sand (which I know isn't easy to do) and facing the often-intimidating task of looking at where your money is actually going. First, we identified your essential expenses - the non-negotiables like rent, mortgage, utilities, and food. Then, we took a closer look at your discretionary spending - those things you could live without, but enjoy having, like your daily takeaway coffee, that subscription to Sky, or those impulse online purchases.

Before we move on to the next step - examining your values and ensuring your spending reflects them - I want to show you how even just the first two steps of this journey can make a big difference. To illustrate this, let me share a real-life example (with names changed for privacy) of how this exercise transformed a couple’s relationship with money.

Meet Susan and Paul

Susan’s biggest desire? To feel secure with money, without the constant cloud of anxiety hanging over her. She couldn’t see how they could ever save, often saying, “we can’t save.”

Step 1: Facing the Numbers

The first exercise was a big one for Susan: reviewing their joint bank account. This was significant because, traditionally, Paul had been the one to monitor their finances. Paul had already prepared a spreadsheet with their income and expenses, so Susan sent it over to me. Interestingly, their income exceeded their expenditure, yet they still weren’t saving.

Step 2: Highlighting Spending Categories

Next, we dove into what I like to call a “fun” exercise (yes, really!). We broke down their spending into clear categories. Susan and Paul highlighted their essential expenses in one colour, then separated their non-essential spending into two distinct colours - one for Susan’s and another for Paul’s. Since they didn’t have any joint non-essential expenses, we used just two additional colours. But if you do share non-essential spending, simply use a third colour to track it separately. We also selected a month with slightly higher-than-usual spending to account for any extra costs that might pop up.

To address this, we created a new system:

Joint Account for Essentials: They would each transfer a predetermined amount into the joint account to cover essential expenses like rent, utilities, and food. We made sure that both of them had enough in their personal accounts to cover their discretionary spending before transferring the rest into the joint account. This arrangement allowed them to enjoy their "wants" without guilt or the need to justify their spending. They both felt more in control and less anxious, knowing they had a clear system for managing both essentials and personal indulgences.

Joint Savings Account: We opened a joint savings account for their shared goals, like family holidays and home repairs. They started saving their child benefit each month, and any leftover money in their personal accounts at the end of the month would be added to this fund.

This new system gave both Susan and Paul clarity over their finances. It allowed them to maintain independence while still ensuring transparency and fairness in their financial management. It also helped them start saving for shared goals and unexpected expenses, giving them a sense of security they hadn’t felt before.

Step 4: Aligning Spending with Values

With their new system in place, Susan and Paul were ready for the next step: identifying their values and ensuring their spending reflected them. For example, if they valued personal growth, they could allocate money for courses or hobbies. This step isn’t just about saving; it’s about living intentionally, creating a more fulfilling life through mindful financial decisions.

The Results

Even with these initial changes, Susan felt a dramatic shift in her mindset. She no longer dreaded checking the bank account, and her anxiety around money began to fade. Paul appreciated the collaborative approach, and both of them felt more secure knowing they had a plan for emergencies and shared goals.

They went from feeling overwhelmed by their finances to feeling empowered. This simple shift in how they managed their money - facing the numbers, categorising their spending, and creating a fair, intentional system - brought a sense of clarity and peace of mind that had been missing before.

Your Turn

If you’re feeling overwhelmed by your finances, take a page from Susan and Paul’s story:

1. Face the Numbers: Review your accounts and categorise your spending. Take an honest look at where your money is going.

2. Build a System: Develop a structure that fits your unique situation and needs. Whether that means having separate accounts or adopting a different strategy, find what brings you clarity, confidence, and peace of mind.

3. Start with where you are right now: Make small adjustments that align with your needs and goals.

Next week, we’ll dive deeper into how to spend intentionally and align your financial choices with your values. But for today, start by understanding where you’re at and find ways to make that work for you and your partner.

Taking this first step will set you on the path toward a more peaceful, fulfilling life - one where money isn’t a source of stress, but a tool that supports the life you want to build.