{"id":37517,"date":"2021-04-16T23:10:36","date_gmt":"2021-04-17T03:10:36","guid":{"rendered":"https:\/\/www.mominthecity.com\/?p=37517"},"modified":"2023-07-13T17:08:34","modified_gmt":"2023-07-13T21:08:34","slug":"5-personal-budgeting-tips-that-will-help-you-meet-your-financial-goals","status":"publish","type":"post","link":"https:\/\/mominthecity.com\/5-personal-budgeting-tips-that-will-help-you-meet-your-financial-goals\/","title":{"rendered":"5 Personal Budgeting Tips That Will Help You Meet Your Financial Goals"},"content":{"rendered":"
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Bills and money can be stressful. Add a pandemic to the mix and the topics can become even more nerve-wracking. On the flip side, personal finances can sometimes surprise us in pleasant ways. As I mentioned in the \u201cHow She Does It with Marva Smith\u201d interview<\/a>, one of the highlights of 2020 was that my family became 100% debt-free. (Yay!) Some people have asked \u201chow\u201d <\/strong>we did that so I want to share the five personal budgeting tips that helped.

Since I come from a finance background, I handle creating my family\u2019s household budget. I create it with my husband Reggie\u2019s input and then Reggie makes sure that we actually stick to it. (Left unchecked, I could <\/strong>totally ruin our finances with eating out and buying gifts!) That\u2019s why we make a great team. <\/p>\n\n\n\n

I have been using the method that I\u2019m going to share with you for as long as I can remember\u2026since pre-marriage and kids days. I have actually taught these tips to various women whom I have mentored over the years also. They work!<\/p>\n\n\n\n

Personal Budgeting Tips<\/h2>\n\n\n\n

1. Write down all of your debt. <\/h3>\n\n\n\n

Write everything that you owe anyone financially on an Excel or Google sheet. When I say everything, I mean everything<\/strong>. If you owe family members or friends anything, write it down. If you have an old magazine subscription that you haven\u2019t paid, write it down.

Doing so helps you to have a sober estimate of where you stand financially. I\u2019m not going to lie, people have burst out in tears after doing this first step but<\/strong> it has helped them to manage their finances better.<\/p>\n\n\n\n

2. Decide how you are going to \u201ctackle\u201d your debt.<\/h3>\n\n\n\n

There are a couple of main options that are normally suggested. You could pay the smallest debts first so that you can have some \u201cquick wins\u201d. Another option is to pay the highest interest debt first.

Personally, I suggest paying off any \u201cpast due\u201d bills first \u2013 that includes any money that you said that you would pay family and friends back but haven\u2019t. For me, it\u2019s about personal integrity and not taking advantage of those who love you the most. Then, I like the quick wins\/snowball method. <\/p>\n\n\n\n

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This debt-repayment method (which excludes your mortgage) focuses on paying off your smallest debt\u00a0balances first while making minimum payments on all other debts.<\/p>\n\n\n\n

Once a balance is paid off, you take the funds you had previously allocated to your smallest debt and put them toward the next-smallest balance, essentially building, or \u201csnowballing,\u201d your repayment toward the next balance. This cycle repeats until all of your debt is repaid.<\/p>\nCREDIT KARMA<\/a><\/cite><\/blockquote>\n\n\n\n

3. Create a basic budget\u2026and stick to it.<\/h3>\n\n\n\n

There are two basic elements to a budget \u2013 income (money that you bring in) and expenses (money that you pay others). Ultimately, your goal is for your income to exceed your expenses. <\/p>\n\n\n\n

I use three columns in my household budget for expenses<\/strong>. <\/p>\n\n\n\n

Expenses<\/td>Predicted<\/td>Actual<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Under each column, you would include a row for each expense. For instance, my rows include Tithes & offering; Reggie\u2019s personal spending; My personal spending; Boys\u2019 Expenses; Work-related spending; Parents; Groceries; Rent; Cell Phones; Cable; ConEd; National Grid, Insurance 1, Insurance 2, Insurance 3, Laundry & Household; Gas & Transportation; Kids 529 plans; Credit cards; Streaming Services (Netflix, etc.); Savings; Investments; Entertainment and Miscellaneous (gifts and non-recurring expenses).

