How to Grow a Money Tree in 5 Simple Steps
How to grow a money tree in five steps
In the age of materialism, when more is more and less seems less, we need to look to examples of people who are truly happy with their lives and time and time again when I seek those people out, I find that they have chosen to simplify and streamline their lives.
Meet Mark, one of those people. I didn’t have to look very far to find him. We grew up together. He and his wife Erika have chosen to try to navigate the path of financial freedom while maintaining a fun, enriching lifestyle for themselves and their kiddos. Mark, an elementary principal, and his wife Erika, a nurse, want to show everyone that living financially stress-free can be done no matter what your profession with some awareness and a clear sense of purpose.
Mark is rooted in his goal of creating and growing his own money tree. He is creating a financially safe and secure future for his family and overcoming the hurdle of and one of the biggest obstacles in marriage: discussing money. I often go to him to pick his brain on all things surrounding becoming financially independent. If you’ve never heard of FI (Financial Independence), google it. It’s a pretty amazing community.
Mark sketched out his plan for growing a money tree, so to speak, to share with you, and I can tell you from our own family experience, being on top of the money game and having those conversations regarding finances can be hard at first. Still, it gets easier over time, and the trade-off is less worry and stress over money. Mark also included some of his favorite financial books to get him started, and I added them at the end of this blog. Happy reading!
5 Steps to Growing a Money Tree
The taboo subject in marriage, MONEY! I know, I have been there before. For some reason, couples don’t talk about money. Yet, financial stress is often listed as the main reason for a divorce. Why is it so taboo? I believe there are usually two types of people in each marriage, the saver and the spender. This often leads to conflict over money.
Open communication about money is paramount to a successful marriage! This is one of the most important talk discussions you can have. Both partners need to be included and heard in financial talks. If money has been a stressor in your marriage, I will give you some tips I have learned the hard way.
Start with Goals
Most time when couples sit down to talk about money, they start with a monthly budget and ends about 10 minutes later with the couple fighting. This is because usually, the saver wants to have a budget, and the spender feels attacked. Instead, your first meeting about your finances should be about your short term and long term goals.
HERE ARE SOME QUESTIONS TO PONDER
Short-Term Questions:
Are there any improvements for our house?
Are there any trips we want to take?
Are there any big purchases we need to make?
Long-Term Questions:
Where do we want to be in 5, 10, 15, 30 years?
What do we enjoy doing with our free time?
These are just some starter questions. The purpose is to get you and your partner on the same page when it comes to finances. I know when my wife and I started this, I wanted to pay down our debt as fast as possible, but I never explained why that was important in my eyes. I just became the saver and debt payer, and she didn’t understand why we were making extra payments instead of spending that money on our family. It wasn’t until we talked about goals that clicked for both of us, and we got on the same page.
For example, my wife and I have a couple of longer-term goals of traveling around for a year in an RV with our kids. We would also like to be able to have my wife stay at home full time with our kids. We also have short-term goals of new carpet upstairs, some landscaping and a mini-van. Having these goals helps us stay on track.
Action Step: Leave this meeting with at least one long-term goal and 2-3 short-term goals.
Lay Everything Out
This is the time to put everything on the table. What is your monthly/yearly income? What debts do you have? What are your typical monthly expenses? Housing, food, clothing, cable, etc.? The key to this is to be nonjudgemental; this is a fact-finding mission. Sometimes the saver doesn’t realize they are overbearing. Sometimes the spender realizes they could cut back in an area. The key is too let each person come to their own conclusions.
Action Step: Whats your net worth? (assets - liabilities = net worth)
Create a Road Map
This is when you start to get to the nitty-gritty, but this is when you roughly start putting down some checkpoints for what you want. When do you want new carpet? When do you want to go on that big trip? Retire early? The reason this is important is because now all your other spending affects your goals.
For example, let’s say you pay $150 a month for cable but could get by with a $10 a month Hulu account. That extra $140 a month over ten months is $1140!!!, getting you a lot closer to something you want. You and your spouse need to realize how your budget affects your goals.
Action Step: Create timelines for your goals.
Create a Budget
Now that you have the rest out of the way, the budget becomes the easy part. Budgets don’t have to be complicated, grab a sheet of paper and a pencil. Put down your monthly income and then start listing your major expenses, food, housing, utilities, car payments, etc.
Remember, you and your spouse are a team and will need to compromise. There may be items in your budget that you disagree with, and that is ok. Try probing to find out why that item is so important to them. For example, let’s say you have a $200 restaurant budget, but you want to slash that to $0, but your partner disagrees. Why do they disagree? Maybe that is the only time they feel like they get your full attention. Maybe as a compromise, you do an in house date night after the kids go to bed and cook together with a bottle of wine. Maybe you pick one night that month, and that is your date night. The key is to work together.
Action Step: Walk away with your first monthly budget.
Make it Fun
If budget meetings are stressful or still aren’t working, get out of the house and make it fun. Hire a babysitter (or a family member) and go to a quiet restaurant or coffee shop and discuss over wine or coffee. This will help neutralize any power struggles and help move the meeting along.
Lastly! Learn from my mistakes.
When I first started this process, I started working from the bottom (budget meetings), and all it did was cause fighting and hurt. Do not try and do all of these in one night! Spread these steps out over time. Remember, you and your spouse are a team! Work together, listen to each other, and realize it will never be perfect!
The two books that got me started on this amazing journey that I highly recommend are:
Good luck,
Mark