Finding Financial Success By Controlling The Controllable

Control the controllable. In this blog post we will discuss financial aspects of your life that you CAN control, and some things that are out of your control. So focus your time and resources on the items within your control. Don’t waste time, money, and effort on things you have no ability to change.

At CayDen Wealth Management, we often encounter savers and investors feeling overwhelmed by their financial situations and the choices they have to make. While it's true that many aspects of your financial life are influenced by external factors beyond your control, such as market fluctuations and economic downturns, there are several key elements in your financial life you can, and should take control of. Let’s explore what aspects of your financial life you can control…

Controllable #1. Managing Your Expenses

One of the most critical aspects of personal finance is controlling your expenses and living below your means. This begins not only with understanding where your money comes from, but with understanding where your money goes to, each month. Also known as “tracking your monthly expenses”. So do just that. Start by tracking all your expenditures, each month, and categorizing them into two core categories; necessities (such as housing, utilities, and groceries) and discretionary spending (like dining out, entertainment, and vacations). 

Once you have a clear picture of your spending habits you’ll be empowered with awareness of your cash flow to decide what is good use of your money, and what expenses can be cut out of your life. Now, create a budget that aligns with your financial goals. That way your money is working for you and you are making consistent progress towards achieving your goals. Here are the controllable aspects of budgeting you should focus on…

Distinguish Needs vs. Wants: Prioritize your spending on needs before wants. This doesn't mean you can't enjoy life, but balance is key.

Cut Unnecessary Expenses: Identify areas where you can cut back. With greater awareness of your cash flow, you have more clarity into what is truly a worthy expense for your household. This might include reducing dining out, canceling unused subscriptions, or shopping for better deals on recurring expenses.

Use Technology: Leverage budgeting apps to help you stay on track. Apps can provide insights and alerts to keep your spending in check, as well as providing an accountability partner.

Also, check out our blog CayDen's 5 Point Guide To Creating A Realistic Budget to help you with creating your budget.

Controllable #2. Setting an Achievable Savings Rate

Your savings rate is the biggest contributor to building wealth. It is the percentage of your income that you save and invest for the future. A higher savings rate can significantly impact your financial security and retirement readiness. Your savings rate is the number one contributor to growing your wealth, meaning that your savings rate is the single, most impactful controllable within your personal finances that directly contributes to the growth of your wealth. So focus on controlling your spending and increasing your savings rate consistently. You can make saving easier by…

Automating Savings: Set up automatic transfers from your checking account to your savings or investment accounts. This ensures you pay yourself first.

Increase Contributions Gradually: If you’re not currently saving much, start small and gradually increase your savings rate. Aim to save at least 20% of your income, but any increase is beneficial.

Prioritize Retirement Accounts: Take advantage of retirement accounts like 401(k)s or IRAs, especially if your employer offers matching contributions. This is essentially free money towards your retirement.

Controllable #3. Setting Your Long Term Asset Allocation

Asset allocation, or your investment mix, refers to how you distribute your investments across different asset classes, such as stocks, bonds, and cash, ideally in the form of index funds. Proper asset allocation can help manage risk and optimize returns based on your financial goals and risk tolerance. You can confidently invest your money to align with your long term goals by doing the following…

Assess Risk Tolerance: Understand your comfort level with risk. Younger investors may afford to take on more risk, investing more heavily in stock index funds, while those nearing retirement might prefer more bond holdings.

Diversify Investments: Diversification involves spreading investments across various asset classes to reduce risk. A diversified portfolio can protect against significant losses in any single investment.

Rebalance Regularly: Periodically review and rebalance your portfolio to maintain your desired asset allocation. Market fluctuations can skew your allocation, and rebalancing helps realign it with your goals.

