Emily & Amanda work through a visualization exercise that psychologists say is proven to increase savings rates. According to Dr. Brad Klontz, those who spend one hour visualizing their goals and creating an automatic savings system increase their savings by 73% after only one month. For more, see: https://www.bradklontz.com/research
Or find us on Apple of Google Podcast Apps
Emily Agosto (00:08):
Welcome to Connecting the Dollars, a personal finance podcast. I'm Emily Agosto, a CPA and financial advisor.
Amanda Vaught (00:16):
And I'm Amanda Vaught, attorney and financial advisor. Both Emily and I are co-owners at Propel Financial Advisors.
Emily Agosto (00:25):
Propel Financial Advisors is an investment management and financial planning company. We are fee-only fiduciaries and independent registered investment advisors. I'm based in Chicago and Amanda is in New York City, but we work with clients nationwide.
Amanda Vaught (00:40):
The purpose of our podcast is to explore personal finance topics, including budgeting, investing, behavioral finance, current events, and other helpful information. We also hope you'll get to know us along the way.
Emily Agosto (00:54):
Thanks for listening.
Amanda Vaught (01:00):
Hey Emily, Happy New Year.
Emily Agosto (01:02):
Happy New Year. How are you?
Amanda Vaught (01:04):
I'm good. Wondering if you set any new year's resolutions this year?
Emily Agosto (01:10):
Mm, such a fun topic. It's always so easy to get motivated in January. So to help ride that wave, let's talk about some financial goals.
Amanda Vaught (01:20):
Okay. Yeah. I think it's the time of year where people are setting new year's resolutions and if you have set a financial resolution, then hopefully today's episode can help you achieve some success with that one. Yeah. So I think today we have a process that can walk you through how to set a spending goal, but I think it's important to put it in context of savings. So this is sort of a exercise assumes that you've already put aside your savings for retirement or your emergency savings and, and this type of financial goal process we're walking through today is more for when you have disposable income after that. Yeah. And so I'll sort of walk through it and Emily is going to tell us her goals as we go through, right. Emily?
Emily Agosto (02:13):
Yep, I'm ready.
Amanda Vaught (02:14):
This process has seven steps. We'll put the, a PDF on our website and I mean, I highly recommend printing it out or if you already have a journal or something that you like to write in use that, but I, I think it's important to put pen or pencil to paper and actually sit down and force yourself to take the time to do this. Don't just, if you just answer these types of questions in your head or type them on your computer, they just don't stick in the same way that, that it does when you actually physically write. Yeah. So that's tip that's tip number one. So the first step is to, is to write down three different goals. So they can be short-term, long-term. Where are you? What do you want, what are you doing? Who are you with? These are different things to think about in terms of what could be a financial goal for you. Mm-Hmm so, Emily, what, what, what are you thinking about as one of your goals?
Emily Agosto (03:19):
So one of my more shorter term goals is to buy a new drum set. And I know it seems a little silly for this to be like something that I'm putting a lot of thought into, but I have been playing more often and it's something that I miss having in my life. And, this set I was playing before is just really old. And now it's just time to set out and find something new.
Amanda Vaught (03:46):
Oh, okay. And I don't know, like how much is a new drum set? Like what's a range?
Emily Agosto (03:53):
Yeah. There is a wide range. Even used sets can be like $500. For new sets we're probably looking closer to a thousand dollars, something in that range.
Amanda Vaught (04:07):
Okay. And then what do you have a more long term goal that you're looking?
Emily Agosto (04:12):
Yeah. I have another long term spending goal that is remodeling one or two of our bathrooms in our house, depending on our budgets.
Amanda Vaught (04:23):
Yeah. That's exciting. I would love to get a new bathroom, but personally I'm in a rental, so I don't really have the flexibility to remodel. I just have to move . Yeah. Okay. So now that we've named some of our goals, then you can rate them in order of priorities. So which one do you think is more important to you?
Emily Agosto (04:48):
Probably the drum set, because it's something that I could be using right now.
Amanda Vaught (04:54):
Okay. So you would say on a scale of one to 10, it's very important to you - more in the 10 and yeah. Closer to ten. And the bathroom remodel would be, where do you think on the scale?
Emily Agosto (05:07):
More like a five,
Amanda Vaught (05:09):
Like, it would be nice, but you'll live if it doesn't happen kind of thing. Right. Exactly. Okay. Okay. And then step three is we wanna get more specific with our financial goals. So if we just think about the drum set, you know, earlier you mentioned used or new, I mean, think about what you really want. Do you really want it to be a new set or do you want a certain brand? Do you want it to be certain color? You know, what create a mental picture that helps you get excited about this drum set.
Emily Agosto (05:44):
Yes. I have a mental picture of like a tortoise shell vintage Ludwig set, which I don't even know if that exists.
Amanda Vaught (05:53):
Okay. Okay. I love the specificity. I can really, I don't know what that looks like, but I'm sure you can really picture it. Which is what, which is what the key part of it. And then that year that you would like to be able to get that is 2022, or is this more of a 2023 thing?
Emily Agosto (06:13):
I'm gonna set this for 2022.
Amanda Vaught (06:16):
Okay. And then for your other goal, which was the bathroom remodel, can you create a mental picture of what that would look like?
Emily Agosto (06:26):
Yes. I went to get rid of a tub in one bathroom and have just a nice glass panel. Mm-Hmm instead of a shower curtain, that's the main thing I want to change.
Amanda Vaught (06:38):
Okay. Okay. And then what, what year? Like how far off is that?
Emily Agosto (06:43):
Probably more like 2024 or five.
