the big b word - budget
"Money always flows away from those who don't manage it toward those who do"
Since my last blog post, I have had a few people ask me for a follow-up post about BUDGETING. Some were really interested in how we paid down our debt, and others just interested in getting their finances in order for the new year.
So obviously I have some folks who are: tired of overspending, want to save money for certain purchases, get paid, and have no clue where all their money goes; that follow me. Do any of these things sound familiar to you? Fret not, I wrote this post with you in mind.
I was once that person I just described above. After a few changes to my mindset surrounding money and some healthy adjustments to my spending habits, I can now answer those questions in the negative!
(Ok I still overspend at times on coffee - smh- it is a process.)
Most people don’t like talking about finances because it’s such a taboo topic. Myself included.
For instance, Noah and I never discuss dollar figures & finances with anyone outside of our circle, (God, each other & our financial advisor.) Just because we feel as though it’s nobody else's business. I mean really it's not. But mainly because we have a healthy view and relationship with money that some people don't share. We view money as an object to make exchanges. We don't let money control us, we control our money. We don't think more money will take away our problems, we make it work with what we have. We spend within OUR means, and we allocate every dollar to what WE deem is important to US.
Some people really don't have boundaries when it comes to money. People also tend to think if you make x amount of dollars you have imaginary money that they like to spend for you. So to keep from having to run down the long list of expenses and places our money goes, we just choose not to talk about it with anyone outside of us.
We do however believe in discussing money with our kids, well mainly Kubb, Ian has no clue what money is right now. This is because a lot of the money habits people have been inadvertently handed down to them. So we want our children to understand money for what it is and have a healthy relationship with money themselves as they grow older and make their own financial decisions.
I also think it’s ok to talk about eliminating debt. Sometimes people just need to know that they can do it too. Wealth building and financial independence should not be a secret. (Especially when you're talking about what most Millenials can relate to STUDENT LOANS -- the added layer of Medical School & Law School type of student loans (6 FIGURES) yea, we all need some advice in that area - I will dedicate a post to this in the future) In the meantime if you're looking for more (Medical School Debt advice) the best place to start is- THE WHITE COAT INVESTOR.
Ok, now back to the reason you're here. You want to discover the magic of mastering your finances in 2018, SO YOU CAN ANSWER NO TO THOSE QUESTIONS TOO. Guess what?! It starts with one word, BUDGET. Budgeting is the first step to financial literacy and freedom.
Budgeting allows you to create a plan for your money and ensures you have enough for everything you need. Budgeting most importantly allows you to control your money instead of your money controlling you.
Seeing where your money goes every month can be very eye-opening.
Realizing you overspent on groceries, gas, & eating out is not cool. Especially when that extra money could have gone to eliminating debt or building wealth.
DISCLAIMER: I am not a money expert. I can only share what works for us & hope that it helps you! Talk to a financial advisor or CPA for individual advice and direction.
First things first
STRATEGY
Note your NET income (after pre/post-tax deductions- in other words, what you bring home)
Track your spending for a month (Every item, every dollar- it is time-consuming at 1st but it is for a great reason- don't skip this step)
Set your budget -- Allocate your money. THIS IS WHERE YOU CREATE A BUDGET.
Fixed expenses first: Tithes, Mortgage/Rent, Utilities, Car Payment, Insurance (health, car, life), DEBT, Subscriptions, Phone Bill.
Then variable expenses (things that change month-month): Household products, Gas, Groceries, Leisure, Personal, Misc.
Non-Negotiables ( Savings Categories listed below)
Adjust if necessary: if you realize that you only spend x on misc stuff instead of yz then allocate that money somewhere else.
Also, review your budget month- if not every couple of weeks! I do a mid-month and month-end budget check to see where we are.
Savings - My mantra is to pay God 1st, then yourself. Don't wait to see what you have leftover to save, instead use what you have after you SAVE.
Here are some suggested savings categories. Think of what is non-negotiable (things you will put money to no matter what) and start funding those things first.
EMERGENCY FUND - Life happens. You can lose your job, have huge medical expenses, and so forth- Some people suggest having 3-6 months of income in an emergency fund. [DO WHAT WORKS FOR YOU] but don't neglect to create an emergency fund. Even if it is $500-$1000.
RETIREMENT FUND - (401K, 403b, IRA, Roth IRA, TSP) My suggestion here again is to do what works FOR YOU. Everyone's financial situation is unique. If you're able at the very least put in enough to get your employer match if there is one - it is FREE MONEY)
CHILDREN EDUCATION FUND - Post about different ways to do save, here.
INVESTMENTS - (Mutual funds, Index Funds, Stocks- whatever you PERSONALLY decide to invest your money in. If you don't know where to start, do some research or talk to a financial advisor.)
DEBT PAYOFF - (NON-NEGOTIABLE) Paying off your debt allows you to save more money. The money you would have paid in interest can go to something else, if you make extra debt payments with any extra money you have monthly (even an extra $50 a month) can save you a ton on interest.
SPECIFIC PURCHASES -(If you know you're going to be needing a new car in 6 months, or planning a big party/wedding, vacation, etc. those things should go here.)
SINKING FUND - ( Car maintenance, house repairs, birthdays, holidays, etc.)
Budgeting can be difficult the first few months but if you hang in there it will pay off -- Pun Intended ;)
It takes practice and discipline, but you will be so happy you did this once you begin to see results.
~ HAPPY BUDGETING ~
The MAJOR Financial Move I love to make to reach a huge financial goal: NO SPEND - In 2018 I did a no-spend year, it lasted 7 months…. in 2019 I did various no spend months that were wildly successful as well as some no spend days. I challenge you to do the same!
Here is a downloadable BUDGET SHEET to get you started.
Also in our LUXE Weekly Planner for 2021 there is a budget sheet to keep you on track every month.
