Are you looking for simple ways to learn how to budget your money?
You are tired of living the paycheck to paycheck without progressing forward.
Most people are live paycheck to paycheck not because they have too but became that are poorly managing their money.
Its an amazing feeling to be debt free and not worry about your finance situation.Create the financial freedom your family needs to work if you want to, do what you love to do and travel where you want to go. Do not let money drive your decisions. #financialfreedom #babysteps #howtobudgetmoney #debtfreeliving Click To Tweet
Which are you?
There are 2 types of people.
Family 1: Has good paying jobs with income over 100,000, they spend more than they earn, shop often, in debt but have a difficult time reducing debt amount.
Family 2: Has 1 one working parent making 45,000 manages to pay off 50,000 in 3 years and moving toward a debt
How you may ask?
The route you decide to take is determined by your mindset of money and how you manage your money.
This post contains affiliate links. For more information, see my disclosures here.
What your Mindset around Money?
There are those believe debt is with them forever so why pay it off, while others understand the financial freedom they will have once debt was not a factor in their life.
Don’t believe me or need motivation then check out these Debt success stories. They will blow your mind! People are paying off debt within two years, debt free by age 30 and teacher who paid off 102,000 in Debt! Amazing.
I don’t know about you but I’m inspired.
Having the financial freedom is a serious goal of mine.
The thought of not having debt and bills excites me.
But I understand it’s a process that should not be taking lightly.
As of now my husband and I have been aggressively chipping at our debt. We sold our truck with high monthly payment and replace it with a used truck without payment ( thanks dad).
And although the process has gotten harder will the new baby. Why is daycare so expensive?! We are determined to stay on path of getting out to debt.
I am not an expert at clearing debt, but I do have a basic understanding, which helps me move closer to my debt free goal.
What is a Financial Plan?
Financial Planning is the process of setting goals, and understanding what it takes for you to get there. Everyone’s financial plan looks different, so determine what right for you.
To create your financial plan you need to have a budget and goals.
What is Budgeting?
A budget is a strategy that helps you track you’re finances in detail.
It’s telling your money what do to and find out where it’s going. Treat your money like your kids! Some times your money needs to be grounded.
Now there is nothing sexy about budgeting your money, but it’s the only way to manage your money correctly, so you get on the right foot.
How to budget your money and why?
It’s common to people to owe debt but why not make life more simplistic and stress free.
You don’t want debt to define you.
- Instead you are striding for your finances to be the least of your worries. Life is busy enough.
- You want to leave your family a legacy not debt
- You have financial goals and plan to make your dreams come true.
Which budgeting method should I use?
Because I am super lazy and hate doing a budget, I have found this amazing free excel sheet.
You simply plug in your numbers, and it does the hard work for you. It allows you to budget your money with excel, which is the simplest method ever.
I just sent my husband the video to watch, so I didn’t have to explain why I wanted to sit down with him and ask him a million financial questions. He was onboard right away.
If planning for a year is too overwhelming, then I suggest starting with a monthly budget your family.
How to Budget Your Money Monthly
1. To start on the right track begin thinking about your finance the month before and start at the beginning of the month.
2. Write down your income. Include regular paychecks, side hustles such as your blog, bonus, child support and gifts.
3.Calculate your expenses. And all your bills that you pay monthly, years, etc.
Tip: I printed a calendar, went through the bills, then
List of Priority bills that should be on your mind.
- Cell phone
- Groceries (including diaper, formula, and household items)
- Health Insurance
- Television (cable, Netflix, Hulu, etc.)
- Family Fun
- Schooling (daycare, college)
- Clothing (the kids grow like weeds)
- Don’t forget the expenses that happen less frequently like water, recertification, registration fees, dues, etc.)
use a budget planner 4. Take all your income and subtract your expenses so you can understand where you are financially.
We are not done, bare with me.
5. Understand where you are now and what you owe.
You will start by making a list of all of your debts, their balances, and interest rates.
This section right here opened my eyes about my financial situation.
My college loan started at 63,000 with 6.7 percent and paying 777 a month with 206going to interest!!!!
It was like I was paying nothing. * crying
Therefore, I had to rethink the approach. I decided to sign up for Earnest. Earnest gave me a much lower interest rate so instead of paying 206 to interest and paying 573 to the principal, I was able to pay 650 on principle.
This allowed me you pay 7000 in 18 months.
6. Know what’s on your credit report. For your free credit report by visiting AnnualCreditReport.com
7. Know your credit score. For your FICO score, visit www.myfico.com.
What are your financial goals?
It’s very important to set goals for your finances. For you to achieve a debt-free life, you need to determine your WHY, set tangible and realistic goals, and keep your eye on the prize.
So write down your goals and tell your money where to go.
What should be my financial priorities?
There are different experts such as Suze’s Best Advice on Getting Out of Debt, Chris Hogan, Robert Kiyosaki, and many more that have different approaches on getting out of debt.