Amanda Vaught (06:50):
Okay. So two to three years? Yeah. Okay. Okay. So now we have the timeline and so we have a one year goal, or let's say maybe 12 months, and then we have maybe a 24 to 36 month goal, you know, because the next, eventually we get to the point where we have to sort of budget into the savings. And so having like a certain monthly amount to save is a good thing to keep in mind. Okay. So we've got a timeline. Next step is really to picture it. And before I talked about creating a mental picture in your mind, but in this step, you really wanna get a physical picture. And so this would be, you know, on Google, you know, finding the exact drum set you're thinking or finding a magazine with a beautiful bathroom and cutting it out. You could draw it if you're a skilled artist. Boy, I, I am not me either. but, but, you know, get the physical image and then you can print it cut it out. Like I said, and we at Propel have magnetic frames that we offer, if you want to use that, you can use it to hold up your picture on your refrigerator or filing cabinet or somewhere that you walk by every day where you can see it.
Emily Agosto (08:14):
Yeah. they're really cute.
Amanda Vaught (08:16):
Yeah. So it's good. It's not just, this is not so one time thing where you say, oh, maybe a drum one day. It's oh, I'm going to see this drum set every day and be constantly reminded of this goal that I've created.
Emily Agosto (08:30):
Yeah. And something I just thought of is, I mean, I should be excited about buying a drum set and I am, but it's, it's an investment. So this process is helping me feel more confident in my choice. And then I'm not just going somewhere and like spending a thousand dollars and then maybe having buyer's remorse because it's not the thing I actually wanted. Yeah.
Amanda Vaught (08:52):
Yeah. And seeing that picture of the drum set day after day mm-hmm I think, you know, I mean, just because you made this goal, you're still allowed to change your mind, right? Yeah. So if you see it and you're like, actually, maybe I don't like that tortoise shell or whatever it is, you know, you can decide that in advance. Absolutely.
Emily Agosto (09:13):
Yeah. I'm sorry. I'm get distracted. There's a lot of cool drum sets on oh, you're you're on the internet. I'm already looking, I'm already looking
Amanda Vaught (09:22):
And then and depending on where you bank, a lot of banks, you can create sub-accounts in your savings accounts. You can really earmark those accounts for those different things, like label them drum set, or bathroom remodel or whatever your goals are. And or you could always use the old school way of the envelope and write outside the envelope "drum set" and put your $20 in that envelope once a month or whatever the appropriate number is. Yeah, our dollar amount is, I mean, so that was step six, the sub-accounts. And then step seven is to automate it. Right? So if you've determined, the drum set you want is $1,000 and you have 12 months to do it in. That means that every month you will need to deposit a little more than $83 into your, into your subaccount savings account. So a lot of people do online banking these days and you could just automate it every month. $83 gets moved to this account, and then you don't even have to think about it. Cool. And then next thing you know, it's 12 months later and you can afford your new drum set.
Emily Agosto (10:36):
My neighbors will love it.
Amanda Vaught (10:41):
Yes. So I think it, I mean, it seems pretty straightforward. This process it's supposed to be straightforward, but it's also supposed to be an exercise. It forces you to sit down and think about these things and to become intentional around your spending. Because a lot of times you just go to the store, you see something cute. You're like, I'm just gonna buy it. Mm-Hmm , that's not intentional spending. Which is fine too. It's not a judgment. It's just, you know, if you're doing that, then you're not doing something else with your money that you might prefer.
Emily Agosto (11:20):
Right. You might think like, oh, I want this big ticket item, but I can't afford it. And then you look at your credit card statement and you're like, oh, I spend $50 at Target every other week without. And like, what do I have to show for that? You know, mm-hmm, , you would've set that $50 aside and put it towards something you really wanted. I don't know. I think it's
Amanda Vaught (11:41):
Something to try. Yes. I think it does help a lot of people, especially the visualization part of it, you know, because you're making your own visuals instead of being, you know, subject to the barrage of advertising visuals, you know? Right. When, think about what you want, not what some advertisement wants you to want.
Emily Agosto (12:00):
Yeah. That's important. Yeah. I'm not this kind of person, but if you're what is the behavioral money avoidant?
Amanda Vaught (12:07):
Oh yeah. Money avoidant. Yeah. The four money personalities. So
Emily Agosto (12:11):
If you and partner like my husband and I will be doing the remodel of the bathroom along somewhere along the line together, and his personality of spending money is different than my personality of spending money. So if we do this exercise together that could help us get on the same page.
Amanda Vaught (12:29):
It's like cheap, cheap couples counseling on finances. Right. When you, if you do this together and you have a shared income with a spouse. Yeah. You know, what do you value? What's your goal? Oh, you want a drum set? Oh, well I want a new motorcycle. Oh gosh. Well, you know, then you have the conversation about it in advance and, and can talk through, you know, these different types of things and, and resolve them. Yep.
Emily Agosto (12:56):
That's of good
Amanda Vaught (12:57):
Tips. So hopefully you find this helpful, we'd love to hear from people who do this and hear how it works for them. So please, please let us know.
Emily Agosto (13:06):
Yeah. Send us an firstname.lastname@example.org. If you would like us to send you one of those fun financial goal setting magnets or if you wanna send us any questions we'd love to hear from you.
Amanda Vaught (13:21):
Okay. And Happy New Year.
Emily Agosto (13:22):
Happy New Year For all links and resources mentioned today. Head over to connecting the dollars.com. Thank you for listening.
Amanda Vaught (13:33):
This podcast is for informational and entertainment purposes only, and should not be relied upon as a basis for investment decisions. This podcast does not engage in rendering legal, financial, or other professional services.