Budget 101 Your Money Inventory

100 dollar bill in the light

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Budgeting money first steps
GET YOU MONEY ON TRACK!

Money Inventory Basics

It’s that time again, Tax season.  The first quarter of every year is when new resolutions are made, and many people get their tax refund. Tax refund time is the perfect setting to start your financial makeover.

Some years ago, I got fed up with my financial status. I had a good income but I could not keep any of the money I made for any length of time.  There had to be a reason I was making a good living but living paycheck to paycheck. Many of us may find ourselves in the same situation.

When you think about your finances and where your money is going, on the surface things may seem ok. A closer look at your finances may be in order. I know you may have heard this all before, but it really is true. Money and resources must be managed.  The time is ripe to knuckle down and become your own auditor.

Where do I start: Budget – Money  – Inventory

Steps

  1. Grab a piece of paper ( Not your computer or tablet)
  2. Think – about every and I mean every dollar you spend.
  3. write down three columns on the piece of paper. Label them Bills – Necessary – Unnecessary.
  4. Write every dime you have spent in the last three months in bills and spending.
  5. Separate the items into the three columns.
  6. List how much money you make per month on the paper.
  7. Add the total of the columns and play with the unnecessary from the money you make to see how much you can save.

100 dollar bill in the light
100 dollar bill in the light

photo credit: torbakhopper transparency with ben, scott richard via photopin (license)

What am I doing

Recording where your money has gone is a start and only a start. The reason for writing down these numbers is to find out how many bills and spending items are on the table.  The next action putting items in categories gives you and indication where your money is going while placing priority on those funds.

I did it you can too!

Listing out where my money was going was a sobering act. I started to find my bank account had a trickle in the form of $20 to $100 expenses that were a pure luxury and very unnecessary.  Little money vacuums such as subscriptions, dues for things I really did not use and other money ripping items. those were the bills listed in the unnecessary.

Hardcore

Once I had a visual on expenditure, it was easy to see I could get my money in control. It became a game to see how much I could save.  When I had a bill that I could not pay off immediately, I developed a time plan by attacking the smallest, then rolling the payments of the paid off debt to the next item on the list. My family thought I was nuts, as they had not had a money mindset change as I had. Actually, my divorce came some time later(go figure). It was imminent anyway. I went nuts, I called credit card companies, closed accounts,  got rid of cable channels, started taking car of my own lawn and snow. I was a mad man.

I want to touch on something I may have breezed over. The reason for the 3 moths of bills was to get a good average of items that many not occur every month. Those surprise non-monthly bills can hit you in the face. If you don’t take an average over time of your spending habits, that sudden expense could derail your efforts.

24 Months – The Outcome Over Time

Failure to reach a goal is typically due to unrealistic expectations. 24 months is a good timeframe to make great changes in your life. As you rid yourself of the unnecessary cost in your life, freedom will show up. The goal is to run for the duration and not sprint to the finish line. This is a lifestyle to make living better and more manageable. Freedom of choice will become more dominant as you free up money to be used or invested. The task I have placed before you is really easy. Start with one item per month then use the snowball moeny management method to get your finances in order.

Next time I will show you some free tools to help you budget.

Now go live the Billionaire Lifestyle.

 

Peace Out Emmitt

 

 

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Ignorance in American, Personal Finance

Personal_financeI seem to have stumbled upon a kindred spirit in Alexa Von Tobel, in that we have to favorite thing we share. NBC’s the Biggest Loser television show and Personal Finance. For most of us, our historical education concerning personal finance is as described in the TED Talk. I have share the video in this blog post for the world to see as I believe hearing the same message from several points of view are critical.

Alexa von Tobel at TEDxWallStreet


There is absolutely no clear logical reason why many Americans should be suffering the financial status before us. If greater number of the American public were educated in optimal personal finance, it may be far easier to hold accountable external forces, municipalities, and factions placing influence upon our life, and the global condition.

