Archive for October 2015

Budgeting Tip #4: Be REALISTIC

Welcome to the “Budgeting Tips” series! These tips have proven extremely helpful in getting my own budget in order, and I’m confident they can help you too.

Budgeting Tip #4: Be REALISTIC

Perhaps nothing will destroy a budget from working effectively like being untruthful with oneself. If you have three children involved in three different sports, and yet you include nothing for restaurants (including drive-thru fast food) – you are lying to yourself! If you do not include enough money for groceries, hunger will drive you to the grocery store – even if it requires the use of a credit card.

If you want your budget to truly work for you, then you must be realistic. Employ the other budgeting tips of this series by giving every dollar a name, before the month begins, and force your Income minus Outgo to equal Exactly Zero all with reality in mind. This is, after all, your money to manage! Don’t do yourself a disservice by lying to yourself. Ensure there is some “fun” in the budget – restaurants, entertainment, and spending money. This is what will make your budget work for you – month after month – year after year. As the saying goes, “All work and no play makes Jack a dull boy!”

Here are a few ways I have been realistic in my budget:

  1. I include “Spending Money” for both myself and my bride – we get to use this money for whatever we want. Mine is usually spent on hunting, fishing, running, gardening, or food/snacks.
  2. We include “Dining Out” in our budget each month. We have agreed that this money is to be used ONLY when the family is dining out together. If I want to grab lunch by myself during a work day, I must fund that with my “spending money” because it is not with family.
  3. We save each month for Known, Upcoming Non-Monthly Expenses (KUEs) – these are expenses we know are coming, but they aren’t monthly. Since they are not regular bills, people can tend to forget about them. We’ve fixed this issue by saving for these expenses every single month. That way, when vacation time rolls around, the money is ready and available for use.

ClickFreeToolsAre you ready to get your budget working for you? Click the above link to download a free budget tool and get started toward living a fully funded life!

NOTE: This post is part of the “Budgeting Tips” series. Click HERE to read other posts in the series.

Budgeting Tip #3: Plan BEFORE The Month Begins

Welcome to the “Budgeting Tips” series! These tips have proven extremely helpful in getting my own budget in order, and I’m confident they can help you too.

Budgeting Tip #3: Plan BEFORE The Month Begins

If you want to gain control of your money and your financial future, nothing is as powerful as planning your spending BEFORE the month begins. Most of us have had occasions where we did not plan before an important event, and everything went poorly. This was a routine feeling I experienced before nearly every test I took while studying mechanical engineering at Purdue University! Instead of studying (planning) for the test, I usually raced off to the Co-Rec where I could play basketball for hours on end. Then I would watch hours of ESPN followed by wasting hours away on other non-study-related items. Then the moment would arrive: test time. The dreadful, but familiar, feeling of being unprepared would take over. You know how it turned out, don’t you? My 2.64 GPA was a direct result of my lack of planning!

Those same poor test preparation habits also affected my personal finances. I did graduate from college with a degree in mechanical engineering, and I embarked upon a career in engineering. This came with a very exciting development – INCOME! However, without a budget, I managed to spend all of it plus some more, which I financed with debt.

The day that I started planning my money BEFORE the month began was the very same month that I began to prosper. By planning my spending BEFORE the month began, it allowed me to be INTENTIONAL with every dollar I expected to receive. In turn, I was able to anticipate financial challenges and make better choices. Instead of encountering the financial challenge in the middle of the month when my choices would be greatly limited, I was able to see them an entire month ahead of time. This gave me a lot of choices like working overtime, reducing an expense, or completely eliminating a planned event. This gave me CONTROL. Control equals AWARENESS. Awareness equals ADJUSTMENTS. Adjustments led to financial success.

ClickFreeToolsUse one of our free budget tools to plan your spending before next month. You will gain control of your money and ensure that your plans, hopes, and dreams are being funded! That’s what we call a fully funded life. You can do this!

NOTE: This post is part of the “Budgeting Tips” series. Click HERE to read other posts in the series.

Budgeting Tip #2: Income – Outgo = Exactly Zero

Welcome to the “Budgeting Tips” series! These tips have proven extremely helpful in getting my own budget in order, and I’m confident they can help you too.

