Thursday, February 6, 2020

How to Be Smart with Money

Personal finances. One of the most important aspects of our lives yet we don't want to talk about it. From all of the data and information that I've seen, I would say at least 75% of American adults are in debt or owe some kind of money. What? Is this how we want to live? We should and can do better.

I think part of the problem is that we aren't educated enough. In school, I remember learning how to balance a checkbook, but...um...what good does that do me in 2020? I don't remember learning about investments, taxes, mortgages, contributions, etc...you know, the real-life things. So it's something we just try to wing and we end up being in over our heads... yet I don't think that's an excuse. Managing your money isn't something you can ever get away from...so why not take some responsibility for our own education and do all that we can to be in a really good place? I remember the first time I wanted to take control of my finances. I was in college making $10/hour at my part-time job and super naive but I started with this book and I've kind of stayed conscious of what I learned ever since. Take accountability for your own education and personal development (across this subject and so many others)!

I wanted to allude to financial wellness in my post about solid marriage because your family finances need to be a prevalent part of your household management. But I decided to keep it separate as another pillar I champion...because you don't have to be married or in a relationship to be financially well. And guess what? You don't have to be wealthy either!

So where to begin? First things first.

The B Word.

Budget, budget, budget. I can't say it enough! I never had a real one until I was married but it's been pivotal in navigating our finances as a couple. Consistency is key. There have been months that we have been "off" or skipped the budget (like this past January!)...and our spending was out of whack and our checking account reflected it. I'm at the point now that not having a budget causes me more stress than having it in place and following it. The joys of adulthood. ;)

One of the apps we love is Mint by Intuit. It's so easy to link all of your accounts and have them all in one central place for management (checking, savings, credit, loans, assets, bills...literally everything!). It provides a lot of valuable information like your net worth, credit score, spending graphs, income graphs, and notifications if something is out of your ordinary. We track every single transaction, assign them categories, analyze our trends, set goals, and modify our budgets on an as-needed basis. My husband also likes the Every Dollar app.

Why?

It's really important to use since our income isn't salaried and since our work is contract-based with variable rates. I've heard people say that it's hard to budget when you get paid by the hour and the income amount is inconsistent. There are a few ways around that. You can estimate your monthly income, you can go by the previous month's income, or you can take an average of several months' income. So all I'm saying here is that hourly or contractual pay is no excuse to not have a budget. But even if your income is salaried or consistent, it's still important to plan, plan, plan!

How?

We have a variable budget that we adjust each month based on projected income and spending and decide where we want to put our "extra" money left over after all appropriate categories have been assigned their amounts. Examples of these categories include restaurants, coffee shops, entertainment, groceries, restaurants, gifts, tithes, wellness, home supplies, and shopping.

As of this year, we track and project our fixed expenses and investments. I built a spreadsheet table with automatic sums and category filters. (You can reach out to me via the e-mail in my sidebar if you want a sample template.) This helps us to see the "big picture" and also zoom in on the small parts. Examples include insurance policies, phone plan, and IRA contributions. These are the expenses that stay the same every single month. It helps us to eliminate unnecessary and wasteful costs where we can. We have already cut out over $1000 of  "fixed expenses" in 2020 by emptying out our storage unit in Seattle and ending use of our post office box. This is also a place to include subscriptions. The way I set up the spreadsheet, you can automatically see the math of what any single subscription will cost you for a total year.

At this point, the only subscription we pay for is Amazon Prime. For the moment we have Disney Plus but only because it's free through Verizon...so it's on my calendar to cancel before we start paying for it. See, it's important to note here: Unused and wasteful subscriptions will get you every time! It's important to see them all in one place and evaluate if they're a true necessity or just a budget blower or silly use of your dollars.

What does it boil down to?

It's really not rocket science. The most important thing is to have a plan in place and have everyone be on the same page in your family. It is also important to learn to live beneath your means. It will never stop blowing my mind how much money people will spend to make others think they have money. Sounds counterproductive, right? The wealthiest people I know are some of the most frugal people I know. If you don't believe me, well, one of the richest men I have ever known would only purchase airline tickets in coach if that shows you anything. Just because you have it doesn't mean you have to spend it.

It's become a game to me now of how much I can save, and I really enjoy it in a nerdy type of way. The advantage is that when I do WANT to shop, I CAN! I don't have to feel guilty for spending or wonder if I can afford it. I don't have to hide any kind of spending from my husband because it's just built into the budget. If we're under on shopping for the month, and one of us wants to buy some new clothing or outdoor gear? We shop. We don't deprive ourselves. We just manage and spend wisely. We stay aware and intentional of where our earned dollars go, that's all. As a side note: when shopping online, always go for the cheapest shipping! I've really tried to be more conscientious of added fees and costs and eliminating them from my purchases when I can. It adds up to make a difference, and in most cases, you can go a few days longer without the ordered product. :) 



What about the D Word?

