The Highlighter Exercise: A Powerful Way To Improve Financial Planning

Financial planning plays a huge part in our daily life. The average woman thinks about their finances 5-10 times a day. Not planning will sometimes lead to tons of stress, so I have developed a simple system that helps me get organized. As Emily Stroud said, “If you take control of your finances today, then you won’t be a victim of them tomorrow.” Let's introduce you to a simple exercise that will improve your financial planning.

We know that the general prices for goods and services are rising. It is imperative to determine the status of your current finances that will help you think about how you will improve your financial planning. One of the easiest ways to track your expenses effectively is the “Highlighter Exercise Method,” which will show how you have already spent your money. When I have the women in my community do this, their reactions are mixed; some cry, others are surprised. After the initial shock, it’s time to take action. 

Taking these steps can be powerful and intimidating. However, I promise you that it will forever change your perspective when it comes to your finances.

WHAT IS FINANCIAL PLANNING?

Financial planning defines your current money situation, long-term financial goals, and strategies to achieve goals.

We sometimes hear financial planning and automatically assume that it is an extended, drawn-out plan, accompanied by an even more boring budget that is impossible to stick to. 

While I haven’t found a way to make budgeting fun, I have tried to outline the rewards to motivate me to start financial planning today. 

Think of financial planning as the first step to freedom from having to look at your bank account to make any decisions. Better yet, look at it to leverage a more stable financial future because you tell your dollars what to do. 

In the next paragraphs, I’m going to explain how to use the highlighter financial planning exercise to organize your money plan.

THE FIRST STEP IN FINANCIAL PLANNING: THE HIGHLIGHTER EXERCISE

Highlighter Exercise is for those who don’t know where to start budgeting and those who want to take control of their money and see the exact numbers. This method is also excellent for people who readily absorb data by using graphs and colors instead of a spreadsheet.

I get it.  Budgets and balancing checkbooks are not my favorite things too, however, I noticed if I made my tools easy and “fun” to use my dread towards it got a lot lighter, and it is also because of routine in my monthly activities.

When looking at your money plan, the essential goal is to plan out what your money will do and how it will be allocated to eliminate as many “financial emergencies” as possible. 

I put everything in a money plan so that I know what is coming up. You want to assess where you stand financially today and look at the past few months to start a draft of this plan.

Nowadays, people are surprised that they spent more than they thought they did when analyzing their monthly expenses. Analyzing monthly costs is crucial to get an accurate picture of your money and where you like it to go.

The Highlighter Exercise is fun and works in organizing data and much more. Let’s dive into the highlighter colors and learn more.

What you will need:

• 3 Highlighters: BLUE, YELLOW, AND PINK
• Your two most recent bank statements and credit card statements
• Our digital planner or a notebook to record

Steps:

1. The first color is Blue. Print out your bank statements if you don’t receive them in the mail. Use the blue highlighter to highlight your income from all sources. 

While, of course, your job may be your primary source of income, don’t forget to include some of the other sources of income, even if they aren’t frequent. Include child support, side hustle income, and even income that you may not receive all the time. 

2. The second color is Yellow, which you will be using to highlight expenses.

You will highlight the absolute needs in your expenses which cover things like rent/mortgage payments, car payments,   all types of insurance such as health insurance, automobile insurance, homeowner insurance, groceries, and essential spending.

3. Next, use the Pink highlighter to highlight your memberships, subscriptions, non-grocery foods, drinks, and the expenses of traveling and shopping. This also may include splurges outside.

REVIEWING INFORMATION

The Highlighter Exercise doesn’t end at having colors on your bank statements. 

It’s time to review the information to make sure that everything is clear and fine before you start calculating.

• To get your total income for a month, you need to add everything that has a blue highlight.
• Add up the numbers with yellow highlights to know how much you spent on your needs in a month.
• Finally, calculate all the numbers that have a pink color to understand how much you spent on your desired things for the entire month. 

Now ask the question, do you have an income problem or the problem of too many expenses?

Either way, there are adjustments that you can make if you are strategic. 

INCOME PROBLEM

Have too many “needs” expenses and not enough income? Start thinking of ways to add to your income by listing 50 things you are good at. It may sound like a lot but most of the time we are good at things that we don’t even realize can be tremendous in our life. 

Ask yourself, “What am I good at that people call on me to do?”

Is it baking? Can you simply explain something that can substitute as a tutoring service? This will help you add income. 

If you are working, ask for a raise. Simply put, if you feel that you are an exemplary employee, asking for a raise can help your bottom line. The one thing to remember is that once you get a raise, don’t adjust your lifestyle to that amount until you balance finances, pay down your debt, and invest regularly. In the meantime, obtaining a raise can help improve your finances greatly.

SPENDING PROBLEM

Let’s face it, sometimes we are making enough money to support our lifestyle, but the splurges in life are what is taking us in the red month after month. 

Maybe we are spending so much of our income that we cannot save for an emergency fund or have any money to invest in growing it. Remember that being a consumer is nice, but being an investor is truly what will get you ahead. 

Looking at the statements and seeing where you may have to spend money that could have been invested will change your outlook. While you don’t want to deprive yourself of an abundant lifestyle, you have to make choices and sacrifices.  

You have to ask yourself, “Do I want to be moving in the direction of being financially free, or do I want to make an unnecessary Target run?”

The choice is truly yours. However, I know that you aren’t reading this blog because you want to keep struggling, and quite frankly, you deserve an abundant lifestyle. 

CONCLUSION​

Starting to take complete control of your finances can be intimidating and scary. Most of us avoid it like the plague (or COVID-19). 

When I first did this exercise, I was genuinely floored by how much I spent on things I couldn’t even remember. When I decided on investing in real estate and then later in the stock market, I had to choose what was more important. 

Financial stability or the fruit smoothie from Wawa (with the energy boost)?

It was tough in the beginning, I relapsed a bunch of times. I even quit altogether because it was too hard.

I’m here to tell you that you will succeed if you are willing to do the work.