Are you finally ready to get on track with your finances but aren’t quite sure where to start?
Well, stick around to the end of this blog, because today we’re going to take a deep dive on how to budget and how to finally get on track to pay off your credit cards, your student loans, and how to finally start saving to accomplish your financial goals.
The first step in any journey is to see where you are now. In the case of cash flow, that means seeing where your money is being spent every single month. We suggest that you track for three to six months where every dollar has been spent. Whether that’s in a journal, writing down every purchase you make, or in the case that you spend your money from a debit or credit card, you can take a look back in your history for the last few months and see where all your money is being spent every month. Here’s the rule of thumb,
If it’s not monitored, it can’t be managed.
The next step is to manage. The way we do that is with a budget. First, you’re going to want to track your inflows. What money do you have coming in every month? Do you have child support? Do you have a job? Do you have commission income? What can you count on every single month coming in? And then on the other side, you want to be looking at what’s going out every month. How much do you want to be spending on entertainment, dining out, groceries, gas, bills for your home, your mortgage or your rent, or your car payment? You want to look at every single dollar that’s passing through your hands every single month. The point of the budget is to be making sure more money is not going out than is coming in. And then we could start looking at how to save, how to get on track financially, and how to manage our money so we could reach each of our financial goals.
Once you’ve determined that there is excess cash flow, meaning that there is more money coming in than is going out, then you can decide how much you can consistently save on a monthly basis towards meeting your financial objectives.
As a general rule, we suggest you should be saving at least 20% of your income. Now we understand, we’re American, and most Americans are spending 95% to 110% of what they’re bringing in every single month. I mean, think about the competition that’s going on to get in your checkbook every single month. We have TV subscriptions, drink subscriptions, and even subscriptions for dog toys these days. Everyone’s trying to get into our wallets and to add on top of that, the credit card debt that we’ve already accumulated and the thousands of dollars that many of us have in student loans. The competition is fierce to get in our wallets. It’s not an easy thing to regain control of your cash flow and that’s why we spend so much time focusing on that on our blog.
The key is to spend less money than you make. If you’re doing that, then you’re in a position to create some financial security for yourself. But it’s been said in America that people buy things they don’t need with money they don’t have to impress people they don’t know, who in the end don’t care. The bottom line is that once you’ve determined a baseline of how much money you can save, then we can get you to the 20%. The key is eliminating inefficiencies in your current cash flow, and that’s where we can help you.
Speaking of inefficiencies in your current planning, we’ve identified five areas where people are giving up control of their money unknowingly and unnecessarily. Those five areas are:
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- Taxes
- Mortgages
- How they’re funding their retirement
- How they’re paying for their children’s education
- How they’re making major capital purchases.
Speaking of major capital purchases, if you’ve been putting yours on credit cards and you’re looking for the best way to pay off that credit card debt and start saving, check out our latest blog post on how to pay off your credit card in the most efficient manner, how to get on track for saving faster.
Here’s the secret, start saving now and start saving on a consistent basis. No matter how little, put some money away every single paycheck so that you can start your compound interest curve now and never let it stop. When you’re looking for a savings vehicle, you want a vehicle that is going to give you full liquidity, use, and control of your money so that you could have access when you want for what you want without incurring any penalties.
When you’re ready to get started saving, schedule your free strategy session and we’ll be happy to guide you through this journey.
“And remember, it’s not how much money you make, it’s how much money you keep that really matters.”
