A Budget is not…

A budget is not a random set of numbers written down on paper or typed in a spreadsheet. A budget is not how much you have left in your checkbook that will get you to the next payday. A budget is not guessing how much you think you might need to get you by till next payday. A budget is not the same every single month. A budget is not difficult if done monthly and tracked daily!

When establishing a written budget or cash-flow plan, you need to determine what categories are fixed, which are variable, and turn your periodic expenses into a monthly fixed amount.

To start, you should list all your monthly, quarterly , periodic, thAZERH749semi-annual, annual and long term expenses on the left hand side of a spreadsheet. Next you want to list all the known fixed expenses next to their corresponding category, then you want to review the last six months of your variable expenses and list the average next to all variable categories, lastly you want to review all your non-monthly expenses (Periodics), determine how much time remains before that expense comes due then divide by the number of months that remain.

Once this is complete, you will have a baseline budget that you can use to develop future monthly budgets going forward. At four days before the month begins, sit down and determine if any adjustments need to be made based off of last month’s expenditures.

To understand last month’s expenditures, you will need to track every penny that comes in and goes out. Measure this against what you allocated for each category and adjust as needed. When you develop next month’s budget, you will need to assign every penny to a category that is on your expense list until you show zero left. This is what we call Zero Based Budgeting.  Tracking enables you to see if you are staying on track with each budgeted category and will show you what’s remaining till the end of the month.

Budgeting is not hard, but requires a family to be committed, diligent and focused. If you need help getting started, call me at 352-678-0521 or email me at ed@waypointsfinancialservices.com.

What’s Your Plan?

Have you ever asked someone what their plan is? Most people will deliver an elaborate plan that will describe their life goals, education goals, professional goals, travel goals and retirement goals. They will talk about what they want to do, the time frame they want to accomplish their goals and the specific details of that goal. But, on most occasions those same people fail to financially plan for all their life goals.

Every established goal will have a financial sticker price attached to it; there will be a cost associated with accomplishing that goal. Regrettably, most plans will falter and the goal never reached because proper financial planning was never a key ingredient to the plan.th144D01QV

If you want to succeed at setting and achieving all of your life goals, you WILL need to cash flow the event into your plan.

This my friends, is what we call a budget. It is a cash flow PLAN that will enable you to set aside monies on a regular basis that will be used to finance your life goals.

If you plan to go to school, it is wise to plan early so as to offset the high cost of education. My niece is about to go off to College in three weeks and will graduate in four years with an $80,000 student loan. This level of debt will seriously delay other goals she may have established because this 25 year debt payoff will suck up a large percentage of her professional income…and that is if she can find a job in her field of study.

Proper financial planning is the key ingredient to successful goal planning. Without it, goals are merely dreams.

What’s Your Retirement Number?

Most people I talk to hope to retire some day. Almost everyone of them gives me an age at which they would like to retire at, but rarely tell me how much they will need in retirement dollars when they retire.

Your ability to retire should not be based on age but on the amount that YOU will need in order to maintain your standard of living without working.

This calculation can be cumbersome and complicated to figure out if you don’t know the factors that should be considered.

First and foremost, you need to determine your payoff date for all your unsecured debt. Many people continue to add on and service their debt until death. This is a very unhealthy way to live and will not privilege you with a dignified retirement.

The key to planning for retirement lies in the necessity to be debt thI00L13G4free before that time begins. Once you are debt free and you own your home, then the calculation becomes very easy.

Here is a real life example. If you and your spouse make $60,000 a year and service a $500 a month debt payment, a $650 mortgage payment and a $250 car payment, then your actual retirement monthly requirement will be only $2350.

Here is the calculation: If you and your spouse are making $60,000 a year, your estimated take home per month is 75% of that divided by 12 (months) which is $3750. Then you want to subtract all your debt payments from that amount since you need to be debt free to retire. The $3750 minus the $500 monthly debt payment, the $650 mortgage payment and the $250 car payment will give you a monthly requirement of $2350.

The $2350 requirement over 12 months will equal an annual requirement of $28,200. In order to secure this amount, your retirement investments will need to produce that much in interest every year. If you conservatively get 5% a year return, then your retirement dollars need to be $564,000 in order to maintain your standard of living.

Keep in mind, that many retirees will receive some type of Social Security Benefit, but conservatively, the number above represents a true number.

Every family is different, so contact me to find out what your retirement dollar amount needs to be, so you too can retire with dignity. mail@WayPointsFinancialServices.com

Why Do We Overspend?

The reasons why people overspend extends deep into the human psyche. Human psychology is a very complicated subject and one that I am not qualified to even address, but I do know that the way people think about money can be very unhealthy and disastrous in the long run. After 7 years of coaching clients, here is a list I have compiled of reasons why people find themselves overspending.

