Why a Money Makeover?
Do you ever watch makeover shows like “What Not to Wear” and think, “I’d like a makeover. Sure, my clothes are fine and I even get compliments on my style and makeup, but still. A new look and some general polish would be nice.” I know I have! I even went through with a makeover myself! I didn’t need a whole new look, just some guidance. Someone to help me develop the style I always had mentally (and on pinterest) into real life.
What about a money makeover? Have you ever thought about having one? Have you ever even heard of this concept before? A money makeover works just like a style makeover. Let me explain how.
The first thing that happens in a makeover is a closet audit. The stylist will get rid of anything in your closet that isn’t in good shape, doesn’t fit well, or doesn’t line up with your style goals. They’ll also get rid of anything you have too much of, which could end up getting in the way of your goals. (For instance, I have a serious gray t-shirt addiction. Meaning I wear a gray t-shirt under everything. Not surprising to find out that I felt bored with my wardrobe and had no clue how to mix it up.) This audit gives you a clean slate to start from.
Similarly, the first thing you should do in a money makeover is a financial audit. Weed out the unnecessary items and determine what to focus on building. Do you have too many checking accounts and can’t keep track? This will make it hard to keep a budget. Consolidate down to one. Do you have debt? This is a direct burden on savings goals so you’ll want to pay debt off first. No matter what your goals, you won’t be able to move forward until you first know where you’re starting from. So don’t skip the audit!
Develop a Strategy
It’s natural to want to hit the stores right after the audit. But not so fast! First you need a strategy. If you’re going to get rid of all your gray t-shirts (okay, I kept a couple), then you’ll need to make sure you find something to replace them with. If you have a specific idea of what you want to look like, you’ll need to know all the necessary items to buy.
The same goes with your financial makeover. What are you going to focus on? Is debt payoff your number one goal? How about building a retirement account or emergency fund? Perhaps you simply need a solid financial plan because you’ve never had one before. List everything you’ll need to make that happen. If you don’t create this strategy, you could end up maintaining the same money habits you already had, just like I would have ended up buying more gray t-shirts if I didn’t have a strategy for replacing them.
Hit the Pavement
With a clean closet and strategy in mind, it’s easy to have an efficient shopping trip in which you only bring home what you need – and in which all of the items you buy add value to your wardrobe and have a specific role. Going for an artsy, bohemian look? Make sure to get the skinny jeans, flowy tops, and versatile boots on that checklist! But you have to stick to your checklist. Even if you see and love an item, it doesn’t make sense to buy it unless it lines up with your new wardrobe goals. (For example, walk away from the black leather studded belt – it won’t make sense for your new bohemian look. You’ll end up taking it home and wondering what to do with it.)
Your budget works the same way. And yes, your budget should be the core component of your strategy – kind of like a shopping list. If your goal is financial freedom, then you’ll want to focus on paying off debt before you worry about things like buying a house or traveling to Europe. If your focus is on building a solid financial plan, then stick to more well-rounded goals. It’s imperative that you stick to your plan. Avoid anything that can get in the way of your goals and always keep the big picture in mind.
It’s amazing what a makeover can do for you. With just a few simple changes you can feel like a whole new person. Want to see this in action? Stay tuned! We’re giving money makeovers away to four girls in the next three months and you’ll be able to watch their audit, strategy, and action right here. You may just end up with some ideas that you can take home yourself!