Complete a Budget & Stick to it!
Your ability to create, manage and stay on track with your budget is one of the most important elements of our program(s). Therefore, we focus a good deal of time on this topic.
In order to improve your financial position you have to be disciplined with your income and expenditures. Shrink your expenditures down to only what you need to survive and/or sustain basic living needs. If you do not have enough income to sustain your most basic needs, then you have to increase your income. If you have enough income to sustain your most basic needs but not enough to spend on non-essential expenditures, then you have to find a way to increase your income. (ask us)
In order to improve your financial position you have to be disciplined with your income and expenditures. Shrink your expenditures down to only what you need to survive and/or sustain basic living needs. If you do not have enough income to sustain your most basic needs, then you have to increase your income. If you have enough income to sustain your most basic needs but not enough to spend on non-essential expenditures, then you have to find a way to increase your income. (ask us)
If you figure out how to increase your income then you have to budget that extra income into reserves and a separate savings accounts and then implement the reward-expenditure goal system.
If you don't change your spending habits you will continue to struggle paying your bills on time and/or continue to experience financial hardship and unnecessary financial stress.
By identifying and separating your essential and non-essential expenditures and then modifying or adjusting your spending behavior you end up delaying the gratification of those non-essential expenditures.
This allows you to create the differential you need to build a reserve and ultimately a Savings Investment Account (SIA). We will look at how and when to setup your SIA after you've successfully mastered the basics of operating from a budget.
If you don't change your spending habits you will continue to struggle paying your bills on time and/or continue to experience financial hardship and unnecessary financial stress.
By identifying and separating your essential and non-essential expenditures and then modifying or adjusting your spending behavior you end up delaying the gratification of those non-essential expenditures.
This allows you to create the differential you need to build a reserve and ultimately a Savings Investment Account (SIA). We will look at how and when to setup your SIA after you've successfully mastered the basics of operating from a budget.
Frequency Matters
The frequency at which you look at your budget is as critical as the budget itself. If you only look at your spending behavior every 3 or 4 weeks or worse...every 3 or 4 months, it will be difficult to really manage your money effectively. We recommend that you review your budget every time you get paid and/or every time you make large payments. More is better. The more you can setup and get comfortable with operating your household on a budget the better.
The Differential
The reality is most families have to work hard just to make ends meet. Finding money to save may seem difficult at first.
Getting ahead often seems like a distant dream, and we understand this. Our objective is to help you identify what we call your “DIFFERENTIAL”. The differential is the difference between your income and your expenses.
The key to achieving this differential is based upon being aware of what you spend and where is your income going.
The frequency at which you look at your budget is as critical as the budget itself. If you only look at your spending behavior every 3 or 4 weeks or worse...every 3 or 4 months, it will be difficult to really manage your money effectively. We recommend that you review your budget every time you get paid and/or every time you make large payments. More is better. The more you can setup and get comfortable with operating your household on a budget the better.
The Differential
The reality is most families have to work hard just to make ends meet. Finding money to save may seem difficult at first.
Getting ahead often seems like a distant dream, and we understand this. Our objective is to help you identify what we call your “DIFFERENTIAL”. The differential is the difference between your income and your expenses.
The key to achieving this differential is based upon being aware of what you spend and where is your income going.
Are You Uncle Sam's Best Friend?
Many people are thrilled at the dawn of every year when they do their taxes and find that they are due a big refund. While the idea of getting a big check from the government is understandably attractive, a big refund simply means that you have been loaning money to the government, interest free, for the past 12 months. While this is certainly a good deal for the U.S. Treasury, it is not such a good deal for you. You could increase your net bring-home-pay by adjusting your withholdings to even things out. This change in withholding will typically result in more take home pay - and a smaller refund the following year. This strategy produces additional monthly income "found money" in your paycheck. This new found money was there all along, it was just going to the government before. Now, for the next year your monthly differential can be "RE-ALLOCATED" into savings that you can leverage. You will have stopped lending interest free money to the government and increase pay to yourself instead.
Many people are thrilled at the dawn of every year when they do their taxes and find that they are due a big refund. While the idea of getting a big check from the government is understandably attractive, a big refund simply means that you have been loaning money to the government, interest free, for the past 12 months. While this is certainly a good deal for the U.S. Treasury, it is not such a good deal for you. You could increase your net bring-home-pay by adjusting your withholdings to even things out. This change in withholding will typically result in more take home pay - and a smaller refund the following year. This strategy produces additional monthly income "found money" in your paycheck. This new found money was there all along, it was just going to the government before. Now, for the next year your monthly differential can be "RE-ALLOCATED" into savings that you can leverage. You will have stopped lending interest free money to the government and increase pay to yourself instead.