Investment Strategist and CayDen’s Portfolio Manager, Daniel Caycedo, MS, EA, ChFC® says “Controlling the controllables with investing means understanding our limitations as investors. We know that we can not see the future, and neither can anyone else. So instead of attempting to predict what company, industry, or location that will do best in the future, you can simply buy the whole market through index funds. Index funds provide ownership in thousands of companies in a cost effective and tax-efficient way. We don’t know what companies will perform the best in the future, but we do know that companies will continue to make money, and the market will likely be higher 10 years from now than it is today. So keep it simple by investing in stock and bond index funds, balanced to your desired risk level.”

Final Thoughts

Taking control of your personal finances requires discipline, planning, and regular review. By managing your expenses, setting a robust savings rate, and maintaining a thoughtful asset allocation, you can navigate financial uncertainties with confidence and work towards achieving your financial goals by focusing on controlling the controllables. Remember, while you can't control the markets or the economy, you can control your financial decisions and habits, laying the groundwork for a secure financial future and a strong financial foundation.

At CayDen Wealth Management, we are here to guide and support you on your financial freedom journey. If you need personalized advice or have questions about managing your finances, don't hesitate to reach out. Together, we can create an action plan tailored to your unique situation, ensuring you’re prepared for whatever the future holds. Plan, save, and invest with CayDen Wealth Management. Schedule your free Financial Review and Intro meeting with CayDen Wealth Management here: https://calendly.com/caydenwealthmanagement/introductory-call?month=2024-06

About the author: Shane Dennehy is a CERTIFIED FINANCIAL PLANNER™ professional, as well as the President and Sr. Wealth Management Advisor at CayDen Wealth Management, a Colorado registered investment advisory firm with offices located in Broomfield, Colorado and Charlotte, North Carolina. Shane works out of CayDen Wealth Management's Broomfield office, providing virtual, fiduciary, comprehensive wealth management and tax services for high performing professionals and their families. Services include proactive Financial Planning, Investment Management, & Tax Services.

CayDen Wealth Management, Our Purpose & Mission

Welcome to CayDen Wealth Management, a Financial Planning, Tax, and Investment company that stands as your trusted partner in achieving financial success. We specialize in providing virtual, comprehensive wealth management services tailored for high-performing professionals and their families.

At CayDen, we understand that life is dynamic, and so should be your financial planning. Our mission is to help you and your family confidently plan, save, and invest to reach your financial goals, build wealth, and realize your own version of financial freedom."

Your financial journey is unique, and that's why at CayDen Wealth Management, we become your strategic partner. We act as the CFO to you being the CEO of your household. You provide the goals, and we provide you with the data, insights, and advice needed to make confident financial decisions.

Our passion for helping clients and their families succeed drives every decision we make. The CayDen team is dedicated to lifelong education and staying ahead of the curve, ensuring that your wealth is managed with precision and foresight.

Experience the difference with CayDen Wealth Management. Your journey to financial freedom begins here. Contact us today, and let's plan, save, and invest for financial success together. Schedule your zoom-video intro meeting and Free Financial Review by following this link: https://calendly.com/caydenwealthmanagement/introductory-call?month=2024-06 About the CayDen advisors:

Daniel Caycedo is the Investment & Tax Strategist, as well as a Wealth Management Advisor for CayDen Wealth Management, a Colorado registered investment advisory firm with offices located in Broomfield, Colorado and Charlotte, North Carolina. Daniel works out of CayDen Wealth Management's Charlotte office, providing virtual, fiduciary, comprehensive wealth management and tax services for high performing professionals and their families. Services include proactive Financial Planning, Investment Management, & Tax Services. Shane Dennehy is a CERTIFIED FINANCIAL PLANNER™ professional, as well as the President and Sr. Wealth Management Advisor at CayDen Wealth Management, a Colorado registered investment advisory firm with offices located in Broomfield, Colorado and Charlotte, North Carolina. Shane works out of CayDen Wealth Management's Broomfield office, providing virtual, fiduciary, comprehensive wealth management and tax services for high performing professionals and their families. Services include proactive Financial Planning, Investment Management, & Tax Services.

