Everyone sees there bank account number but what does that really mean? It says I have $5,000 but in all actuality I am broke because it is all spent money. Between my shelter and food ans car, I have not much left over to just willy nilly spend. As an experienced Investor and Financial Planner, I have come across a lot of “plans” and strategies to help save you money. I have to laugh at some of these plans, they want you to live like a squirrel hovering over a trashcan, alive but not living. So, you ask ‘how can I put away enough money without having to sacrifice everything?’
Well over the course of the blog I will shed the light on some ideas, using the #BudgetPlan to do so. Let’s start out with 3 points to help the beginner, or even someone who has a plan that needs a little help.
What exactly are your goals in life? what stage are you in life? Right out of college with a job? or mid life trying to make it work?. Goals are a very simple idea, but they are the one point that everyone skips over. One big goal is always retirement, also paying off debt whether that is school debt or any other debt.
For Goals, I suggest writing them down and making them vague, at first. Rule numero uno is to start vague and narrow in as you get more and more information and time to do so. Some examples of goals could be as big as a house or as small as a new TV. Break out these prices that you want to spend on this upcoming purchase. Now you might be thinking these goals are good but those are fun goals, what about my debt.
WRITE DOWN ALL YOUR GOALS. Get out of debt. Pay your credit cards off. Go back to school. Buy a house. Buy new furniture. Get a new Computer. Goals from now to 5 years are always good to plan. Anything less than $100,000 and not expected in the next 5 years is not necessary to plan for. Write them down with an approximate dollar amount next to them.
2. Expense Buckets
Write down all your fixed expenses. (I do everything through Excel) Put a price next to them. These are all expenses that you must pay on a monthly basis. Break them up into these buckets.
- Utilities: Electric, Water, Trash, Cable/Internet.
- Medical: Do you have a monthly or yearly medical cost that you know of off hand? Do you pay for contacts or glasses? Any Health Care expenses you know of should g in this bucket.
- Entertainment: Netflix? Hulu Plus? iTunes or any other subscriptions that you have. Magazines would be another example here too, or if you want to get sports tickets or concert tickets here would be the bucket to budget.
- Car/Travel: Car insurance, Car Payment, Gas, Maintenance. Whatever it takes for you to get to work, to the store or in fact anywhere.
- Food: Breakfast/Lunch/Dinner
- Clothing: You know what you need, set aside what you think you need/want to spend on a monthly basis
- Savings: You are thinking, savings? in the expense category? You can call this what you want but this is where you would put aside money to pay student loans, or other misc. debts. You also will want to put a set amount aside in savings say $100 a month for example. This is a Fixed Savings unlike the savings I will explain later.
I create a tab for each expense bucket. In each bucket/tab list out each expense with the dollar amount in rows. In the first column at the top put PAY and the next column MONTH, figure out the expense by month and then DIVIDE it by 2 for the PAY column.
This will bring you to an amount for each bucket that when you get paid, you will need to put aside right away. If you have a method that puts that money aside the second you get it will help you. REMEMBER: Include your goals somewhere in your Buckets, these are the buckets that I use, but they do not have to be the exact same. Personal change may be needed.
3. No Place Money
After you put all the money aside, hopefully you have money that is left over. I always have a main tab that shows this amount. Money that does not have a destination, money that is left over each month is a free for all. This is where you decide whether to boost up a certain bucket or pile it all in Savings, or to go spend it. Remember you can always up your Fixed Savings if you are left over with too much. But the difference between ‘No Place Money’ and Fixed Savings is every pay/month you decide what to do with the money rather than automatically putting it into savings.
This strategy helps the spender in all of us, by giving you a plan to see what you can spend while also saving and accomplishing your Goals.
If you are looking for a working template of this strategy in Excel, please leave a comment on this post.