Make Your Savings Automatic
The above strategy works so well because it is automatic - the "extra" funds recovered through the change in withholding is automatically directed to an account that is NOT touched by you or your family [EVER]. It never reaches your hands, and therefore the temptation to spend is eliminated. Whether the money comes from "found-money" or money from additional pay, or selling something that you don't need, you must find a way to put that money into a savings account that you only go to for "leveraging" purposes.
The above strategy works so well because it is automatic - the "extra" funds recovered through the change in withholding is automatically directed to an account that is NOT touched by you or your family [EVER]. It never reaches your hands, and therefore the temptation to spend is eliminated. Whether the money comes from "found-money" or money from additional pay, or selling something that you don't need, you must find a way to put that money into a savings account that you only go to for "leveraging" purposes.
Dealing with Unnecessary Expenditures
The typical family can often let their everyday life get so busy that they tend to "buy" impulsively. An impulsive buyer is one who completes purchases and gives little or no thought to the significance of the purchase as far as how it truly impacts a “budget” (assuming you have one). It may be that you see an item marked "On Sale" and buy it when you don't even need it, or you overpay for what you do need just to have it “NOW”.
Or perhaps you have used so much of your hard-earned money buying things you want, that you don’t have enough left over for things you really need. A family that develops this type of spending pattern is less likely to save money. This family lives from paycheck to paycheck and often times that paycheck does not stretch far enough, soon becoming a case of "borrowing from Peter to pay Paul".
For such a family, even if there is a burning desire to get-ahead with your finances, it simply seems out of reach. The purpose of going on a budget is to help you understand your own spending habits by giving you guidance - and the tools necessary – to help you save money that will ultimately be leveraged to improve your long-term financial picture.
The typical family can often let their everyday life get so busy that they tend to "buy" impulsively. An impulsive buyer is one who completes purchases and gives little or no thought to the significance of the purchase as far as how it truly impacts a “budget” (assuming you have one). It may be that you see an item marked "On Sale" and buy it when you don't even need it, or you overpay for what you do need just to have it “NOW”.
Or perhaps you have used so much of your hard-earned money buying things you want, that you don’t have enough left over for things you really need. A family that develops this type of spending pattern is less likely to save money. This family lives from paycheck to paycheck and often times that paycheck does not stretch far enough, soon becoming a case of "borrowing from Peter to pay Paul".
For such a family, even if there is a burning desire to get-ahead with your finances, it simply seems out of reach. The purpose of going on a budget is to help you understand your own spending habits by giving you guidance - and the tools necessary – to help you save money that will ultimately be leveraged to improve your long-term financial picture.
Keys to successful budgeting:
Common Myths About Saving Money
Saving money is trendy these days, but there's a lot of misinformation flying around about the best way to do it. Even worse, too many people believe these seven common myths. Which one is stopping you from saving money?
1. Saving money takes a long time.
Sure, saving for a new house or car can take months or years. However, there are probably a lot of other things you don't buy on a regular basis because they seem too "frivolous." How long would it take you to save up for a massage, a meal in a nicer restaurant, or a pair of shoes that cost twice as much as your normal shoes? Saving money can take weeks or mere days, depending on the price tag and the time you're willing to invest.
2. Saving money only makes sense if you have something specific to buy.
Can you predict when a co-worker will offer you half-price tickets to a Caribbean cruise, your new romantic interest will ask you to sign up for skydiving lessons together, or your favorite band will play a pricey benefit concert? How about predicting when your car will break down, your aging parent will need a hospital visit, or your water pipes will burst? Saving money lets you take advantage of once-in-a-lifetime opportunities and/or take sudden emergencies in stride.
3. Saving money is impossible if your family isn't on board.
Is there anything more infuriating than learning that your spouse just blew through your joint savings account? How about when your kids plead to go out for pizza after you've explained that you can't afford it until the credit card is paid off? Granted, it's easier to save when your whole family is on board. However, if they're not, then set up a private savings account, deposit your monthly savings before you contribute to household bills, and cheerfully encourage your kids to get part-time jobs.
4. Saving money means you can only spend on the basics.
Do you remember the food pyramid in health class, with the boring nutritious food groups at the base and the yummy no-no foods at the bottom? News flash: there's no universal spending pyramid. Most people spend money on basics like food, rent, and transportation, but that's an average, not a rule. If you want to rent a cheap room in a run-down neighborhood so you can afford designer clothing, go for it. Saving money means honoring your own priorities.
5. Saving money means learning about IRAs, 401Ks, and CDs.
Do you need to learn how to use an elliptical training machine before you can go for a jog around the block? Do you need to get a degree in graphic design before printing out garage sale flyers? Of course not. Likewise, you don't need to have an elaborate financial plan or spend hours researching complicated investing strategies. Saving money can be as simple as emptying your change purse into a jar every evening.
