How To Trim Your Budget

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With the new year in full swing, people are doing their best to stick to the freshly made New Year’s Resolution’s they mapped out for themselves.  The most common resolution always seems to be losing weight.  Instead of going with the status quo resolution this year, why not try to trim something else?  Your budget perhaps?




How to cut my expenses? Is a question often asked by many in order to free up funds in their daily lives.  Maybe they are living paycheck to paycheck, maybe they are trying to save up money for a special purchase, either way trimming your budget is the best way to go about doing this.

For starters, you need to have a budget.  You can download a free budget template and simply put in your income and expenses.  The best part about budgeting is you get to see where your hard-earned money is going every month.  Perhaps you are spending a large portion on eating out, can you bring your lunch instead of going out to eat?  If so, you might be able to not only cut some expenses but trim your waistline also.

The free downloadable budget allows you to choose the expense categories you have for a given month.  Say for example you spend $100 a month on your cellphone bill, can you change service providers and possibly get the monthly expense down to $80 per month?  If so, you have freed up $20 per month or $240 for the entire year.  Can you trim $10 a month off your grocery bill by purchasing generic products versus name brand?  This can be an additional $120 in savings for the year.  Attempting to save as little as $10 to $20 per category for a few of your monthly expenses can add up to some awesome end of the year savings.

Below is a quick easy way to trim your budget:

  • Create a budget: If you don’t already have one, now is the best time to start budgeting. This will determine where you are spending your money every month.
  • Track all of your expenses: See just how much you are spending in the various categories every month. Some may surprise you.
  • Pick 2-4 categories: By selecting a few categories where you think you can cut some expenses you will maximize your yearly savings.
  • See how much you can cut: It can be $5, $10, $20 or maybe even more per category per month. Living on a little less each month won’t change your quality of life for the worse.  Instead, you can use the money saved to enhance it by saving up for a vacation or a future purchase.
  • Don’t incur new expenses: While trimming your budget to save up money is the ultimate goal, don’t incur new expenses during the process. A car payment or a gym membership will quickly eat away at the money you are trying to save.

Stick to it: Trimming your budget will only be beneficial to your wallet if you stick to it.  Developing discipline for sticking to a budget can be tough but also very rewarding.

 

Book Review: The Surprise Millionaires

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I recently finished ready The Surprise Millionaires by Keith McDowell.  A great read indeed.  It is packed with amazing stories of ordinary people who passed along extraordinary wealth.  Keith did a wonderful job of including stories from all over the country that date back to the beginning of the 20th century.  You can purchase the Kindle version of the book for just 99 cents!  You can also follow his blog here: https://thesurprisemillionaires.com/

Here are my 3 main takeaways from his book:

  1. No matter your income level, everyone and I repeat everyone has the opportunity to create wealth over $1,000,000.
  2. Most if not all of these individuals valued relationships over possessions and money.  It was who they could impact with their wealth that was much more important than the amount of earthly items they could collect.
  3. Every single one of the stories ends with a person(s) creating a lasting legacy in their community.  When your time on earth is finished what do you want to be remembered for?  I’m sure the people in these stories asked themselves this question, and the legacies they created was beyond comprehension.

Budget Smart, Invest Wise

The Benefits of a Budget

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Budgeting is an essential part to taking control of one’s financial life.  You would be surprised to know that nearly two out of every three Americans do not budget their income.

With today’s technology, it is now easier than ever to track your income and spending.  Personally, I use Google Sheets to budget.  I have the ability to access my budget on any computer with internet access along with my smartphone.  Another great way to budget is through Mint.com.  Signing up is free, and they have an app so you can update your budget on the go.

Now that you can see just how easy it is to start your budget, I will quickly lay out why you want to budget and the benefits.

  1. You know how much you make:  Ask someone how much take home income they have in a given month, you would be surprised the number of people who can’t give you a specific dollar amount.  Knowing how much you make is vital to determining how much you can save and spend.
  2. Plan Purchases:  Saving up for a vacation?  By budgeting you will be able to determine how much you need to set aside each month so you and your family can enjoy a getaway.
  3. Eliminating Debt:  This can have a two fold benefit.  Firstly, if you know how much you make, then you know how much you are able to spend, thus you can avoid spending more than you make.  Secondly, budgeting can help you set aside income every month to tackle debt, be it student loans, a car note, etc.
  4. Enjoying your money:  Budgeting allows you to feel confident about your spending habits.  It allows you to plan for purchases and should limit financial stress on your life by worry about how you are going to pay for something.

This is not a comprehensive list of the benefits, but a few of the major ones.  If you are curious of the benefits you can receive from budgeting then give it a shot if you haven’t already.

 

Budget Smart, Invest Wise

Ending the Financial Year with a Bang

2015 has come to a close and with that, the end of another year of budgeting and saving.  I have many proud financial moments for this past year.  The main one being paying off my student loans.  I had ten years to pay them back, but I was determined to be free from them as soon as I could.  I budgeted and was able to pay them off in just 2.5 years.

