Prosperity Mindset Month - Chapter 4

This month was dedicated to different types of debt that we take on during our life. After we talked about student loans, wedding expenses and mortgages, we will talk about how to plan our monthly budget so we can make sure we pay off all these debts and reach financial serenity.

I know that "budget" is a tough word in Americans' vocabulary. I will endeavor to make it easier for you, my reader, by telling you that by budgeting your money you are not giving up all opportunity for fun and things you desire. You are only planning all your desired purchases and you are also making sure that all your necessities are taken care of. 

I have to agree with the financial experts who tell you to track all your expenses, to the last penny. It is the best way to understand your expenses over a 30-60 day period and to be able to control them afterwards. However, I also have to agree that most of the people (including myself) don't have the patience or the discipline to track every penny spent and to plan where each penny goes. So I have devised a simpler system that has also been sustainable. And I will go over the 3 categories of expenses that I use in my own budgeting:

1. Fixed expenses
This category includes all the payments that are due every month and that have set amounts that cannot be changed, such as: mortgage/rent, insurance payments (all policies: homeowners, car, life, etc), retirement contributions (once you determined how much you contribute), car payment (only after you negotiate the best interest rate available to you), student loan payments, credit card payments (once you negotiate the monthly payments). This is what you must cover every month from your income. You will include all those payments that are a must, and once you have listed them all, you make sure your income goes to them first, before taking care of the next two categories.

2. Flexible expenses
This category includes all the payments necessary every month, that can be negotiated with the companies you have to pay, such as: utility payments (you can control how much electricity, gas or water you use), gas for your car or common transportation (whichever way you need to get around, most of all for work or your business), groceries and any food you eat out (if you have to go out for business meetings), any dues to professional organizations, any other activities that you need to pay for (like children's music and sport activities). 

3. Discretionary expenses
This category is for all the fun spending, such as purses and shoes, or clothes, or any other items you want to collect, as well as vacation money, and money for any other fun family activities. These expenses should not happen before any of the other two categories. I'm not saying to give up all the fun, I'm only saying that these cannot be a priority over the fixed and flexible expenses that you have to take care of every month.

Hope these ideas help you, as you build a better relationship with your money.

Money Mondays Episode 6

spreaker.com/show/money-mondays

Check out the new episode to learn more about a topic you might find scary... Budgeting. We are helping you make friends with your budget, so you can achieve your goals and take confident steps toward your financial serenity. Emerald Sparks shares her money story, and you can learn how a young woman was able to buy her first car while in college, without having to take on a car payment. Can you learn anything from her story?

SMART Goals for Financial Freedom

There are 2 ways to work towards your financial freedom:

1.    Figure out how much money you need annually to live comfortably, to at least maintain your current standard of living. Then, take that number and divide it by 0.4% to find out the total amount of money you need to have set aside. When you invest this money (once your reached your number) and generate at least 4% interest, it will generate the income you need.

2.    Figure out how much money you need annually to live comfortably, to at least maintain your current standard of living. Then, work on building assets that generate enough money annually to provide that amount without you holding a job. These assets can be: real estate investments, businesses, investments.

Visualization of your goals is important, and so is planning. You either plan your work, and then work your plan; or you fail to plan, and then you plan to fail. The reason why planning your finances is probably your most important plan, is that all your dreams and goals will be in some way connected to money.

Writing down your goals and having a vision board will help you find ways to achieve your goals; your brain will come up with ways to lead you to what you most desire. Which also means you must be very certain that your really desire those things you claim to want. Part of the planning and mapping of your goals will include coming up with the money to achieve some of your goals. Of course some goals like happiness and health don’t have a price tag. Others like a trip, college education or a new house or car, come with a price tag that must be known.

It may seem simplistic to say that if you know how much something costs you can start working on achieving that. However, even though it is simple, that is how it is done. I’m not saying it is easy – otherwise everyone would achieve their goals. But it is simple – in 3 steps: see it, map it and plan it. All that is left is the hardest part: doing it.

