Do you have a friend who got super into stock trading during the pandemic? Or maybe you know someone who made a bunch on crypto (and won't stop talking about it). Anyone in your network who swears by their budgeting app? What about your friends & family members with "normal" jobs who save for retirement with workplace accounts like a 401(k)?
It's easy to feel like everyone else has their personal finance game nailed down, while you struggle to understand where to start. Working in a creative field often means navigating unfamiliar territory – and figuring out how to manage your money on your own.
So what can you do to take control of your financial well-being now and build a better future for yourself later? One surprisingly simple step makes everything that comes after so much easier – and is absolutely essential for anyone juggling multiple income sources and a fluctuating income, all while trying to make smart decisions with taxes, debt, saving, and investing.
While it may seem obvious once you hear it, the number one most important step in taking control of your financial life is having a system for organizing and making sense of all of your important information in one place. Luckily, that is also the first step in the financial planning process!
In this article, we’ll explore why having a way to keep track of your entire financial picture holds a timeless advantage over tracking the stock market, following the latest social media influencer trends, or ratcheting down on a budget.
Why start there?
Maybe you're already sold on the idea of getting organized. You see the utility of having one place to organize and analyze your entire financial picture and are ready to dive in. If that's you, feel free to skip to the next section.
If you're like a lot of people, you might have one or two specific financial goals or pain points to address – but aren't necessarily motivated to dive into the less pressing areas. For example, one person might want to pay down student debt or another might want to invest for retirement. So why go through the effort of collecting all of your most important financial information if you only care about improving one area of your financial life?
Because it's all related. From income and expenses to spending and saving, from debt to investing to insurance to estate planning – every part of your financial life is connected to every other part. Being able to see those connections helps you understand what you're already doing well, the areas that need attention, and which questions you should be asking. Without a viable system, some questions become very difficult to answer and others become so confusing that you can feel overwhelmed.
Here are just a few of the questions that are easier to answer with a well-organized system for tracking your money:
What is the right amount of cash to keep in a savings account? How do you know that?
How much risk should you take with your investments? Why not more? Why not less?
What percentage of your income do you spend? How did you arrive at that amount?
How much would it cost to pay your bills if you could not work for six months? Where would that money come from?
What happens if you need more cash than you have available? Do you borrow? Sell investments?
How much money do you need to make work optional? What if you could only reach that amount faster by investing more aggressively?
If you have trouble answering any of those questions, it might be time to look for a better way to get organized.
What Would This Look Like?
We can see how having one place to organize and analyze your entire financial picture makes it easier to answer tough questions. But would would a system like that look like?
There are plenty of options for collecting, tracking, and analyzing your personal finances. Some people use apps, others make custom spreadsheets. A lot of people figure out ways to track the parts they understand, and hope for the best with the parts that are confusing.
I use a platform with clients called Elements to monitor the most important and impactful financial metrics in one easy to understand scorecard. Want to know if you're saving enough? There's a score for that. How about the amount of your income goes to taxes? Yup, that's also included. There are scores for debt, spending, how long your assets could support your standard of living, and even a score that tells us your relative retirement readiness.
An example of a financial scorecard
Your scorecard lets us look at a lot of information all at once to quickly identify things that are going well, things that need more work, and conversations you should be having around your money.
Collecting your information all in one place is the first thing we do in the financial planning process. It's essential to every conversation that follows. If you're curious about the current status of your own financial well-being, you can get a free assessment by completing your own financial scorecard today. It takes most people around 10 minutes to get started, after which I'll send you a quick 2-3 minute video highlighting strengths, weaknesses, and any questions that would help us get a clearer understanding of your big picture.
(Want to see an example of what these financial assessments look like? Click here.)
What Comes Next?
Once you have all of your financial information collected in one place, you can begin to understand how the different pieces fit together.
Your income, spending, and saving define your cash flow: money coming in and going out. Even though your income may change from one year to the next, you can still manage where your money goes by paying attention to your scores for saving, spending, debt repayment, and tax liabilities. Your equity & insurance scores help understand if you are taking on the right amount of risk, while your liquidity, qualified (i.e., retirement accounts), real estate, and business scores let you see how your assets compare to each other – and if you should think about more diversification. Finally, we have a score that we can use to evaluate how close you are to making work optional.
Collecting your most important information in one place is the first thing we do in the financial planning process. While everyone can benefit from having a well organized system for monitoring financial well-being, this is especially important for creative professionals who may be operating outside the structure and confines of traditional employment. If you'd like to learn more or get started on your own financial scorecard – with zero obligation – please click here to learn more.
Timothy Iseler, CFP®
Founder & Lead Advisor
Iseler Financial, LLC | Durham NC | (919) 666-7604
Iseler Financial helps creative professionals remove stress while taking control of their financial futures. As both advisor and accountability partner, we help identify current strengths and weaknesses, clarify and refine your long-term goals, and prioritize understandable, manageable, and repeatable actions to bring long-term financial well-being. Reach out today to take the first step.