Debt. I know this can be a sensitive subject, and I know that it takes on so many different meanings across an expansive spectrum. But like I've said repeatedly, the least that you can do is have a plan in place. You don't want to spend the rest of your days owing others, living check to check, or putting your credit cards deeper and deeper in the red.

Thankfully last year we worked really hard at paying off all of our loans except our only vehicle. Since then we have been able to strive toward more of our savings goal and are finally getting close to where we want to be. I will say that when your spending outweighs what you put toward debt, you will feel like you are spinning on a hamster wheel. No ending in sight. At some point, you have to stop and make a better plan if you want to get in the green. Get some control over yourself. Be an adult and reign yourself in. I said earlier that I think part of the problem is lack of education. I think another part is that we are just lazy and lack accountability and ownership of our lives.

It does take discipline but it's not impossible and you don't even have to deprive yourself if you're methodical about it. Just maybe cut back on your $5 coffee habit. :) You're not alone. I had a bad one. Now I buy this coffee and this creamer and it's so delicious to me that I crave it over sugary, expensive alternatives. (Side note: I can't wait to go back to this creamer after my W30 is over! Hahaha the nut pods are saving my coffee this month, but they just don't measure up.) Way more efficient for the budget, and I don't even have to leave my house.

The point? You work hard for your money so be smart with it!

Like I said at the start, too many Americans are living in debt, and I think that it has become too normalized. We've got to stop being OK with it. Hear this: I know that things can happen and we all have unexpected setbacks. We all have hard times. I get that. I just don't think it should ever be a permanent strategy or an acceptable way of life long-term. The bumps and blocks can hurt a little less when you have a game plan in place.

For what it's worth, I am not 100% on the Dave Ramsey train. We fly too much to not be earning Sky Miles for purchases (and it doesn't make sense to live where we do right now and not have a Mileage Plan card as Alaska Airlines is the only airline with year-round service...if we want to afford to get off this remote island every now and then). But the key is that we treat our CC like debit and put our large expenses on a plan. We also don't really live conventionally right now, so his mortgage stuff doesn't apply to us in this season.

That said...I do think his team has some solid resources if you need somewhere to look. The debt snowball makes complete and total sense, and it's been a guiding principle for us. I think this book would be the best place to start if you're at the beginning of your financial health journey. If you want something a little more advanced and geared more towards long-term planning and how you want to provide for your family for generations to come, then I would recommend this book. I read it last year and learned some valuable information based on biblical principles. 

Now what?

Ultimately you have to do what works best for you. There are so many healthy and smart ways to manage your money. I'm just sharing what works for us in hopes that it's helpful for someone else. I just reiterate that the worst thing you could do is not have a plan or know where your money is going. I know that this can be a problem in marriage, so it's important to be on the same page with your spouse. In a college course I took on Marriage and Family, one of the things my instructor stressed the most was ONE FLESH, ONE DEBT, ONE ACCOUNT. Don't just add each other's name to your own accounts. Join your accounts. Put it all on the table and conquer it together. Leave nothing hidden. Radical transparency is the only way to go in marriage. I know there are different opinions on that, but honesty and teamwork will truly take you way farther than deceit and division ever will.

The Internet has endless resources out there on money management: books, courses, sample budgets, templates, apps, spreadsheets. You name it and you can probably find it. I like to find industry leaders on social media and follow their accounts for self-education. There are several Instagram accounts that I follow just about money and finances. It's silly to not use these platforms in easy and helpful ways. Learn while you scroll. :) I also think that Pinterest has a plethora of information and links to anything you want to know or learn how to do in regards to your money and your budget. You just need to take the first step.

And the best part?

As you start to execute the plan that you put into place, you start to have the margin to give extra to others. This goes above your tithe or regular offering. This goes above rounding up your purchase to the nearest dollar for charity. This goes above donating your spare change. And yes, it can still be a sacrifice at times, but it doesn't have to be a stressor. Even when it's a stretch in the budget, I'll bet you find that it brings you some joy. Find a cause or organization that you really love and give above and beyond your norm. Stretch yourself. Want to give $50? Give that plus $10 more. Sponsor a scholarship. Feed a child. Pay for a kid's medical or dental expenses. Fund a mission trip. See...the ideas and opportunities are endless. It's worth skipping coffee a few times...and I don't think you will regret it.

It is a goal of mine to be able to do more for others and to also stretch myself. I am not going to lie that I can be pretty selfish so this is an area I need to do some work. Thankfully, our budget will keep me in check. :)

So I want to know...do you have a budget and what are your favorite financial resources? I'm always learning!

Be well today (and save some $ while you're at it). 

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