I choose to use the Dave Ramsey approach because it’s the simplest budget method to help you track your finances.
If you are a paper person like me also use a budget planner to help you reach your goals.
Let’s Dig in!
DAVE RAMSEY BABY STEPS TO FINANCIAL FREEDOM
Goal 1: Dave Ramsey suggests to starts a 1,000 to start an Emergency Fund.
An emergency fund should be used for things like replacing your vehicles tires, and there is a leak in the home or something is broken and needs to be replaced.
You can use an online savings account so you can get the most out of your interest.
Goal 2: Pay off all Debt using the Snowball Effect.
I personally used the snowball method to pay off my credit card debt. And it works.
Basically, after you list your debt balances and interest rates, you will arrange them in ascending or based on the loan amount.
For instance, if you have a car debt of 21, 000, college loan debt of 155,000 and credit card debt of 5,000, then you will put the credit card at the top.
Credit card 5,000
Credit card debt 155,000
Then you pay the minimal of all but put more to the smallest loan which in this case would be the credit card debt.
Now if you owe a mortgage, this step doesn’t include it towards your debt free goal. Some experts define debt-free living achieved once consumer debt is gone.
This is because a mortgage is looked at as both good and bad debt. This works for me because we own two home, the one we live in and the other we rent out.
Goal 3 is to Save 3 to 6 months of savings
I am still on step 2, according to Dave Ramsey plan, but because I am a contractor for the Government, and I can get let go at any time having savings is a priority for me. I can default my student loans if I need to but not having money if I am instantly fired scares me.
Besides, my savings helped us through the government furlough, which was rough because we didn’t know when we were returning to work.
Your savings is important because it gives you the freedom of worrying about what would happen if instead, you can for those rainy days.
It’s important not just to put your money in any saving account. The idea is to have your money to make money. Most banks offer a low Annual percentage yield of .01 -.04 % that will never get you anywhere.
After tons of research, we decided to go with Discover for a saving account because they offer 2.10%, now your money can make money.
For 500 dollars you will earn 10.51, and for 2,000 you can earn 42.03.
Regardless of which bank you choose, pay attention to the APR and online banking offers better rates.
If you are in a situation where money is tight and need more options to make more money then here are 30+ LEGITIMATE WAYS MOMS MAKE EXTRA MONEY AT HOME
Goal 4- Invest 15% of Your Household Income in Retirement
This seems far for someone in their 30’s like me, but I know it will sneak up on you, so it’s better to be prepared and save for retirement.
You should put 15% or more in a Roth IRA and Pre-Tax Retirement accounts. My husband has both, and his company matches his percent.
I have a 401 (k), my company doesn’t match, and I am only saving about 2%.
Because my company is not matching what I put in, then I am considering moving it to a Roth IRA.
Whether you decided to open a 401 (k) or IRA depends on your situation.
If you not sure which decision is right for you, Dave Ramsey has a free service.
Also, check the services offered by your bank USAA offers free financial advice.
Goal 5. College for Kids
Now you have completed goal 1 through 4, saving for your child’s future is your next major step.
If you are deciding whether you should pay for your children’s college expenses that depend on your situation.
If I could do things over again, I would have found out more about free educational resources.
But, if you must help your child look into the 529 College saving plan or Coverdell Educational Savings Account (ESA). The two options are different, and one might be better than the other, so do your research.
Goal 6- Pay off the HOME
Ok, let’s imagine real quick. You don’t have any debt the kids are taking care of, and money is still rolling in.
What do you do with that extra money?
If you serious at getting to Goal 6 in your life then find the best approach from
12 Expert Tips to Pay Down Your Mortgage in 10 Years or Less – Due
Goal 7: Build Wealth and Give Back
As you get closer to your debt-free life, your goals change, and you will begin to want to help others.
Helping others is the motivation behind getting out of debt and acquiring more.
Some people have a negative mindset when it comes to money like money is the root of evil. Wanting money is selfish. People who strive for money lose touch with other priorities in life.
But those statements can’t be far from true. How you are as a person doesn’t change once you make money. If you are stingy as a poor person, then you will be stingy rich too.
I believe money is the tool to help you help others. We are people who want to make a positive change in the world.
Unfortunately, you can’t do much being broke. To build wealth, help others, and bring positivity into the world.
How to get out of Debt: Wrap -up
Overall, I believe Dave Ramsey approach to get out of debt and build wealth is possible. And necessary to create a worry-free life. You may have to tweak it a little depending on your families personal and financial situation, but as long as you stay consistent, you will reach your goal.
The fact that you’re even looking at ways to make a change is a positive step. So pat yourself on the back.
Next, you may want to find out your money mindset because you don’t want that to limit your growth.
Remember, as you take each step towards a debt-free life, you are pursuing financial freedom. And leaving a legacy to help others.