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If I could wish a wish for you, it would be financial freedom. I am not referring to making millions, being a CPA, or being the female version of Warren Buffet. That would be epic! I am just wishing you the wisdom to have a plan and follow through in good times and bad. Mostly because financial freedom is awesome. Life has ups and downs, and the ups are great! When the downs come, being financially stable really helps to cushion those awful moments.
Let’s begin this road to financial security with a plan. Here is the plan. the magical, get your poop in a group, plan. It is (deep breathe, big reveal) a budget! I know, I know, a budget. It’s not sexy, or exciting, it doesn’t even have glitter! However, this is an essential tool to help you ensure financial security. This plan will tell you everything you need to know about your money. It will also show you what you are deeming important by showing you where all your money is going.
Begin with a Budget
Crafting your first budget can be a punch to the gut. My first budget was. It was awful and made me sick looking at it. Years later (yes I said years) I love working with my budget because I used it as a tool for change.
A budget has helped me to:
- have an emergency fund that has more than 6 months of my pretax pay
- have a retirement account that is more than my annual salary
- allowed me to pay for trips to Europe and Alaska without accumulating debt
Let’s start with a budget win. For the next few months, keep track of everything you spend. Bills, a latte, even a pack of gum. Anything that requires you to pay money, I want you to write it down in your budget. Create categories for your budget. My categories are home, groceries, spending, gas, restaurants, and bills. Make sure your categories are tailored to you. After you have a few months of writing everything down, to the point it’s boring, then it’s time for the next level.
Keep it Simple: 50/30/20
This is when you will start manipulating your budget. Most financial gurus suggest a 50/30/20 rule. 50% of your budget goes to needs like housing, utilities, groceries, insurance. I suggest 30% go to financial goals like retirement, paying off debt, and saving for an emergency fund. Let the 20% be all the wants. New clothes, dining out, movies. This is a perfect world scenario kinda rule. Obviously in some areas 50% for housing is a distant dream. Giving California the side eye. Maybe you have aggressive savings goals, like me! My budget rule is more like 55% needs, 35% goals, and 10% wants.
My passion is travel and it’s expensive which is why I save aggressively. I don’t make a lot so if I don’t want to go into debt I have to make adjustments. These aren’t sacrifices because I enjoy focusing on a goal and letting go of things that don’t serve this goal like dining out, Starbucks lattes, and new clothes.
Either way this about keeping track of what you are deeming important. Your money is going to funnel in that direction. If you want to change the script you have to put in the work. No one is going to take care of this better than you, because your going to care the most. That is what got me started on a budget. I looked back on years of spending and I had nothing to show for it. Now, when I look in the rear view mirror I see trips, experience, and fond memories.
Okay, deep breath. I know this looks intimidating. The hardest part is the start.
You got this!