Blog #1 Financial Independence Series - Handling Money 101
Posted Jul 16, 2020 12:37 PM
Start your journey towards Financial Independence today!
Handling Money 101
Blog #1
In this blog post, we are going to talk about handling the money which you receive from your job, a sale, or other means. Our goal is to save more money than we spend; ultimately, earning money from our money. Most of us know what to do, but most of us don’t do it.
This is the very first blog that I will release. This first blog is also the most important one. If you cannot follow the below and maintain discipline, none of the other blogs will be practically beneficial for you.
We will go over:
- Discipline & Spending Habits
- Essentials & Non-Essentials
- When to save money
- Where to save money
We will NOT go over:
- How many exact dollars you need to save
- What to invest in the market
- What I personally do
Discipline & Spending Habits
One of the first keys to success is discipline. Very much like brushing your teeth every morning, or taking out the trash once a week, paving a road towards financial independence requires self discipline every day. Too often than not, we may find our heads are up in the clouds in a world that is not real.
In this world, things may be going well. You’re making money that you don’t need instantly for something. Overspending does not feel like a burden to your bank account. Purchases for yourself, someone else, or some thing, give an instant gratification in the moment. The $25 you received from an ebook is only $25; therefore, you can afford to spend it or lose. Stop and think about this blog before you make a decision.
Coming back to reality shows a different story. Your dreams or “steady foundation” in your job and other income causes you to become sloppy. You’re pushing money around in the middle of the month because your “bill isn’t due yet.” If you’re reading this and saying to yourself, “That isn’t me!” or “I’m not sloppy!”, then you are already in denial.
Discipline yourself into saving that money right away. Take it and place it somewhere temporarily until you are able to evaluate where you need your money. Cancel your recurring subscriptions that you don’t need or use. Stop putting it off. Do not throw your money towards something else and say, “I’ll figure it out at the end of the month.”
Essentials & Non-Essentials
Before we can talk about investment opportunities in blogs to come, you must first create a list of Essentials and Non-Essentials. If you like to budget, or would like to begin to budget to determine where and what your monthly expenses are, I recommend downloading Mint (free) or YNAB (You Need A Budget - paid). I do not personally budget because I have disciple.
Examples of Essentials:
- Debt (student loans, credit cards, personal loans, mortgage, etc.)
- Emergency Fund (1-3 months expenses for starters)
- Utilities (Electricity, water, gas, Internet, etc.)
- Savings Accounts (liquid cash set aside from your emergency fund, 529 plans)
- Retirement Accounts (401k’s, IRA’s, others.)
Examples of Non-Essentials:
- Entertainment (Netflix, Spotify, Hulu, Pornhub subscriptions)
- Gifts for yourself or someone else (clothes, amazon products, virtual game items).
- Fast Food (eating out every day vs grocery shopping every so often)
The steps are simple:
- Pay your debts/monthly expenses
- Pay yourself
- Save money for emergencies (skip if completed)
- Set aside or maintain an X amount of savings in your account (skip if completed)
- Pay your future self.
Divide the rest of your money up to include non-essential, things like groceries, gas, entertainment, small repairs, etc. Take the rest of the money leftover at the end of the month and A. Pay down debt or B. Through it into retirement. You will likely want to go with option A, but this will be discussed more in coming blogs. There is good debt and there is bad debt.
When To Save Money
Saving money should only come after paying your dues and debts. Do NOT skip the essential step 1 of paying down your debts. I will keep it short and simple and get straight to the point.
If you have $10,000 in debt at 14.99% APR with a 60 month term and $237.85/monthly payment, it will take you $14,270.81 to pay off entirely.
That is a LOT of money going towards interest and a lot of money your future self is losing. Paying down these debts first is a must. You cannot afford to delay your debts as your retirement date will just get further and further away.
On top of this, stop paying your expenses with a credit card if you are not disciplined enough or able to pay it off right away. Paying cash and cash only will help you not be reckless with your credit card debt. Carrying a balance month to month is not beneficial and anyone else who tells you otherwise is wrong. You will need to maintain activity on accounts however or they may be closed due to inactivity.
End Note
Remember, this is more of an introductory blog that will pave the way for the rest. If you want to get into specifics or a plan, you may PM me or start a conversation. Everything I say is a recommendation and is solely up to you to decide on what to do.
Recommended reading for this blog:
Financial Peace by Dave Ramsey - What to do with the money
Total Makeover by Dave Ramsey - How to plan it
~ Kill Joy