CayDen's 5 Point Guide To Creating A Realistic Budget

Here at CayDen Wealth Management, we emphasize the fact that creating a budget is one of the most crucial steps toward achieving financial stability and reaching your financial goals. Whether you're saving for a big purchase, trying to pay off debt, building long term wealth, or simply want to manage your money more effectively, a well-thought-out budget can be your roadmap to financial success. Here are five of CayDen's essential tips to help you create and maintain a realistic budget.

1. Be Realistic with Spending Behavior

One of the biggest mistakes we see people make when creating a budget is being overly optimistic about their spending habits. It's important to be honest with yourself about where your money goes each month. Start by tracking your expenses for a few months to get a clear picture of your spending patterns. This will help you understand your true financial behavior and identify areas where you might need to cut back. CayDen's Sr. Financial Planner, Shane Dennehy, CFP®, ChFC®, says, "Awareness is key for success. Tracking spending brings awareness to where your money is coming from, and more importantly, where it is going to. Once you have awareness of your cash flow you can determine if that money is being spent and saved the way you want."

For example, if you enjoy dining out, don't set an unrealistically low budget for meals and entertainment. Instead, allocate a reasonable amount that reflects your current lifestyle and look for gradual ways to reduce it if necessary. Being realistic about your spending will make your budget more sustainable and easier to stick to over the long run. Consistency is critical for long term success.

2. Budget for Miscellaneous and Unforeseen Expenses

Life is full of surprises, and not all of them are pleasant. That's why it's crucial to include a line item in your budget for miscellaneous and unforeseen expenses. This should be in addition to your emergency fund. And this can cover anything from a sudden car repair to an unexpected medical bill. A good rule of thumb is to set aside around 5-10% of your monthly income for these expenses.

By planning for the unexpected, you can avoid financial stress and prevent these surprises from derailing your budget. It’s also wise to build an emergency fund over time, if you don't already have one, which can serve as a more established buffer for larger unexpected expenses.

3. Being Successful with a Budget Takes Practice. Consistency is Key.

Creating a budget is just the first step; the real challenge is sticking to it. Like any new habit, budgeting takes practice and persistence. Don’t be discouraged if you slip up or overspend in certain categories. The key is to learn from these experiences and make adjustments as needed. Consistency over time creates long term results.

Consider using budgeting tools or apps that can help you stay on track. These tools can provide reminders, track your spending in real-time, and offer insights into your financial habits. Remember, becoming proficient at budgeting is a journey, not a destination. With time and practice, you’ll get better at managing your money.

4. Track Your Progress and Make Changes

Regularly tracking your progress is essential to ensure your budget is working for you. Set aside time each week or month to review your spending and compare it to your budget. This will help you see where you’re doing well and where you might need to make adjustments.

If you notice that you consistently overspend in certain categories, don’t be afraid to adjust your budget. Perhaps you need to allocate more funds to groceries or transportation. The goal is to create a flexible budget that adapts to your changing needs and circumstances.

Additionally, celebrate your successes, no matter how small. If you manage to save money or stick to your budget for a month, reward yourself in a way that doesn’t compromise your financial goals. Positive reinforcement can motivate you to continue your good habits.

Conclusion

Creating and maintaining a budget is a powerful tool for achieving financial well-being and your own version of financial freedom. By being realistic about your spending behavior, budgeting for miscellaneous and unforeseen expenses, practicing your budgeting skills, and regularly tracking your progress, you can take control of your finances and work toward your financial goals. Remember, a successful budget is one that you can stick to and adapt over time. With persistence and flexibility, you can master the art of budgeting and enjoy the peace of mind that comes with financial stability. Consistency creates lasting results.

About the author: Daniel Caycedo is the Investment & Tax Strategist, as well as a Wealth Management Advisor for CayDen Wealth Management, a Colorado registered investment advisory firm with offices located in Broomfield, Colorado and Charlotte, North Carolina. Daniel works out of CayDen Wealth Management's Charlotte office, providing virtual, fiduciary, comprehensive wealth management and tax services for high performing professionals and their families. Services include proactive Financial Planning, Investment Management, & Tax Services.