Did you know…
- 77 % of Americans say they have financial worries, but only 40% report having any kind of spending plan.
- One in three baby boomers has less than $1,000 saved for retirement.
- The #1 fear of baby boomers is outliving the money they have saved. (Death, by the way, checked in at second place.
- According to an Ernst & Young study, 75% of Americans can expect to see their assets disappear before they die.
(Taken from Tony Robbins’ article “ Taking Steps Toward Financial Freedom”)
Basically…financial education is extremely important, but most of us (if you’re like we were anyway) have no clue where to start.
I don’t know that this will work for everybody, but when we originally created our budget, this is exactly how we did it. Things have changed for us financially because of AdvoCare, so we aren’t as strict as we used to be. However, a lot of this is already engrained in our brain & helped us tremendously early on in our marriage. We are still very conscientious and work hard to be good stewards of what we’ve been given. We always want to live beneath our means and work towards complete debt freedom so we are able to give more. Our goal is to ultimately live on 30% of our income (including saving & investing) and give 70%.
Jonathan & I both know how to use Excel & I recommend that if you do too, but I am a pen and paper kind of gal so I hand write all of this out. Mint.com is another great {free}tool that I highly recommend if you’re just getting started!
1. We began by setting goals. “Without a vision the people will perish.” You have to know where you’re going, WHY you’re doing what you’re doing, why that’s important to you, & when you want to accomplish that. That all has to come BEFORE the “how to” or you’ll eventually fall off the wagon. We prayed about it individually and as a couple, discussed it, and determined exactly what we felt the Lord wants regarding the direction for our finances. We wrote down (for accountability- there is power in WRITING it out) SPECIFIC amounts and a timeline. We have a set $$ amount we want to earn each month, give each month, save each month, invest each month, etc. We wrote a monthly, yearly, 5 year, and 10 year set of goals. It’s so important to create those small, tangible goals with a big picture ‘long view of time’ in mind as well.
2. The next step was to track our income and expenses for 1 whole month. Every.single.dime. If you want to know where you’re going & how to get there, you have to know where you’re starting by taking an honest inventory of your finances. Most people are like we were and spend more than you think you do. I will never forget when we realized Jonathan was spending $100 + a month at the gas station! Be real with yourself about your total income & total expenses. I know some people who really struggle financially but buy tons of soft drinks & lottery tickets, or maybe have on a new outfit every time I see them. The reality is, most people spend everything they earn & don’t even know where their money went. They have no idea how much they’re really spending. Little things like buying your kids candy every time you check out at the grocery store or being late returning a Redbox (SO GUILTY) can add up to surprising amounts over time.
We personally use our one and only credit card for pretty much everything we can and then pay it off in full at the end of the month (for the credit card points- helps out a little bit with travel expenses). But I ONLY recommend that if you can be extremely disciplined & won’t be tempted to overspend. Jonathan & I are both more on the frugal side so that’s not really an issue for us. We wrote down every penny we spent- whether cash, EFT (several of our bills come out automatically), or on the credit card.
3. We set our budget up into categories based on our spending.
These are the non-negotiables we spend money on every month. You may have to add or take our a category (ex: cable, prescriptions, medical bill, Netflix, pet food/meds, etc.)
- tithes (this is the very FIRST thing that comes out when we get paid)
- mortgage (includes escrow, taxes, & insurance)
- health insurance premium
- car insurance
- life insurance
- water
- electric
- gas bill
- gasoline
- groceries
- eating out
- internet
- gym membership
- phones (we are both still on our parents’ plan because it’s cheaper, so we just pay them once a year for the total)
- AdvoCare products
- diapers/wipes (we buy at Costco to save money/unit)
- savings/investments
- lawn service
- pest service
- travel
- IRA contributions
- date night
- other
We also have a category that differs depending on each month, but we do have a place for it in our budget.
- books
- entertainment
- clothes
- toiletries (all from Costco)
- hair cuts/highlights for me (I get my hair done every 3 months & budget $60)
If there is something we know comes up each year, we go ahead and write it out in that month’s budget. Here are a few examples.
- Christmas
- birthdays
- gifts (wedding, showers, birthdays, etc.)
- anniversary
- tag renewal
- taxes (we have an AWESOME accountant and will never skimp on that service)
- oil change
- new tires
- car repairs/home improvement
- dental cleanings
4. We went back in the the previous 6 months to determine averages in each of those categories. For example, obviously some months the gas bill is higher than other months. Discover has an awesome spend analyzer that breaks it down really well for you too.
5. We made sure we were spending less than we were bringing in and looked for places in the budget we could cut. For example, cutting cable saved us nearly $1200 a year. We also stopped going out to the movies & started watching Redbox at home. That saved over $600/year. We started buying Zaycon chicken and that saved big time on our grocery bill. We no longer stop at the gas station (except for gas, obviously, and even then we use our Kroger Fuel points to save) or eat fast food. We buy in bulk at Costco to save money on things like diapers, toilet paper, soap, detergent, & paper towels. Say it with me now… “Live beneath your means.” I remember growing up hearing my mom use the phrase “They have steak taste & hamburger money.” So true for so many Americans, thus the debt issue crippling most families today. We live by a pretty simple strategy….If you can’t pay cash for it, you don’t need it.
6. Savings are crucial, but so is investing. So we came up with a plan for both by reading several books & studying what financial experts have to say on the issue. By savings, I specifically mean a 6 month emergency fund. On top of that & contributing to a retirement plan (we have both a traditional and ROTH IRA), you want to invest. Make your money work for you!
7. If you can’t afford to do these things, you want to increase your income. Based on everything we have read from financial experts, the BEST way to increase your income is to start an in-home business. I am personally a huge advocate for moms having the opportunity to be home with their babies, so this is where the entrepreneurship kicks in. Pray about what you can do on a part-time basis from home to bring in additional income. Proverbs 31 even discusses a woman contributing to her household in this way, but not at the cost of managing the home taking a back seat. That is always priority. Both Jonathan and I believe it is ultimately part of the husband’s role to be the provider, so this has just been a way for us to work together toward a common goal for our family. That has strengthened our marriage even more.
Because time was an issue for us, we preferred a ready-to- go biz with no monthly minimums, quotas, autoships, etc., minimal initial investment, and zero overhead.
8. Continue to monitor your results, track your progress, & make adjustments based on your family’s needs & changes income/expenses. This is not a one-time and done type deal. We look at it every month to make sure we know ahead of time where our money is going, & every few months we sit down more at length to really discuss where we are and our progress towards our goals. Sometimes we are missing the mark. Sometimes we make more money and determine where we want to give or invest.
9. Educate yourself. If you’re looking for a starting place, my top four favorites are:
- Rich Dad, Poor Dad
- Think and Grow Rich
- The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness
- The Top 10 Distinctions Between Millionaires and the Middle Class
**Also, here are a few things we choose not to take the “cheap” route on:
- food – real food, quality & organic is important to us. You can’t put a price tag on great nutrition & the PROVEN benefits.
- supplements (although we do get a 40% discount on world’s finest nutritional products, so that’s only a half truth I guess)
- hair products (uhhhh, not to sound gross, but I only wash my hair a few times a week so they last me forever)
- shoes (I’ve said it forever, but taking care of your feet helps your entire body. we avoid cheap-o flats, flip flops, & tennis shoes)
- our accountant. SO worth every penny!
Hope that helps! Anything else you do that I’m missing??
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