Tag: budegting

Achieving Financial Success

To some, financial success is spending less than they make.  This is a key to any financial plan.  The alternative is spending more than you make is a recipe for disaster.  Spending less than you make will allow for savings so that you can purchase assets.  

Financial success is attainable for everyone because it means different things to different people.  Your thought or views on financial success are probably different than mine and vice versa. 

Financial success for one may be to provide an inheritance to his children, and another person may see the vacation house on the lake as financial success.  However, you determine financial success, below are some tips or foundational tools to help you achieve your view of financial success.

Have a Plan

Get organized and develop a plan to get you to where you want to go.  In doing that, determine what your financial situation is.  Often, you can know where you are going until you know where you are.  So where are you?  What is your income?  Who do you owe, how much do you owe, and when is the payment due?  These questions are the types of information you will need to know.   

Once you know where you are, you can develop a plan to develop short-term and long-term goals and ways to meet them. 

Spend Less

To some, financial success is spending less than they make.  This is a key to any financial plan.  The alternative is spending more than you make is a recipe for disaster.  Spending less than you make will allow for savings so that you can purchase assets.  

And it is assets that will help you build your wealth and financial success.

Prepare for Expected and Unexpected Events

Expected events would include things like retirement, holidays, and kid’s college.  How will you plan for these events?  How much will you need for college or retirement?  Prepare for these events to be successful for you and your family.          

Unexpected events include car repairs, a job loss, or maybe unexpected medical expenses.  How will you handle these events?  An emergency fund of six to twelve months of expenses is a good place to start and could be seen by some as a financial success. 

Preparing for expected and unexpected events will save a lot of headaches later. 

A Healthy Credit Report

Many people see a healthy credit report as financial success.  To keep your credit report healthy, you need to do two things.  First, pay your bills on time. 

Thirty-five percent of your credit score is based on how well you pay your bills on time. 

The second thing you need to do is get a free copy of your credit report at annualcreditreport.com.  Getting a copy of your free credit report, and looking over it, may alert you to possible identity fraud.    

Understanding Taxes

Many people do not take advantage of tax breaks that are available to them.  For example, the Internal Revenue Service conducts a program called VITA.  VITA stands for Volunteer Income Tax Assistance.  Volunteers are trained to do taxes for free for low and limited-income individuals and families. 

Additionally, credits such as the earned income tax credit, education credits, and retirement saving contributions, can increase your income and help you reach your financial goals.         

Give Back

Money is used to do three things.  That is, spend or buy things, saving and investing, and giving.  

So, to complete your success, give back. 

Once you achieve financial success, give back to the local elementary school, food bank, or United Way.  Give back to the community in some way.  For me, giving in a much greater way than I am currently able, would be the ultimate success. 

What constitutes success for you.  Comment below, I would love to hear from you. 

5 Steps to a Better Spending Plan

Before you receive any money from a paycheck or any other income for the pay period, you want to sit down and “plan to spend” your money.  On purpose, you want to plan out where all your paycheck will be spent.  Often, we do not plan to spend our money and we end up letting others spend our money for us as we buy things that we did not plan to. 

Creating and working your spending plan is the way that you can manage your money better and stop living paycheck to paycheck. 

There are many benefits to creating a spending plan. 

Financial management success is one, however, for all the pitfalls and changes that come when creating and working with a spending plan, here are some steps to make it better.     

Step 1.   Call your budget a spending plan.

Instead of calling it a budget, call it a spending plan.  I do not know what it is but when most of us hear the word budget, we think of bad things, control, things we can’t do. 

So instead, call it a spending plan and think of it as a way to be a better steward of your money.  Just planning to spend your money, a spending plan, sounds like you are doing better.

Before you receive any money from a paycheck or any other income for the pay period, you want to sit down and “plan to spend” your money.  On purpose, you want to plan out where all your paycheck will be spent.  Often, we do not plan to spend our money and we end up letting others spend our money for us as we buy things that we did not plan to. 

Step 2. Track where your money is going.

You cannot effectively manage your money if you do not know where it is going.  Tracking your spending lets you know exactly where every dollar is going.  From the grocery store to the gas pump, tracking your spending will tell you where your money went.  Tracking allows you to have a more accurate spending plan.

 Sit down once a week or so with your receipts and write down where, how much, and what the money was spent for. 

Two things will happen.  First, you will see patterns in your spending that you did not notice before.  Second, you will see patterns in your spending that you will want to change, and that is the key to managing money better, changing behavior.

Step 3. Cut your expenses.

Once you track your expenses for a while, you will have a much better understanding of how, where, and what you are spending your money on.  You are not ready and able to cut unnecessary expenses. 

Go into deal mode and use coupons to save money.  Make a list for all shopping trips and never, never, never go shopping hungry.  Business is very adept at getting you to spend your money, therefore, maybe you stay at home and read a book, exercise, or do some yard works to keep your mind elsewhere.  Even try car polling and taking your lunch to work.   

Take a good hard look at all your spending and see where you can cut.     

Set up some financial goals for yourself like an emergency fund or a Christmas savings account.  Find a way to keep your goals in front of you.  Tape them to your bathroom mirror.  Take them with you when you are out and about.  Refer to them often, they will help you stay on track and prevent impulse buying.      

Step 4. If need be, increase income.

If you have less money coming in than going out, and after cutting expenses, you still have month left after the money is gone, you may want to try and increase your income.  A second job to help pay off debt is not a bad thing in the short term. 

Be sure to have a plan or goal for the money that you make at a second job and stick to the plan. 

Maybe you start a small business doing something that you like to do or do well for extra income.  The possibilities are endless.    

Step 5. Use spending plan tools to help you manage money better.

So, you ask, “What are spending plan tools?”  A spending plan tool is something that helps manage the budget or spending plan. 

Probably one of the oldest and best tools is the envelope system. 

Basically, in the envelope system you develop a spending plan, cash your check and you distribute your paycheck funds into different envelopes with your spending categories labeled on envelopes.  When the envelope is empty – it’s empty and no more spending in that category.  There are other tools such as calendars and some people use spreadsheets to track their different spending categories. 

Whether you use all these steps or none of them, do something different to manage your finances.  Do not keep doing the same thing and expecting a different result.  How do you manage your spending plan or budget?  Comment below and subscribe to my blog to get weekly spending plan and financial management tips.