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Am I On Track?

Am I on Track?

How many of us can confidently answer the question, “Am I on track?”

Throughout my career, I have always found it interesting that we feel guilty spending our own money. But when we think about what causes this guilt, it makes sense. Aren’t we constantly comparing our finances to our family? Peers? Acquaintances, or maybe even someone we just follow on social media?

“How do I relate to others” is a fruitless game. Your path is YOUR path and it is important to recognize this financially. Finally ending the comparison to others and being able to answer the question, am I on track for my own goals, provides an empowering re-frame of our financial circumstances. 

One of my favorite stories as it relates to this comes from the founder of Larabar, Lara Merriken. In Lara’s interview on “How I Built This,” she discusses her decision to work an entry level job at Whole Foods in order to understand the industry she wanted to penetrate, and ultimately dominate. Lara worked as a floor clerk in her hometown store. She tells the story of running into high school classmates shopping at Whole Foods that looked at her in disbelief over her seeming lack of career progression after earning a reputable college diploma.

While the lessons learned from this ground floor experience proved invaluable to Larabar’s success, how many of us have the fortitude to handle this critical perspective from family, friends, or acquaintances? I know I’ve struggled with it at times with the financial changes I’ve had to make with the launch of Driven! Having the discipline to ignore “where you should be” relative to others in your life proves to be a challenge.

Since you are in the Driven community, I know that you are someone continuing to develop skills and expertise. Generating income won’t be a problem. The path might just be more of a rock wall than an escalator, depending on your pursuits. With Lara’s story in mind, the first step toward financial confidence is to throw the “how much should I have saved by X age” question out the window. Don’t waste energy comparing yourself to others and, instead, channel that effort to ensure you’re financially able to meet your own personal goals.
Focus on developing your own system. A proper system will account for any income level and will automatically improve as your income eventually rises.

Step 1: stop thinking in $; start thinking in %

We think in terms of dollars when we are keeping up with the Jones’s. A more productive process it to focus on your pay and determine the right percentage of each paycheck that should be used toward each respective financial aspect of your life.

Step 2: what should the %’s look like?

The typical financial disclaimer exists for a reason, everyone’s situation is different! That being said, there are some helpful guidelines you can be thinking about:
How much of your take home (after tax) pay should go where?

Toward retirement: 5-15%
*Big advantage is if your company offers a match to your 401(k) contributions! Don’t overlook the power of this free money.
Saving and investing: 5-15%
*Fill your emergency fund and then focus on accelerating wealth with a disciplined investment strategy.

Fixed costs: 45-60%
*Be particularly mindful of the big items – housing, transportation, and kids!

Guilt-free: 15-30%
*One life to live.
The figures could look like this for someone taking home $100k.
Toward retirement: $10,000
Savings: $10,000
Fixed Costs: $55,000
Guilt-free: $25,000

Naturally, the more you can tilt the balance away from expenses and toward retirement and investments, the more money will be available later. But an important principle we live by is enjoying today, while preparing for tomorrow. Accounting for that guilt-free spending is critical.

I encourage you to develop your system so this money flows automatically from each paycheck to its respective bucket. A little time up front will go a long way. Over time, you can continue to optimize and improve the process as your income increases. By automating the process, you can ensure your major goals are being hit, and allow yourself to spend the spillover with peace of mind.
When working with Driven, you will receive a personalized financial plan tailored to your lifestyle and goals that will not only set you up for long-term financial freedom, but will also enable you to enjoy the things that matter most to you today.
And to close the loop on Lara. After paying her dues at Whole Foods, she went on to launch Larabar, which was acquired by General Mills for a LOT of money. Those old acquaintances aren’t looking down on her now! She followed her own path, and I encourage you to do the same.
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