6. Saving money is only possible if you're organized.
If you think you have to track your purchases, divide your cash flow into categories and create animated color-coded charts before you can save money, think again. Plenty of online tools will do the organization for you.
7. Saving money means lowering your standard of living.
If you punish yourself by lowering your standard of living every time you want to save money, you'll hardly feel motivated to save. Saving money means finding smart ways to maintain your standard of living while putting money aside at the same time.
- All income generating decision makers should be involved when it comes to setting up a budget and determining how money will be spent.
- You must decide who will take the lead on paying the bills and maintaining the budget. If there are two of you, one must take lead and the other participate. Make it a team-thing that you come together on.
- Use the worksheet as a tool to help you identify where your money is going.
- Develop your own spending plan-suited to your family’s income, needs, and goals. Don’t try to follow others.
- Don't throw away money on things you don’t absolutely need.
- Only spend money on the highest priority expenditures.
- Plan ahead for at least six months, preferably one full year. This is the only way to see a true picture of where you are going and how well you are following your financial plan. And make the commitment to avoid impulsive spending!
- Be sure to include all of your income and all your expenses in your worksheet, and always plan according to the actual income you have and not what you expect it to be.
- Keep good records but make the procedure as simple as possible.
- It is important to understand that our proposed saving system is our method of conditioning you to save and manage your money effectively. This conditioning behavior should be made part of your everyday thinking. By using this system of saving money, you can build reserves for things like; future vacations with your family, future maintenance expenses for your home and vehicle(s), unanticipated situations like loss of employment, sickness, etc., and ultimately for leveraging into income generating investments.
- In the beginning you may find it difficult to stick to a budget, but Don’t Give Up!! Stay with it. You will succeed if you are determined. Review your plan once a month. Analyze expenditures and alter the plan if you feel adjustments would improve the workability of your budget.
- If you run into money trouble proper budgeting becomes even more critical and can mean the difference between keeping or losing your home, vehicle or assets.
Common Myths About Saving Money
Saving money is trendy these days, but there's a lot of misinformation flying around about the best way to do it. Even worse, too many people believe these seven common myths. Which one is stopping you from saving money?
1. Saving money takes a long time.
Sure, saving for a new house or car can take months or years. However, there are probably a lot of other things you don't buy on a regular basis because they seem too "frivolous." How long would it take you to save up for a massage, a meal in a nicer restaurant, or a pair of shoes that cost twice as much as your normal shoes? Saving money can take weeks or mere days, depending on the price tag and the time you're willing to invest.
2. Saving money only makes sense if you have something specific to buy.
Can you predict when a co-worker will offer you half-price tickets to a Caribbean cruise, your new romantic interest will ask you to sign up for skydiving lessons together, or your favorite band will play a pricey benefit concert? How about predicting when your car will break down, your aging parent will need a hospital visit, or your water pipes will burst? Saving money lets you take advantage of once-in-a-lifetime opportunities and/or take sudden emergencies in stride.
3. Saving money is impossible if your family isn't on board.
Is there anything more infuriating than learning that your spouse just blew through your joint savings account? How about when your kids plead to go out for pizza after you've explained that you can't afford it until the credit card is paid off? Granted, it's easier to save when your whole family is on board. However, if they're not, then set up a private savings account, deposit your monthly savings before you contribute to household bills, and cheerfully encourage your kids to get part-time jobs.
4. Saving money means you can only spend on the basics.
Do you remember the food pyramid in health class, with the boring nutritious food groups at the base and the yummy no-no foods at the bottom? News flash: there's no universal spending pyramid. Most people spend money on basics like food, rent, and transportation, but that's an average, not a rule. If you want to rent a cheap room in a run-down neighborhood so you can afford designer clothing, go for it. Saving money means honoring your own priorities.
5. Saving money means learning about IRAs, 401Ks, and CDs.
Do you need to learn how to use an elliptical training machine before you can go for a jog around the block? Do you need to get a degree in graphic design before printing out garage sale flyers? Of course not. Likewise, you don't need to have an elaborate financial plan or spend hours researching complicated investing strategies. Saving money can be as simple as emptying your change purse into a jar every evening.
6. Saving money is only possible if you're organized.
If you think you have to track your purchases, divide your cash flow into categories and create animated color-coded charts before you can save money, think again. Plenty of online tools will do the organization for you.
7. Saving money means lowering your standard of living.
If you punish yourself by lowering your standard of living every time you want to save money, you'll hardly feel motivated to save. Saving money means finding smart ways to maintain your standard of living while putting money aside at the same time.