  1. Keeping up With ‘Jones’ – Many people feel that if they fall below a certain image that the neighbors have set, the neighborhood will think less of them. The truth behind this is that the neighbors are thinking and feeling the same way.
  2. Avoidance – I cannot tell you how many people, in all financial situations, have told me that the reason they spend too much money for lunch out with friends, shopping with the girls, etc is to not have to admit that they cannot afford it. If your friends drop you because you cannot afford to buy them lunch, are they really true friends?
  3. The money is on its way syndrome – I have heard this over and over “I thought the check was in the mail.” The people who tell me this are telling the truth! The check was in the mail, either late or for far less than was expected. When they heard they were getting money, they spent it before they even had money in their hands.
  4. Credit Cards don’t feel the same – Let’s face it, plastic simply does not feel the same as good old-fashioned paper cash. For this reason people use credit more often and tend to over spend much more than they would if they had used cash instead.  Solution…Cut up your cards.
  5. Immediate gratification – When you can go into a store, see something you think you need NOW, then get credit in 5 minutes or less, you feel a sense of accomplishment. After all, you get what you want now, and don’t have to think of how you are actually going to pay for it until later, when the billth (2) arrives. This route always leads to paying for an item for a lengthy period of time and paying 25-30% more than the original cost.
  6. Lifestyle maintenance – After a person has lived a certain way for a while and suddenly find themselves in a bad place financially, it is hard to give it up. They feel the lifestyle they have become accustomed to must be maintained, even if it means more debt followed by bankruptcy.
  7. Poor as a child – Many people who were poor as a child feel the need to spend everything they can get their hands on as soon as they can. Perhaps there is a fear of someone taking the money away if it is not spent immediately.
  8. Sense of power – Spending money makes many people feel more powerful. Whether it is handing over a wad of cash or pulling out a gold card to charge money, the simple act of spending a large amount of money gives them a rush of false power.
  9. Prove self worth – Spending $55 on a haircut, $170 on a designer dress, $60 on a new pair of shoes, and maybe $75 on a facial every other week sounds outrageous to most. However, for many people, it makes them feel like they are someone. It makes them feel like they are worth something to the world.
  10. Just can’t say NO! – This is the one that I have heard the absolute most and the one that I stumble into at times. Whether it’s a child asking a parent for the newest fad toy or a spouse wanting the newest computer game, some people just cannot say no! Even if they cannot afford to say yes. They feel like a failure if the money is not there to meet the wants of the other person. No matter what, these people will make it happen, even if it becomes a dead end to bankruptcy court.

Are You Your Biggest Problem?

One of the largest searches on the internet today is “I Need Money Help”. In fact, over 70,000,000 people across our globe are searching the internet every month looking for answers.

Some of the reasons so many people are searching for help are due to a Lack of Education, Emotional Attachment, Relational Discord, and Psychological Distress.

Many people in financial disruption place blame on the current economic conditions. Some even place blame on societal pressures and on the spending habits we’ve developed over the past 25 years.

All of these reasons could lead to valid arguments, but they are not the primary cause to your problems.

Your struggles with money begin and end with YOU!

You are Your Biggest Problem…thHILMPB7E

It is so true that finances are 80% behavior and 20% head knowledge.

Developing a Cash Flow Plan isn’t hard once you understand all the components of a budget (this is the knowledge side). Knowing how to handle money responsibly is really simple: live on less than you make, save money on a consistent basis, and never go into debt. Yes, It’s really that simple.

The difficult part is actually doing it. Many people want to live for the NOW, but forget that there’s a lifetime ahead of them. The behavior and discipline necessary to say “no” and limit your spending today is extremely difficult.

Action: Make Your Money Your Problem!

You may be struggling with money, and think there is NO WAY you are ever going to get out of the mess you’re in.

You may be struggling with paying your credit card debts, receiving multiple collection calls every day, and can barely pay all of your necessities every month.

You may be scared and feel hopeless, and don’t believe there is any way to climb out from under the pile of debt you have buried yourself in.

What you need to learn and understand is that your problems, and your inability to pay your bills, are due to your lifestyle and your lack of ability to say “no” to yourself and your friends.

If you stop and think about it for a moment, that’s a really sobering thought: You are the cause of your financial problems.

It wasn’t something you intentionally set out to accomplish…You were normal and just followed what everyone else was doing and ended up in a financial mess!

For most, it’s not an income issue. It’s not because of the economy, society or even the government. It’s not a lack of knowledge and it’s not because of your friends. It’s because of YOU!

You are the reason you struggle with money. (I do realize that this does not apply to EVERYONE. Some people are facing circumstances that are out of their control)

…and You are your Only Solution that can change your Financial Journey.

You CAN change your future. You can have hope and live without fear, stress, or worry.

You can change everything as long as YOU’RE willing to make the necessary sacrifices.

Managing money is extraordinarily difficult.

The friends you hang out with, your family, and our society in general, ensure that you’ll have an uphill battle.

If building wealth and properly managing money were easy, then everybody would do it.

It’s tough, but it’s worth it. Take control of your finances today and you will see the rewards tomorrow. GUARANTEED! If you need help getting started, contact us at mail@waypointsfinancialservices.com. We are here to Navigate, Teach, Encourage and Inspire you to live and lead a Financially Free life.

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