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New Year, New You…Same Old Bank Account

Now is the time to change your financial position

Now is the time to change your financial position

As we say goodbye to 2014 and hello to 2015, I want you to also say goodbye to your poor financial habits and welcome in a new financial discipline. You need to shed the stress and worry from not having your finances in order. Now is the time to usher in changes that will help you to create a positive financial outlook.

“Change is the only constant in life.”-Heraclitus

This means the only thing you can be sure of in life is that change will occur. Therefore, change is something that should be embraced.  It will happen if you like it or not. The best way to approach your finances is to be proactive versus reactive. This mean you will need to have a financial plan.

Ask yourself, what are your financial problems? What are you doing to contribute to your financial instability?  Now ask yourself this very important question, “What are you willing to do differently?”

“Insanity is doing the same thing over and over again and expecting different results.”-Albert Einstein

You cannot expect your financial position to change by continuing to do what you have always done.  The reason I started this blog was because I have seen too many people struggling financially. They had no clue how to turn things around. I also think people begin to believe that struggling financially is a way of life. They see other people in the same boat and have accepted it as a norm.  My goal for you is to become empowered and take steps to financial freedom. This isn’t just a catchy phrase, but can be a reality for your life.

I want you to think of your top 3 financial headaches. Write them down. For example, you may have too much debt, not enough in your savings or your credit score is too low. After writing them down, read them out loud. I want you to read them out loud so that you fully acknowledge that these concerns require your immediate attention.

Believe me when I say that you have the power to change your financial position and put yourself on the right track. If you are willing to put in the effort, I guarantee you will see results. Below are the topics that have been covered in my previous posts:

  1. Start Managing Your Money
  2. What is Coming In and What is Going Out
  3. Why Don’t I Have More Money
  4. Creating a Monthly Budget
  5. Money Saving Tips
  6. Make Saving Your New Habit
  7. Don’t Be Afraid to Negotiate
  8. Don’t Spend Money You Haven’t Earned

For those unfamiliar with the posts I invite you to read them all or the ones you think will address your financial situation. The posts contain solid advice as well as action plans.

I am excited for what 2015 has in store. I plan to continue to bring you practical and useful financial tips as we continue our journey to finances made simple.

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Creating A Monthly Budget

Now that you have an understanding of where your money is going each month, it is time to create your monthly budget. The term monthly budget doesn’t always spark positive thoughts. A budget may be looked at as being restrictive or a hindrance to your lifestyle. I don’t want you to view it that way. A budget is a tool used to help you maintain your standard of living and meet your financial goals.

What are some of your financial goals? Is it to pay off your credit card debt? Save for a down payment on a house? Or increase your emergency savings fund? Whatever your goals may be, budgeting will help turn them into a reality.  Create a chart similar to the one I have below. List your goals and figure out how much money you need to obtain them. Then determine the timeframe in which you want to achieve each goal. . Give your goals a priority, because you may not have the funds to accomplish each goal at the same time. Therefore, you may have to wait before you can add a goal into your monthly budget. Below is an example of the worksheet:

Goal Total $ Amount Need  # of Months to Reach Goal  $ Need Each Month Priority
Vacation 1000.00 12 83.33 3
Laptop 500.00 12 41.67 4
Six months of Salary in Savings 18000.00 60 300.00 1
Create fund for Home Repairs 5000.00 36 138.88 2

Now we are going to construct your monthly budget. Use a spreadsheet application to create your budget. If you don’t have access to software, you can construct a chart similar to the one I have below.  You will add the following sections:

  1. Net monthly income
  2. Monthly expenses
  3. Lifestyle Expenses
  4. Financial goals

Subtract the total of your monthly expenses, lifestyle expenses and financial goals from your net monthly income. Below is an example:

Net Monthly Income 
Bi-Weekly Paychecks $3,000.00
Child Support $400.00
Total $3,400.00
Monthly Expenses
Mortgage/Rent $1,100.00
Car Payment $300.00
Utilities $250.00
Cable $100.00
Credit Cards $100.00
Car Insurance $85.00
Cell Phone $85.00
Total $2,020.00
Lifestyle Expenses
Groceries $250.00
Gas/Transportation $160.00
Clothes/shoes $70.00
Eating out $50.00
Hair Done/Cut $50.00
Total $580.00
Financial Goals
Six months of Salary $300.00
Funds for Home Repairs $140.00
Savings for College Tuition $200.00
Total $640.00
Net Monthly Income $3,400.00
Monthly Expenses+ Spending+Fin. Goals ($3,240.00)
Balance $160.00

After completing your budget, if your balance is positive, meaning you have money left, congratulations! You have created a budget that is within your means and have increased your chances of sticking to it.

If your balance is negative, meaning you do not have any money left, you will need to rework your budget. You have to reduce the amounts designated to your lifestyle expenses and your financial goals.

Remember the amount spent on each item within your monthly budget doesn’t have to be set in stone. You should always be looking for ways to reduce your expenses. Also once you accomplish one of your financial goals you can remove it from your budget and work towards the next goal on your list.

Keep your budget somewhere easily accessible so that you can refer to it and become familiar with it. If you are having trouble sticking to your budget you will need to re-work it or use greater discipline in your spending habits.

If you have any questions or need some advice, just ask. I would be happy to hear from you! Stay tuned for my upcoming posts on ways to save money and stay within your budget!