expert

BY MICHELLE FLOYD

Are you one of the many Americans who doesn ’ t have a personal budget ? Do you find yourself living from paycheck to paycheck , never having anything left over to save for a rainy day ? More and more of us are faced with this dilemma than we care to admit . It seems we all have the intention of creating a budget later , but somehow later never comes . We ’ re also faced with the dilemma of whether to save for retirement , children ’ s college , a rainy day , a vacation or countless other things that we can ’ t seem to prioritize and begin saving . First , let me just say that no one likes to talk about a budget , it is the dreaded six-letter four-letter word ! Unfortunately , it is one of the most important conversations you can ever have .

How do I create a budget ? I don ’ t know where to start .

Create a record of your expenses and income . Start by writing down everything that you ’ ve spent that month . There aren ’ t too many people who still use a check register , but your bank still has them available . Some of you may ask , “ What is a check register ?” Well , in the not-so-distant past we weren ’ t connected and online via our smartphones with balance alerts and everything else available at our fingertips . We had to keep a record of all of our purchases and deposits in a check register and wait for our monthly bank statement to come in the mail to reconcile , or balance , our checkbook . There is something to be said for that now nearly nonexistent ritual : It really helped you know where you were spending your money . After you ’ ve created that record of your expenses and income , do you have money left over or are you negative ? If you ’ re negative , you truly need to take a hard look at where your money is going .

Next thing is to categorize your spending : housing ( rent , mortgage ), utilities , restaurants , shopping , credit card or car loan payments , to name a few . Now ask yourself , “ Can I skip the coffee today ? Do I really need that dress ( handbag , golf club , etc .)?” More often than not , the answer is no on the coffee and yes on the dress . It may be difficult to drive past the coffee shop , but let ’ s put it in terms of your future . You spend $ 15 a day on coffee and lunch during the work week , that ’ s $ 3,900 per year . Wow !

Now comes the hard part , actually making these things happen .

So , you ’ ve set a goal to save $ 50 per week . Easy way to do that ? Set up an automatic transfer from your checking to savings or update your direct deposit information so that the money goes straight to your savings without a stop in the checking account . Out of sight out of mind , right ? Let ’ s look at that $ 50 per week over five years – that ’ s $ 13,000 ! Now , that is simple math and not including the power of compounding which we spoke so much about in our previous video and podcast ( both of which you can find at ExtolMag . com ). When you add in the interest element , that number quickly exceeds $ 13,000 .

Which should I focus on first – retirement , rainy day money , debt repayment , children ’ s education ?

This question is best answered case by case , but as a starting point , look at your employer ’ s retirement plan . Is there a matching component ? Such as , if you contribute 3 percent of your salary they will match you 3 percent of your salary ? If so , great ! Let ’ s start there . That 3 percent match is free money ! Be sure that you are contributing enough to take full advantage of the match ( 3 % is only $ 3 for every $ 100 you make . I promise , you won ’ t miss it after a couple weeks ). Never has anyone said to me or anyone on my team , “ I wish I hadn ’ t saved so much for my retirement .”

Having rainy day money , or an emergency fund , is one of the most rewarding things you can do for yourself . You never know when the washing machine is going to go out or you have to replace tires on your vehicle unexpectedly . As a general rule , you should have enough cash on hand to cover three to six months ’ worth of household expenses . We start this by simply putting a few dollars away at time using the methods above . The hardest part is staying out of it ! So maybe you open a savings account at a different bank than your checking . Whatever it takes to help you remain disciplined . The next part , and the harder part , is seeing the big picture and not giving in to that new trendy outfit . It is easy to set a goal , but no one else will hold you accountable .

“ How am I ever going to pay for my child ’ s college ?”

While having the goal of paying for your child ’ s education is wonderful , you must be able realize that you are not doing them a disservice by planning for your retirement first . Let ’ s face it ; they don ’ t want you living in their basement because you planned for their college and not your retirement ! We all want our kids to have it easier than we had it , and that is wonderful if you can comfortably make that happen . Just don ’ t sacrifice your financial well-being to make it happen .

Debt repayment is sometimes a huge mountain to climb . Have high interest credit cards ? Did you know that you can transfer the balance of that high interest credit card to a new credit card , oftentimes with little to

58 EXTOL • JUNE / JULY 2017