When setting your goals, keep in mind that they must be SMART in order for you to reach them: Specific, Measurable, Attainable, Relevant and Time-bound. In order for you to achieve your goals, they have to fit in this SMART description. So if your goals are vague - ie. I want more clients, I want to make lots of money - you need to redefine those goals. It is not good enough to want more money; your brain does not work on anything so vague. So think instead: How much money? ("a lot" is not a number - therefore it is neither Specific, nor Measurable) When do you want to have the money by? (give yourself a deadline) And, perhaps most importantly, make sure your goals are Relevant: do you really want it? Is it Relevant to you?

If you are a successful business woman, whether you own the business or lead a corporation, you probably rely on a board of advisers. You may call them mentors, business partners or directors. They are your sounding board when it comes to ideas regarding business growth and what is the best way to implement new ideas to achieve the objectives. But how about your financial life? Do you have a board of directors to run your ideas by? Do you have an accountant who knows your like and your story to help you lower your taxes? Do you have an investment adviser who looks out for your best interest in a fiduciary capacity?

The Financial Reset Button





 Where are you with your New Year's Resolution for your Financial Goals?

 

As the end of the first month of the new year approaches, it becomes important to keep your promises to become more financially sound and always develop your action plan to increase your net worth.

In order for your plan to be effective you must be ready to be honest about your spending habits, create realistic goals, and remember to not make any excuses for yourself. Now is the perfect time to reflect on past spending and saving habits and be ready to be a part of the Un-Broke Women around the world! Here are a few tips to help you create successful personal financial goals for 2016.

1) Review 2015 spending habits

An effective method for setting your 2016 goals is to reflect on ​what you spent your money on last year. Derek Coburn, a partner at Washington Financial Group, recommends taking a look at your 2015 credit card and bank statements and identifying the three purchases that you feel best about and the three purchases that you regret most. According to Coburn, this exercise helps people make better decisions on future purchases and set more realistic financial goals. Coburn adds: “In hindsight, hardly anyone ever feels good about the money they spent on material goods and physical things. They almost always feel good about the experiences they purchased.”

2) Create a 2016 personal budget

Once you have reviewed your 2015 spending habits, creating your budget for this year will be easier. According to financial adviser Tahir Johnson, “Many people avoid creating a budget because they think its only purpose is to limit spending, but that is not the case. By keeping tabs on your income and expenses (both essential and discretionary), you not only gain a better understanding of where your money is going but it also helps you to formulate a plan on how you can save and invest in the future.”

3) Stay organized

One of the most effective ways to maintain your personal finance goals is to stay on top of your expenses, spending and taxes throughout the year. Organize your expenses by using apps such as Mint ​and Level Money or more traditional tools such as Excel or a spending notebook to create budgets, manage money and pay bills all in one place. For any income you plan to earn this year from a side job, such as freelance consulting, driving an Uber or hosting on Airbnb, set aside a portion to meet your income tax obligations. Apps such as Hurdlr automatically manage this for you and help minimize these monetary commitments.

4) Create a vision

Developing an annual budget and tracking monthly expenses is only half of your financial equation. You also want to look at the larger picture and create financial goals that are in line with your long-term vision. Creating a financial vision board is an easy, effective method to lay out your short-term priorities and uncover your larger financial goals. All you need is a poster board, scissors, magazines and glue. You could cut out phrases and pictures that represent your short- and long-term financial goals (i.e. pictures of a new house or your dream vacation destination, phrases such as “no debt,” specific numbers that you are trying to reach) and paste these images onto your poster board. After you have created your vision board, you may need to alter your budget to save toward your long-term vision, or you may find the extra motivation to stick to your budget in order to achieve that long-term financial dream.

5) Set specific milestones

Many of us will make lofty goals for the new year, but few of us will actually stick to them as the year progresses. It is not enough to create a budget or a financial vision — you have to follow it through! Set goals for specific milestones throughout the year so that you have a way to measure how you are progressing against your plan. For example, if your goal is to build up an emergency fund, decide how much money you want to have saved by three, six and nine months. Then check in at each of these points in time to confirm that you have hit your target savings and adjust accordingly to reach your ultimate goal.
Use the above tips to set your financial goals, write these goals down, and refer to these goals and your vision board often throughout the year.

Do you need assistance, or someone to help you with your financial overview? Send me an email and let's achieve your financial goals together!  

Research provided by Anjali Varma of the Washington Post.