Updated: Jul 5, 2021
We are about half way through the year! Have you been sticking to your budget? Have you created an emergency savings account or paid off any outstanding debt? If you answered yes, you are doing great and keep it up! If you answered no, you’re still heading in the right direction, otherwise, you wouldn’t be reading this right now.
If you haven’t created a budget, it’s not too late! Start off by creating a spreadsheet of all your expenses and income. The top of your spreadsheet should list your monthly income (salary or estimated commission) and the middle should include all monthly expenses. You’ll want to start off with secured debt and needs-based debt (housing, transportation, and food) first. Don’t forget to include contributing to your savings account (remember to pay yourself first)! You can create a miscellaneous line for extra activities such as eating out or recreational activities. Take the total income and subtract the monthly expenses. If you have money left over, you can either put it towards miscellaneous or add it to savings. If there is a negative result, you will need to adjust your budget to reduce expenses or create more income. Here is an example of a monthly spreadsheet: https://docs.google.com/spreadsheets/d/1M5WJyLnM6D64jBOWWLagiflbzKXj6EsIJpWmTvcpGE0/template/preview.
Starting off with an emergency fund is crucial to a successful financial plan. Most coaches will set a specific amount, but I’d suggest starting off with saving at least one month’s worth of bills and then build up to six month’s worth. Now if your bills are less than $1000 per month, you’ll want to at least save $1000 for unexpected expenses or emergencies.
As for paying off debt, you can choose between two methods: avalanche or snowball. The avalanche method involves paying off debt with the highest interest first and making the minimum payments on the remaining bills. For example, if your highest interest debt is a credit card with 18% APR with an outstanding debt of $5000, you could use the extra money left over after expenses have been paid to pay towards the principal to reduce the amount of interest you pay. On the other hand, the snowball method would allow you to pay the smallest debts first and take the payment to be used toward the next smallest debt until it has been paid in full. This method is often more appealing because it creates a sense of accomplishment quicker as debts are paid in full and taken off the spreadsheet.
Asking for help is the first step and we are here to assist you! Fill out a contact form today and we’ll schedule a time to speak with you!