Do You Need A Budget? Take Josh's 13 Question Assessment To Find Out
Check out Josh’s checklist to see if you should be using a budget
BUDGETING 101: for people who hate budgeting PART 1/ 3
When working with my clients, the first thing I have them do is forget about money and DREAM BIG! I know it sounds weird but stay with me for a moment. Next, we take those dreams and organize them into short/mid/long term goals. Then money and finances comes in. My approach to personal finance is that your money should fund your dreams and goals. And the way we do that is through… BUDGETING.
Do you really need to budget?
Yes.
Don’t believe me? If you answer yes to any/all/many of these, keep reading.
Is your income bucket dry at the end of the month?
Do you use credit cards to fund your lifestyle?
Are you lacking in long term savings for retirement?
Would you like to go on more vacations?
Do you ever fight or stress about money?
At the end of the month do you wonder where all your money went?
Will your kids need to take out loans to go to college?
If you needed a new roof on your rental place (I do!), you would need to pay for it with credit cards or loans
Does your retirement plan include working forever?
If you answer False to any of these, you need a budget.
You have 3-6 months of your typical household spending saved and earmarked for emergency funds.
You know your monthly household expenditures.
You mapped out your short, mid and long term goals and are actively working towards reaching those goals.
You know how much you need to retire and have a target date when you will likely reach that number.
Why are you NOT budgeting now?
Now that you understand, you should be budgeting, let’s address why you aren’t already doing it.
You make too much money, and have plenty at the end of the month
It sucks the life out of you
You tried it and quit
It takes too much time and its boring
The tools for budgeting stink
It causes fights at home
It’s too much work and nobody wants to take the responsibility for driving the conversation
You are slowly but surely reaching our goals without one
You’ve tried it before and failed. You just can’t stand to have to fail at it again
That’s just a few reasons (or excuses) I’ve heard over the years. I get it. Budgets aren’t exciting. But it’s a key component to reaching your goals. And goals are exciting. For example budgeting could fund a fabulous vacation all paid for upfront.
From my experience, 99.9% of people would benefit from a budget. Even those of you with plenty of cash at the end of the month!! Hello, retiring*** at 54 instead of 56! Hello buying the turbo instead of just the V6!! Hello, philanthropy.
The Importance of a Budget
watch this short 50 sec Video to see why you need a budget.
Thanks to my wife for sketching out this visual.
Income filling a bucket at the top of the process.
Out of the income bucket are a set of spigots, that are used to fill expense buckets, first and then goal buckets next.
The key is to control your expense spigots so you can fund your goals.
Non-Discretionary Expenses
The biggest monthly expense for most is housing: a mortgage or rent payment. Followed up by a standard set of non-discretionary items: gas, electric, cell phone, internet, insurance, car, student loans, etc.
Discretionary Expenses
Then you have discretionary buckets: groceries, gas, eating out, beers and clothing. This is where a budget is key in getting a handle of your discretionary expenses. Watch out little expenses add up fast…ahem, eating out.
Your goals
After you deal with your general monthly expenditures, you are left with the excess to allocate to your savings for goals like: buying a house, buying a new car, going on a vacation, saving for kids to go to school and retiring. Typically, the savings buckets are filled with little drips from spigots, if there is any excess at all. Sometimes, your top bucket is empty at the end of the month, and you end up needing a credit card to fill some of your expense buckets.
Next: How to get Started
it’s easier than you think
Why You Need to Friend Your Future Self
Think about you!
Yes, you. Where do you live? Who do you live with? Where do you work? How do you spend your free time? Now picture yourself in 10 years. Where do you live? Same place? Who do you live with? Are you working?... Do you have the same occupation?
Think about you!
Yes, you. Where do you live? Who do you live with? Where do you work? How do you spend your free time? Now picture yourself in 10 years. Where do you live? Same place? Who do you live with? Are you working?... Do you have the same occupation? How do you spend your free time?
In 2008, UCLA psychologist Hal Hershfield, Ph.D., conducted a study asking similar types of questions and found people commonly had two different neural patterns when thinking about the present versus the future: The first neural pattern: "I'm thinking about me". The second neural pattern: "I'm thinking about a stranger".
How you identify with your future self is called "self-continuity". Because many of us are not well connected to our future selves, we make decisions that maximize our current selves, and leave our future selves in bad shape. Check out this short article from Men's Health for more.
An example of this sort of behavior: On Friday watched the Atlanta United game with friends. As the game wound down, I ordered a parting drink. I certainly did not need it, and I had already scheduled an xfit workout the following morning. I failed to contemplate how my future self (only 8 hours into the future) was going to deal with waking up early and feeling crappy for my work out.
Get to know your future self and accomplishing your goals can be simpler than it seems.
Saving now, for either a short term goal such as a vacation, or a long term goal like retirement can seem vexing. And it will require a short term sacrifice. But your future self will appreciate it.
Here are a few things to get in touch with your future self:
1. Write a letter to your future self
2. Take a picture of yourself and run it through agingbooth or faceapp
3. Tap a surrogate, like your mom/dad, or someone with a similar job
4. Schedule a time with me and let me help get you connected
YOUR FUTURE SELF IS LOOKING FORWARD TO MEETING YOU!!
Lets schedule a quick 20 minute call to work on getting you to acquainted.
How to Pick a College That's Worth the Expense
Picking a college is one of the most important early decisions one can make. Its arguably the most important decision…
Picking a college is one of the most important early decisions one can make. Its arguably the most important decision (other than choosing a suitable mate) in determining the trajectory of someones future. Money Magazine published a thoughtful analysis on the Top 25 List of the Best Colleges that graduates are likely "able to avoid heavy debt and succeed in the workplace".
Yes, my alma mater, Ga Tech is ranked 19th!! Tech has long been ranked one of the best values in college. I like how this article expands the data to include the ability to quickly escape the heavy burden of debt.
Have questions on how to help your kids limit their debt burden due to college expenses? Call or email Josh.