A few years ago my wife and I received a brand new set of knives for Christmas. Best gift ever. Listen, in our stage of life, it doesn’t take much to impress us. Until that amazing Christmas morning, I had no idea what I’d been missing. We’re no culinary experts, but with 3 kids and a busy schedule, there was a lot of dinner prep slicing during the week (chicken, onions, peppers, the occasional 7-iron.)
I hated it. It was the dreaded chore in the kitchen. I’d rather wash dishes. Then came Christmas morning…
The difference between our cheap, dull blades, and our new high quality, sharp blades was night and day. The saying, “like a hot knife through butter” finally made sense. As long as it involved slicing or dicing, I began asking to help in the kitchen. I’d do it all – no food was off limits. I could have shaved with those knives! (However, it was strongly discouraged.)
When you have the right tools and proper motivation, it changes everything. The same holds true for budgeting. For most people, the word “budget” sucks. I don’t have many conversations in social settings about expense tracking, personal cash flow, and savings plans. It’s not sexy. It’s not intriguing. It’s not entertaining. And while it might not be the subject of choice at dinner parties, I would argue it’s the one practice that will set the course for financial freedom in your life. And…it doesn’t have to suck.
Motivation
Let’s start with motivation. When you grasp the long-term financial (and even relational) benefits, it’s a discipline you can’t live without. Just like the person who takes control of their physical health by implementing dietary changes and a workout routine, we know their success is directly related to their motivation. You put in the work and establish the discipline to change the way you look and feel. Until you recognize that the discipline of budgeting could result in MILLIONS OF DOLLARS added to your net worth, you won’t make it a priority. But, when you see and believe in the numbers…you’ll get out the spreadsheets and apps and go to work!
Here’s a quick example:
The average American has about $15,500 in credit card debt (Nerdwallet – 2017). We won’t even include student loans or vehicle loans, which would push this number much higher. At an average APR of 16%, you’re looking at $350 to $500/month in payments depending on the terms of your card. So let’s make it $400/month.
If you were to get serious about getting on a budget, and rapidly pay off your credit cards, you will have then freed up $400/month. If you then invest that $400/month in a solid mutual fund and assume a rate of return of 10%…
in 32 years you’d have $1,062,007.
Just imagine the difference in your life – as you approach retirement to potentially have an ADDITIONAL $1 MILLION! What would that mean for your family? What would that mean for your lifestyle? What would that mean for your generosity? And it can all be yours by making the simple decision to begin budgeting.
If you’re married, have a “Dream Meeting” with your spouse. If not, have one with yourself. What could your life look like if you paid off your debt and got serious about investing in your future? Where would you live? How would you vacation? How could you invest in others? When you have a vision for that life, budgeting won’t suck, and will become the tool to fund your future!
Tools
It also helps to have a few sharp knives in the drawer. Thankfully we’re living in a day and time where technology has made so many of our daily tasks easy and efficient. You don’t have to stress over a spreadsheet, or sit at the kitchen table with a pile of receipts to create a budget and track your expenses. The two apps I’ll share below will do most of the work for you. You take a few minutes to set everything up, and you can be on your way to that additional million!
Everydollar
The Everydollar app, developed by Ramsey Solutions, is an excellent tool to help you create your budget. I would highly recommend their premium version Everydollar Plus ($10/month), which allows you to tie your bank and/or credit card accounts to the app so all of your transactions are automatically downloaded. Then in just a few minutes each day, you can quickly “slide” the transactions to the correct category, and you’re done! By “sliding” each of your expenses, there’s immediate feedback on your spending, and you won’t be surprised at the end of the month.
It has a clean, simple, and modern design, and is extremely user-friendly! Remember, a few minutes a day, and $10/month could be the formula for an extra $1 million!
Mint.com
Mint.com is the service I’ve been using for years, and has worked great for our family. It’s totally free, but you have to put up with affiliate ads and product recommendations, many of which are not consistent with createmargin’s coaching philosophy. But, if you’re willing to overlook the ads, mint.com is a great option.
You can tie all of your bank accounts, credit card accounts, and investment accounts to mint, and will allow you to keep up with your net worth, and see your progress. It also will automatically download your transactions, and unlike Everydollar, it can categorize those expenses for you.
There are other tools not mentioned in this article that are great options, the key is to pick one and get started!
What to Expect
You won’t be an expert right away. Learning your spending habits, developing a budget, and implementing a new discipline takes some time. I found that it takes 3-4 months for most to become proficient. Prepare for some frustrations during the learning curve, but before you know it, you’ll be telling your money where to go, not vice versa. For many, the idea of a budget seems restrictive, and removes flexibility and freedom from your life. The exact opposite is true! A budget gives you freedom as you make decisions BEFORE your income hits your account, and sets you up for the future of your dreams!
Budget “Date Night”
Because every month is different, you need to set aside some time each month to discuss and set your budget for the following month. You have to make adjustments when it’s time to take the pets to the vet, or you realize your son’s jeans are riding up mid-calf. If you’re married, a great way to do this is by planning a budget “Date Night.” If you’re single, find someone who’s willing to help you be accountable, and do it with them. It can be your favorite coffee house, restaurant, pub…but make it a place you ENJOY going and will look forward to. Bring your calendar and computer (or pen and paper), go through the month together and you tell every dollar where it’s going!
Creating this habit will be the single most important decision you make if you want to achieve financial freedom and success. Greatness doesn’t happen by accident, it’s achieved. And if you’ll make the decision today, I can guarantee your future will be better for it!
Next Steps
At createmargin, we specialize in helping people walk through this process and change their mindset about money and their future. If you’d like to set-up a 15-minute discovery call to see if financial coaching is a good fit for you, then click here.
You can also send us a quick note by completing the contact form below and we’ll follow-up on some options.
For information about our financial coaching, check out our article “Why Coaching is Right for You.”