Your expenses will be different based on your lifestyle. If you aren\u2019t clear on what your line items should be, write down everything that you spend for a month, then lump the expenses together to make your categories. Just realize that your expenses will change over time. (For instance, our food bill increased so much this past year but our transportation bills went way down.)<\/p>\n\n\n\n

I do the same thing for income<\/strong>.<\/p>\n\n\n\n

Income<\/td>Predicted<\/td>Actual<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

The rows are basically Reggie\u2019s income and my income. Reggie\u2019s income is stable but my income fluctuates. As such, I budget my income based on what I already earned the previous month. <\/p>\n\n\n\n

Budgets don\u2019t have to be super restrictive. Within these personal budgeting tips, there\u2019s a lot of room for choice. You\u2019ll just want to move towards your income being greater than your expenses<\/strong>. In reality, there are only two ways to do that \u2013 decrease your expenses or increase your income. (I prefer the latter option but that\u2019s not always possible in every situation. Next week, I\u2019ll briefly write about multiple streams of income.) <\/p>\n\n\n\n

4. Get clear on your financial goal(s).<\/h3>\n\n\n\n

There are many different things that we can focus on when it comes to personal finances. Making sure that our income exceeds our expenses, paying off debt, increasing our savings, buying homes, paying for our kids\u2019 college and investing are just some of the areas that we can be concerned about.

It can be overwhelming so I try to focus on one main thing at a time \u2013 while not neglecting the other areas that are important to my family. For instance, being completely debt-free was my focus and in my special \u201cPost-It prayer\u201d box for a while. Initially, we were $17,703 dollars in debt. Then, it was $8,000. Then, we were down $13,000 (braces!) and $10,000 before we hit the $0\/debt-free mark on 11\/20\/20. (It would have been great if I had put the dates associated with the numbers along the way but I didn\u2019t think about it.)<\/p>\n\n\n

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\"tips<\/figure>\n<\/div>\n\n\n

Now that the debt is paid off, we are focusing on saving and investing more this year. Next year, we will probably focus on college payments. Those 529s aren\u2019t going to cover everything so my hope and plan is that the residual income from one of my businesses will pay for our sons\u2019 schooling. They are three years apart so that helps spread out payments. (I just don\u2019t want our kids to graduate saddled with a bunch of debt!) <\/p>\n\n\n\n

Those are my family\u2019s short-term goals. What are yours? <\/em><\/strong><\/p>\n\n\n\n

5. Decide how long you are willing to take to meet your goals.<\/h3>\n\n\n\n

When budgeting, think about how long (best-case scenario) you want to take to meet your financial goal(s). Budget accordingly. As long as you are paying your bills on time if you can, I think the timing is a personal decision.

For instance, I was totally fine with maintaining debt in the form of a student loan for a long time. I just paid my scheduled monthly student loan bill when the interest was tax-deductible<\/strong>. When I suspected that the interest policy would change (it did), I went ahead and paid off my balance. <\/p>\n\n\n\n

You will hit your financial goals faster if you are stricter with your budget. I remember a budgeting class that was held at my church back when I was a college student. The presenter shared three different budget options. The only one that I remember was the \u201cdraconian\u201d one because it didn\u2019t leave room for any fun splurges. \u201cNo, thank you\u201d then. \u201cNo, thank you\u201d now.

As a mom, I have heard some financial experts talk about the extremes that they have gone to in order to quickly get out of debt. I remember one person saying that she decided to cancel Christmas for her entire family. I\u2019m impressed that she did that. It worked for her family. \u201cNo thank you, ma\u2019am\u201d regarding me doing that for my family though. (I have no problem canceling Christmas for my husband and myself but I\u2019m not canceling Christmas or birthdays for my kids unless I\u2019m super broke!)

That\u2019s the beauty of choice. I have a \u201cbut I won\u2019t do that\u201d list in my mind regarding moving towards financial goals. I won\u2019t stop:<\/p>\n\n\n\n