Budgeting Tip #2: Income – Outgo = Exactly Zero

There is one fundamental rule of money we all must live by: “To have OUTGO, you must have INCOME.” This rule is understood very quickly when one begins to prepare a budget! In fact, there are few things that will make a person value a dollar as much as preparing a monthly budget. When you realize that money is limited, it causes one to focus on becoming a better financial manager. While preparing my first budget, I quickly realized I was documenting insanity! It became abundantly clear that I was spending far more than my income. “No wonder I’m feeling so much stress!” I thought to myself.

In order to get a budget to work, we must recognize this simple formula: “Income – Outgo = Exactly Zero” You can’t continually spend more you make and expect to prosper. This is where Budgeting Tip #1 comes into play – we must give every dollar a name. In fact, “outgo” should also include giving, saving, and investing. Preparing a budget where you give every dollar a name allows you prioritize the items which are most important to your financial success: Giving, Saving, and Investing! By ensuring the monthly budget balances to Exactly Zero, you are positioning yourself to prosper. It allows you to know that your financial obligations will be met. It gives you control of your financial future.

ClickFreeToolsI encourage you to download one of our free budget tools and begin the challenge of balancing your Income and Outgo so that it equals Exactly Zero. It might not be easy at first, but living without a budget is much more difficult!

NOTE: This post is part of the “Budgeting Tips” series. Click HERE to read other posts in the series.

Budgeting Tip #1: Give Every Dollar A NAME

Welcome to the “Budgeting Tips” series! These tips have proven extremely helpful in getting my own budget in order, and I’m confident they can help you too.

Budgeting Tip #1: Give Every Dollar a NAME

Have you ever started out the day with some money in your pocket (without any intention of spending it) only to return home with only a couple of crumpled dollar bills and a few coins remaining? It has happened to me more times that I would like to admit!

This situation occurs because of a combination of two things: (1) Impulsiveness and (2) Unplanned money

Impulsiveness just may be the biggest threat to your financial well-being and ability to build wealth.

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When impulse meets unplanned money, it is scientifically proven to cause your money to sprout wings and fly away. Marketers know this very well. It’s why grocery and convenience stores put candy at the checkout line. It’s why an item you have searched for on Google suddenly appears on your Facebook feed.

It is virtually impossible to prevent the impulse to buy from happening. The big challenge is to prevent the impulse from destroying your financial future. How does a person do that? Creating and following a budget each and every month – before the month begins. It allows you give every dollar a name before it actually arrives.

A budget allows you to move from managing money IMPULSIVELY to directing it INTENTIONALLY. Intentional money management always trumps impulsiveness.

Because I have made it my habit to prepare a budget each month, I have been able to prevent impulses from destroying my finances. I believe it will do the same for you!

ClickFreeToolsNOTE: This post is part of the “Budgeting Tips” series. Click HERE to read other posts in the series.

How to Locate Incredible Mutual Funds

Locating a Mutual Fund can be overwhelming if you don’t know where to look. In this post, I’m showing you the three-part approach I use.

Once I have determined the category of mutual funds that meets my criteria, it is time for me to review actual mutual funds. Here’s the three-part approach:

  1. Mutual Fund Screens – I really like CNN’s Mutual Fund Screener and Morningstar’s Mutual Fund Screener.  For example, I used the CNN screener to select Small Growth Diversified Funds that have delivered an average of 10% annual return OR LARGER for the past 10 years.  It delivered 36 mutual funds that met that criteria!  This really helps me narrow down the search!
  2. Review Retirement Plan Mutual Funds – If your employer has a retirement plan such as a 401(k), 403(b), Simple IRA, or TSP then be sure to review the options available.  My employer has a Simple IRA with American Fund investment options.  Usually an employer helps absorb some of the fees or the fees are reduced by the plan administrator.  This can really help preserve financial gains!
  3. Seek Professional Guidance – I meet with a financial advisor about once a year.  This professional advice helps me look at my investments with more clarity.

Once I have found funds to look at, I look at the following characteristics of each fund:

  • Age of the Mutual Fund  I like mutual funds that are older than me!
  • Investment Growth  I look at the 1, 5, 10, and Lifetime track records.
  • $ Needed To Start  This is really important for beginning investors.
  • The Fund’s Objective  This helps me understand the direction of the fund.

I use the CNN Money Snapshot feature to analyze funds. I also like to compare mutual funds to each other using the “Advanced Charts” feature on CNN money.

So that’s just a glimpse into how I choose mutual funds. Many times I end up with a dead end, and I go back to the starting point again to get more mutual funds to compare!