What was your biggest financial accomplishment of 2015?

When it comes to 2016, I have a couple main financial resolutions I hope to achieve.  The first being to pay off the remainder of my car loan.  I owe less than $5,000 remaining, so this should be an easy task.  My next goal is to have a net worth of six figures before my 27th birthday (My birthday is in March, so this doesn’t leave me much time).

What are your financial resolutions for 2016?

Today and tomorrow are good times to sit back and reflect on what went well and what didn’t go well with your 2015 finances.  You can then figure out what changes need to be made to create a wonderful 2016 financial year.  It all starts with budgeting, so if you haven’t already downloaded an Excel sheet then do it now.

Monthly Budget Example

 

Budget Smart, Invest Wise

 

Having a Portable Budget

A number of months ago I made a switch.  I used to keep track of my budget using a Microsoft Excel spreadsheet that was saved to my computer.  It was easy for all intensive purposes except that I could only do updates on the computer I saved my budget on.  So I made a switch.




Now I use Google’s Spreadsheet for all of my budget updating.  Here are 3 reasons why.

  1. I can update my budget from any computer where internet is available.  No need to ever save it as it is done automatically.  Whether it is my work computer or personal computer it doesn’t matter.
  2. You can make budget updates with your PHONE!  This is probably the best part about using the Google platform for your budget.  Just simply download the app, login to your Google account and you are ready to make budget updates on the go.
  3. Your budget will never crash.  Computer’s can crash, but having a budget on Google Spreadsheets makes it virtually uncrashable.  As long as you have access to internet you can have access to your budget and unless you decide to wipe it out (which again can still be undone) it is always accessible.

There are numerous advantages to having a portable budget.  The first key is to have a budget, but if you are going to have one do it right the first time and use Google Spreadsheets.

For more on this topic, consider reading my articles on:

The Pieces of the Financial Puzzle

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Achieving true financial wealth is no easy task.  Firstly, you have to generate an income.  Secondly, you have to have expenses that are less than the income you generated.  Finally, you have to take the difference remaining and invest it wisely.  These three things are what I consider to be the pieces to the financial puzzle.  I will illustrate how all three pieces are essential to creating a financial future you will be proud of.

Piece 1: Income

For the majority of us, this is generated from our job.  We trade our hours for money.  The best part about this piece is that there is no limit to how high your income can be.  Additionally there are many ways to generate income.  Getting an extra job part time on the weekends is an option.  Unfortunately, there are only so many hours one can trade for money.  This is where you must get creative.  Making more money each hour is one way to generate more income.  There is also residual income and ways to generate passive income one can do to expand upon this number.  Get creative and don’t limit yourself.

Piece 2: Expenses

Keeping expenses low is similar to a good defense.  Limiting expenses in various categories not only holds you accountable for your money, but it also can allow you to achieve certain financial goals faster.  Budgeting is the easiest way to monitor your expenses.  See what categories are holding you back, look at ways to reduce or eliminate them.  Gym membership you’re not using but still paying for?  Have you renegotiated your cable bill recently?  Much like the income piece of the puzzle, a little creativity in your expense category can go a long way.

Piece 3: Investing Wisely

You make money, you spend money.  Hopefully, the difference between these numbers isn’t negative.  If it is, you’re digging yourself into debt.  If the amount is positive then saving the remainder is often advised, but how you save that money is more important than the actual act of saving.  Placing savings into a low interest savings or checking account is a good way to devalue your money quite fast.  The U.S. economy has an inflation rate that is around 3% per year.  This means you need to invest the difference wisely, and that means in an investment vehicle that yields returns greater than 3% per year.  Vanguard can make this investment strategy easy.  Simply open a fund, pick an asset mix suitable to your risk tolerance and let the money compound over many years.  Of course, it is always advisable to have an emergency fund on hand where you won’t need to dip into retirement or other investments.

When reviewing your financial past, your financial present, and your financial future, all three of these pieces are essential.  Generate income, have expenses that are less than that income, and invest the difference wisely.

Budget Smart, Invest Wise

January 2015 Budget Review

The month of January was an exciting one.  I switched jobs and left the corporate world.  Because of unused vacation days, my income for the month of January was quite high.  This allowed me to put extra money towards my student loans.

I did incur some extra costs that I typically didn’t have.  As of now, I have elected COBRA continuation health coverage.  It is quite expensive and ate up more of my income than I had initially planned but no worries.  Life insurance is another category that I have to take on now as well.

