Finances are personal. Still, it can be hard not to compare your money journey to someone else’s. If you’re starting to feel like you’re financially behind based on how much your friends and family save and spend, take these four steps to start feeling confident in your financial future.
Read more: Learn how Ally Bank’s buckets and boosters can get your savings on track.
1. Face it
For better or worse, the road that got you to where you are is uniquely yours. Maybe you pursued a career that hasn’t produced enough disposable income for you to invest any extra, or perhaps you chose a degree that required taking on debt. Life events like divorce, having children or taking care of aging parents can also impact your ability to get ahead financially. On top of that, an avoidance mindset or overspending habits are often culprits of slowing down wealth accumulation. (To dig deeper, uncover your money story and take an Ally Bank Money Roots workshop.)
The first step is to acknowledge and accept the experiences and behaviors that have led you to the present state of your finances and commit to correcting the course. Easier said than done, of course, but releasing any shame and putting in the work to create new beliefs and actions can lead to a different financial future.
Release any shame and put in the work to create new beliefs and actions that will lead to a different financial future.
2. Create a values-based spending plan
Start by creating a values-based spending plan to reduce expenses, increase income and consider setting aside some funds to invest. Set aside time to carefully review your income, expenses, debts and savings. This clarity will allow you to create a spending plan that aligns with what's important to you while cutting back on other things. For example, if travel and experiences are important to you, then downsizing on a larger expense like a home may be an option. The spending buckets in an Ally Bank Spending Account let you set aside money for future spending on activities that truly make you happy — setting yourself up for long-term success.
If you tend to become anxious or self-critical about where you are in your money journey, use some self-compassion. Think of how you would talk to a friend who felt similarly about their own finances and try your best to remain non-judgmental.
This mindset is particularly valuable when it comes to debt reduction. Celebrate the small victories along the way — they move you closer to achieving a spending plan based on your values. Remember: Paying off debt is a process, and you can take a number of approaches, including the snowball strategy, to achieve your ultimate goal of becoming debt-free.
3. Get creative
Many of us spent early adulthood trying our best to save, but lower salaries coupled with big expenses, like children or buying a home, can make it challenging. As you grow, a higher salary, lower mortgage burden (particularly if you refinance to a lower rate) and grown-up children, may give you the chance to really focus on reaching savings goals and reducing debt by:
Contributing to your retirement accounts: If you have more disposable income and fewer expenses, you can max out your 401(k) or other retirement accounts.
Working on passion projects: Finding meaningful work that you enjoy makes it easier to work longer, whether that’s a full-time job, part-time employment or a side hustle that could bring in extra income.
Exploring streams of income: Interest from bank accounts, especially high-yield savings accounts, or certificates of deposit can add padding to your savings. You can also consider certain lower-risk investments, such as those that pay dividends, but keep in mind that investing always incurs some risk.
4. Find your people and ask for help
Just like you might work with a personal trainer to improve your fitness, receiving support from a trusted financial professional can help you make the most of your money. A financial advisor, like through Ally Invest Personal Advice, can assist you in clarifying your priorities and provide expertise tailored to your needs. Together, you can create a strategy that supports your overall wellbeing. Some common issues advisors can help with include investment advice, estate planning, debt repayment and saving for college.
If you’re not in a position to work with a financial advisor, the first step could be sharing your situation with others and finding a community for support. Resources like books (which you can request for free from a local library) or podcasts (also free online or through an app) can get you started as you commit to improving your financial future. I personally listen to the podcast "Catching up to Financial Independence."
Balance is the bottom line
When it comes to financial wellness, the key is progress over perfection. Guidelines for money management are just that: guidelines. If you feel behind financially, remember that you’re not in competition with anyone else. Know your values and find a financial strategy that fits your lifestyle and goals.
