Know Your Number

Sometimes I'm stunned by the questions that pop up in the middle of a coaching session. It's as if they come out of nowhere, but I know it’s just that all of the fragments have come together in one cohesive thought.

This week, the question that made me pause was something like, “Tauna, what do I need to make each month so that my kids and I can live comfortably?” Until that moment our conversations were about how to make that week’s paycheck stretch. Every week. Week after week.

You see this client is a hard working and dedicated single mom of four kids. She works two jobs and all the overtime she can get to make ends meet, but she has dreams and the drive for more.

Her question is one I hear a lot…What’s my number?

What do I need to bring home each month in order to pay bills, put food on the table, get from point A to point B, AND…still be able to fund the life I dream of and reach my financial goals.

Knowing your number is the very base of the financial life stages. It's the very first reality check and it isn't as elusive as it seems. Your number is your monthly income target — what you actually need to bring home to fund your life. I find that many people don't really want to look at this, not too closely. They don't know if they want to know what the financial reality is. Some haven't looked at their debts, or calculated a total for them. Some, like my business clients, are a little afraid that their needed income is more than they bring in.

This is where I see feelings of shame crop up on a client’s face or in their tone of voice and it’s usually when I tell them about the rear view mirror & the windshield. Something like, when we’re driving down the road we only glance in the rear view mirror, we don’t fixate on it. Instead we look out the windshield at where we’re going. That rear view mirror is good for showing us where we’ve been but it’s small because we should spend most of our time looking forward.

So, if you’re reading this and you’re feeling that bit of shame creeping up your neck, just remember that this rear view moment is short and we don’t stay here long. We’re just gathering information so that we can look forward and make decisions looking through the windshield.

Today we're going to dive into how to find YOUR number. Next month in Part 2, we're going to reverse engineer whether your business — or your j.o.b. — can actually deliver it.

Not a business owner? I've got you. I'll have a special section just for you.

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Key Concepts

The Problem: Feeling like you can’t make ends meet and don’t know what you really need to bring home in monthly income to pay bills, put food on the table, gas in the car AND reach your money goals and dreams.

The Solution: Get clear about what your number is and what does it actually take to fund your life and make progress on your goals

The Core Message: Knowing your number is foundational to making progress with your money, and it’s not as elusive as it seems

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Deep Dive: What is Your Number?

Most people have a number in their head — a guess. Maybe it's three thousand a month, maybe five thousand, maybe more. But guessing is different from knowing. This exercise isn't about budgeting better. It's about moving from that vague sense to a real, named target.

Here’s the thing — the money you bring home this month isn’t just intended to cover the bills that come in or are due this month. It can and should stretch farther. Each month you take care of: immediate needs (food, rent, gas, and bills), near future needs (irregular bills & repairs/projects), and also long term future needs (retirement investments). That's why your number — the real number — has to include all three.

I see clients trying to make one month's pay cover their immediate needs and a near future need that seems to pop up randomly. Usually it is an annual or bi-annual expense, like an insurance payment. BUT…that insurance payment isn’t random and a lot of the “surprise” expenses aren’t actually surprises at all.

So, where do you start? This is when we use that rear view mirror I spoke about earlier and I want you to look back over the last year. I know that feels like a long time. Do it anyway. Go look at your last year of spending and find out where your money went. Figure out your monthly averages for all of the main categories: housing, food, transportation, insurance — every category that touches your life. You only need to do this once. Just gather the information to get the base average amount you need to fund your life.

When you do this, I want you to remember that you are in information gathering mode. You might not like how much you spent in one or more categories last year, and what’s more, you might see that the income to expense ratio just isn’t lining up. But keep in mind that in order to make different choices we need to know what reality is.

Once you have your base average amount needed to fund your life, you now get the opportunity to make some decisions. Do you want to spend that much in each category? Do you want to increase your income to make this all a bit easier? Do you want to change your debt scenario? This is where you get to decide the direction of your money. That total — immediate needs, near future expenses, and long term goals combined — is your monthly income target. It's not just a budget. It's the number your business, or your j.o.b. needs to deliver every single month. Now that you have the reality of what was (rear view), you get to decide what you want to make happen in the future (windshield).

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What Changes When You Find Your Number

When you find your number, like the client I mentioned above, you get to see your financial picture clearly — black and white — and then you get to change it.

She wants a job that won't just cover this month's bills — she wants it to fund her dreams too.

When trying to hit a target, you need to know where to aim. Finding your number gives you that.

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Signs You Need To Find Your Number

• You get to the end of a month and wonder where your money went

• You are making a good income, but you don’t know why it’s so tight

• You are looking for a job, but you don’t know what you need to earn

• You are a business owner, and you don’t know what you need to pay yourself. (Sound familiar? See Part 2 next month)

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What to do Next

Start by looking at your last year of spending. Find your averages across all three areas — your immediate needs, your near future expenses, and your long term goals. Add them up. That's your number.

That client I mentioned? She's got her number now. She knows exactly what she needs a job to pay her. That's where we start.

What I've noticed is that most people get stuck right after they find their number because the math isn't mathing. So, if you're feeling resistance about sitting down and facing these numbers, or you aren’t seeing how your income is going to fund everything you need…that’s exactly when we should talk.

← Miss the last post? Read: Beyond Security–What Money is really for