After I had met all of my expenses for the month of January, I had a remaining $45.22 balance.  This amount I used to make an extra payment on my student loans.  My income for the month of February will most likely not be as high as it was for the month of January.  This means that the amount I have to spend and use to pay down debt will be less.  Every dollar, every penny is accounted for.  Take a look at an in-depth review of my January 2015 budget.  There is no perfect science to budgeting your income and expenses.  Everyone has their own way they like to do it.  The purpose is to hold yourself financially responsible and take steps towards your financial well-being.

Earned Income (After-Tax) $5430.94
Mortgage ($660.00)
Rent/Utilities/Cable ($528.99)
Car Payment ($300.00)
Car Insurance/Cell phone ($121.46)
Gas ($69.68)
Groceries ($100.00)
Eating Out ($142.54)
Roth IRA Contribution ($300.00)
Miscellaneous Expenses ($321.82)
Student Loans ($2545.22)
Life Insurance ($33.98)
Health Insurance ($307.25)
Final Amount $0.00

Budget Smart, Invest Wise

Paying Yourself First

“Pay yourself first”

It is a phrase many of us have heard when it comes to managing our money and investing.  I often post on Quora and see people ask, “What should I invest in?” or “What does it mean to invest in myself?”  These are great questions, as many young people especially do not have the right answer.

Ways you can pay yourself first…

Contribute to an employer 401k and get the full company match. This has a two-fold purpose.  Firstly, you are never seeing the money that is taken out so you will not miss it.  Secondly, your employer match is FREE money and the easiest way to boost your return.

Establish a Roth IRA.  Most individuals are eligible to contribute to a Roth IRA.  If you are unsure, go to Roth IRA and see if you meet the criteria.  Even a small amount of $100 a month automatically withdrawn from your checking account is a great way to add an additional retirement vehicle for the future.

Read Books.  Lately I have been ordering books on Kindle like a mad man.  Many of the books I read are financial related and leverage others’ experiences.  The Millionaire Next Door by Thomas J. Stanley is one I highly recommend.  Austin Netzley’s Make Money, Live Wealthy is another great book that offers wonderful insight into his personal journey of wealth creation.  Austin does a great job of connecting with successful entrepreneurs and innovators throughout his book and illustrates their journey to success.

Your Health.  Investing in yourself isn’t just about money; it is also about being able to enjoy the life you live so that one day you can reap the rewards of all the hard work you have put in.  Start exercising if you don’t already.  They key is starting small.  Do the elliptical for 15 minutes 3 days a week.  Then bump it up to four.  Replace a candy bar with a piece of fruit.  You get the picture.  Investing in your health should be the first one listed in this post, but like many of us it often times is the last thing we think about.

There are many other ways that you can pay yourself first.  Vacations, nice meals out, etc.  When it comes to your finances and personal development, YOU are in control.  Don’t just talk about these things, put them into action and set yourself up for greater success.

Budget Smart, Invest Wise 

How to Save a Quick $250 in Your Yearly Budget

How to Save a Quick $250 in Your Yearly Budget

In theory, budgeting should be pretty simple.  You make money, you spend money.  Sometimes you make more than you spend (Good budgeting!), and other times you spend more than you make (Digging yourself into debt).  Once you have downloaded the free budget spreadsheet: Monthly budget example.




For some budgeting income is pretty simple, it used to be for me.  I was a full-time salaried employee who made the same amount each month.  For others budgeting income is not all that simple.  If you are in a commissioned sales role, your money could fluctuate every month.  Not having a guaranteed income every month means that you have a further responsibility to budget your income correctly.

Budgeting expenses can be tricky in certain instances as well.  Some expenses will stay the same every month: rent, mortgage, cellphone.  While others will fluctuate depending on the time of year: utilities, gas, travel.  Although these “fluctuating” expenses can be hard to determine, in the big picture of things your monthly expenditures SHOULD (and for your financial sake NEED) to be less than your monthly income generated.

So how did I save a quick $250 a year in the expense portion of my budget?

All I did was… Shop around for automobile insurance.  This doesn’t sound fancy at all, but having an extra $20 a month freed up in my budget was something to get excited about.  Say you’ve been with the same car insurer since you first started driving; chances are you have a discount for that.  However, calling other insurance companies to get free quotes is not only easy, but it is a simple way to cut your expenses.  I was with the same car insurer since I turned 16.  I thought I was getting a great deal all along.  However, when I called a few other insurers, I found a much cheaper rate.  So cheap in fact, that it allowed me to save over $250 a year just on my car insurance (FYI, USAA has the best insurance rates and customer service).  That savings freed up an additional $20 a month in my budgeted expenses.  I could use that extra $20 any way I like.

You can save with almost every expense you have.  Whether it is renegotiating your cable bill, or shopping around for car insurance.  Find one expense category in your budget where you can chop out a little change.  The extra money can be used to pay off debt, go into savings, or fund a weekend getaway.  When it comes to budgeting, your expenses are half of the battle.  Lowering your monthly expenses is a great way to make your income go further.

Budget Smart, Invest Wise

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