It is true a mass eduction is in need for personal finance for the public at large, especially with rising cost and an economy that seems to be as stable as Midwest weather in the Spring season.

What I find really strange is the lack of conversation concerning personal finance, it a taboo, equal to speaking about bathroom habits at the diner table. We have to educate ourselves, our Family and especially our children about personal finance. The future of our country and world depend on it.

 

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What’s your monthly money outcome of your income?

-----What is my Outcome of my Income-----

Your Salary is not your Income.

Salary is the total amount received for a task provided to you before taxes fees and obligations are removed. Income is a percentage or actual dollar amount left over after certain criterion have been financially met.

Study your paycheck stub, or yearly W2 form from the IRS and it can be sobering.  There several numbers will clearly stand out, of them being the largest item is your Federal withholding’s from your paycheck or yearly W2 salary. This deducted money you will never physically feel, see, lay with spread on your bed in Las Vegas or manipulate even though it’s your money. There are  many cases requiring you and I to contribute even more money to the Federal and State government during the American tax reporting season. On average 1/3 -1/4 of your income is directly removed from your hands in the form of taxes and fees. The more debt of certain types can offset the percentage, but who wants debt to save a few bucks. Debt to save actually sounds crazy, does it not?

You owe, you owe it’s off to work you go!

Yes there are methods to use the money withheld from your paycheck and have it in your pocket, but only for a briefly, since it must be paid to the Government agencies such as the IRS at some point. It is not your money, so stop thinking it is you money.  They say one thing is certain Death and Taxes. The more you make the more you relinquish, unless the category of super rich is your niche tax bracket. It is a good idea to understand what your true income or “OUTCOME” of money actually available to you, which is that monetary value you have at your disposal to do with as you please. What you will find is that it is lower than you thought.

-----What is my Outcome of my Income-----
Calculating your true Outcome from your Money Income.

Many of us obtain a paycheck monthly, bimonthly, or in the rare instance weekly basis. Paychecks are usually allocated for the various financial obligations for survival, living combined with the automatic deductions. I wonder how many of us truly understand how much income we have at our disposal with each passing pay period or month.

Here is a constant question, “How can the money you receive as income be income if it is outgoing before you decide it’s purpose”?

The income we report to the federal and state government is not a true indication of our personal income to do our bidding. So let’s break this down. We will use $2000 gross paycheck as the example. Your employer states in the form of paper tender or the form of a direct deposit stub you have generated for yourself $2000.00. So here is what you can expect.

$2,000 = Gross Pay a single two-week pay period, which means your salary is approximately $4,000.00 a month, or $48,000.00 -$50,00.00 a year depending on if it is bi-weekly or semi-monthly.

Now for the deduction before you obtain a dime.

  • Federal Income Tax
  • State Income Tax
  • FICA (Medicare and Social Security)
  • Voluntary Contributions (Health Insurance)
  • Involuntary Items – Child support, defaulted student loans, taxes, and unpaid court fines.

What is left over is your Net Pay.

Example: Here is a shot of a downloadable Excel file to perform your audit.

Here is the Link:  what_is_your_income

Calculating your expense outcome.
Calculating your expense outcome.

From your net pay you still have a list of the most common financial obligations such as:

  • Housing payment
  • Transportation payment(s)
  • Child Care
  • Utilities (Gas, Water, Electric, Heat, Trash,)
  • Student Loans and education bills
  • Cable bill
  • Cell phone
  • Food
  • Credit Cards
  • Medical bills
  • Miscellaneous
  • Car insurance
  • Gym/club memberships

If the listing of obligations are added together you may find your “OUTCOME” of your “INCOME” is  much lower than you think.

It is far easier to move towards a controllable money savings system once you are armed with the proper cash flow and accurate information. Typically you may find several areas to trim the fat in order to hold on to more of your outcome of cash.

Ignorance concerning money outcome is one reason credit cards will never away.

It’s better to fully know where the water level is before the water gets deeper“.
The Billionaire Lifestyle

 

 

 

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