Becoming a Financial Late Bloomer - Phase 2: Gain Control of Your Money

Are You a Financial Late Bloomer? As I defined a few blog posts ago, a financial late bloomer is someone who actively started managing their money and building wealth later in life.

In my last post, I focused on the first, and super important, phase of becoming a financial late bloomer: gaining full clarity of your financial situation. I walked through three tangible steps that you can take to do this: 1) doing a spending analysis, 2) finding out how your spending and saving compares to the 50-30-20 rule, and 3) calculating your net worth. If you haven’t yet read the post, here’s the link.

In this post, I will focus on the second phase of becoming a financial late bloomer: gaining control of your money. 

Have you ever felt like you didn’t have a grasp on the money coming into and leaving your bank account? Does the end of the month come around and you have no idea what you spent your money on and where it all went? Do you have savings goals but just can’t seem to meet them? This is what it feels like to not have control of your money. 

The word “control” might be a bit triggering but I honestly think it's the best word to use here. Taking control means telling your money what you want it to do, rather than reaching the end of the month and wondering what happened. You are in charge. It means being conscious and deliberate about where you want your dollars to go. 

To do this, I recommend three steps: start zero-based budgeting, automate your finances, and simplify your accounts.

Step 1: Start Zero-Based Budgeting

Everyone needs a budget and zero-based budgeting is the best way to gain control of your money. Zero-based budgeting does not just mean making a list of your monthly bills and tracking your spending after it occurs. It is much more intentional than that. It means assigning all of the dollars in your bank accounts to particular jobs, whether it is spending, savings, and other goals like paying down debt or investing. As you spend, the money available in your spending categories draws down. Each time more money comes in, you assign every new dollar a job. Zero-based budgeting is flexible too. When life happens and you need to make an adjustment, you can move your money around between your categories. 

There are several advantages of zero-based budgeting. First, since you are budgeting based on the money in your account today, and not money projected into the future, it is a very reliable and consistent method of managing your money. You feel present and connected to your money. Second, zero-based budgeting ensures that you spend within your means. If you “overspend” in a particular category, since you are dealing with the actual dollars you have on hand, the difference must be covered by the dollars from another category. And finally, since you are entering transactions and ideally referring to your categories and money available before spending, you are very much on top of your spending. No more wondering what happened at the end of the month. 

Want to start? I recommend YNAB. I offer a YNAB set up program if you need help getting up and over the YNAB learning curve. Trust me here, it's the best zero-based budget app out there.

Step 2: Automate Your Finances

Where starting zero-based budgeting is the heavy lifter of gaining control of your money, automation is its more laid back cousin. Automation can come into the picture after you’ve gained full clarity of your financial situation and have implemented zero-based budgeting. That way, you’ll be really clear on what you want your dollars to do and confident in your cash flow. In other words, there is no risk of overdrawing your accounts after you set up your automations. 

Here are some automations you could consider setting up:

• Automatic transfers to your investment accounts.

• Automatic credit card payments. 

• Automatic bill payments.

• Automatic transfers between your accounts (e.g., to a shared account with your partner).

If cash flow is a little tight, you could even time your automation to match when you are paid. Do all of your bills seem to come due at the same time? Give some vendors a call and request a change to the billing date to spread things out a bit. You’d be surprise how easy it can be to change that due date.

Step 3: Simplify Your Accounts

The last step of gaining control of your money is to simplify your accounts. In other words, close some of your bank accounts. Simplifying your accounts consolidates and streamlines your financial landscape, reducing unnecessary complexity.

There is simply no need to have multiple savings accounts each with its own goal! If you are using a tool like YNAB these goals are all managed in the app. If you’re not using YNAB, you can track them in a simple spreadsheet. K.I.S.S. 

If you’re using an app like YNAB there is also no real need to keep separate accounts for your spending money or “fun money” - these can all be categories in the app. 

Conclusion

Becoming a financial late bloomer isn't just about catching up; it's about taking charge of your financial destiny, regardless of your starting point. This second phase of becoming a financial late bloomer, gaining control of your money, is a pivotal phase in this journey. It's about shifting from a passive observer of your finances to an active manager, directing your dollars with intention and purpose.

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