Developing an Xtreme Budget & Savings Plan
Don’t Know where to Start? Get to know your money, and your money will get to know you
When it comes to building and maintaining great relationships with other people, most would probably agree that it takes a certain level of work- a commitment of time, effort, and energy to build strong bonds. This is certainly true at the onset of getting to know someone as you need to learn about the other person, establish trust, and begin to build shared memories together. As the relationship matures over time, people can go about their separate lives and pick right back up where they left off months or even years later. Although it would be expected that there would be some level of relationship decay, the reason why picking back up would be fairly easy is because the work has already been put in.
You probably know where this is going right? Well, just like building a relationship with another human being takes a lot of work in the beginning, so too, does getting to know your money. I’m sure this probably sounds weird, but if you don’t already, you need to build a real close, personal relationship with your money. This means knowing how much you make and where it is all going- your bills and your splurges, and how much you have left over for savings at the end of every month. This is what I did so that I knew exactly what I had made, and exactly what was left in my pocket after bills and expenses. This was critical because it allowed me to get intentional and precise about my savings goals every month. Now if your income varies because it includes or is primarily commission/tip income you need to do some homework. Find out how much you made or deposited for each of the last 6 months and take an average as your monthly income. If it’s too late then start today.
Now on to some of the fun part! Time to take one of the 1st actionable steps to building your financial house. On the Xtreme Tools page I’ve created Money Nate’s Xtreme Budgeting Worksheet to help you do a complete and thorough budget. This is an extremely detailed budgeting sheet because we need to get in the habit of tracking where every dollar is going. You are about to start winning with money, so that you can keep more of it! Seriously, take some time to work through this spreadsheet (include spouse/significant other). You can bookmark this page, and come back when you know what your money is up to. You and your money are about to become real close friends. J
My hope is that you’ve now detailed out what your money is up to. Any surprises? Knowing what’s coming in and where it’s going lets us see what is left for savings and debt reduction under Total Net Surplus. Ideally we want this surplus to be several hundred dollars or more, and to continue growing it from there. If it’s not, or even if it’s negative, don’t panic. Let’s spend the rest of the time today talking about expense reduction and increasing your monthly net surplus. There of course are only two ways to do this: increase income or reduce expenditures. We will talk about the income in an upcoming post, but let’s start off by reducing what you’re spending. Start by looking for ways that you can cut back. Reducing entertainment and dining out can be quick wins, but what about also cutting out a gym membership or overpriced phone bill? I would also venture to guess that most of us could cut back on our grocery bills as well just by making some small adjustments. Let’s go through some specific action items that can reduce your monthly output and start adding up to great savings:
Non Debt Expenditure Hacks that work:
Reduce Food / Grocery Bill – Cut out what you know you don’t need. For help to greatly reduce your grocery bill, try $5 Meal Plan, a meal planning service that sends you meal plans so that ALL your meals stay under $5!
Reduce Phone Bill – There are a few low cost cell phone carriers out there. Check out one like Republic Wireless. Republic Wireless offers smart phone plans for as low as $15 a month! If you need data you can still have a very reasonable plan for $20-$30 a month! Their network coverage also seems to be really good.
Reduce gym – If you have an expensive gym membership, try a less expensive alternative like Planet Fitness or 24 Hour Fitness. If you’re able to eliminate the gym membership and workout from home, even better!
Eliminate Cable Bill – Buy a very inexpensive digital antenna like this one and watch free TV! With many people nowadays using inexpensive streaming services like Netflix, consider dumping the cable or satellite.
Shopping Savings – I always look to see if I can find a deal or sale first before ever making a purchase. Ibotta is an addictive, must have app that allows you to get rebates and cash back on purchases that you make by scanning a photo of your receipts. Also be sure to always use Ebates and Groupon first to look for great deals and discounted purchases.
DECLUTTER –
The shopping savings you can create by being a “discounted shopper” whenever you must buy really is a big one and has saved my wife and I several thousand dollars on clothes, curtains, a dining table, and other furniture. The Ebates program that I mentioned above provides free cash back for buying things you normally would, and is currently offering a $10 gift card just for signing up. I always evaluate the ease of signing up for some of these discounts, and will only recommend them if they add value and can be completed quickly and easily. Ebates is a legitimate one.
Another area I would strongly urge you to shop and see if you can save is in the area of insurance- auto and home in particular. While I don’t necessarily advocate for one particular carrier over the other, I switched to Progressive on my auto insurance a couple years ago and ended up saving over $600 a year. You have to have insurance, but there is no need to pay more than you have to. Take the time to get quotes from multiple companies to make sure that you aren’t getting ripped off.
Reducing Debt Expenditures
In order to attack and cover this plan from all angles, we do of course need to give serious consideration to reducing interest rates on actual debt expenditures like credit cards, auto, and student loans. If you are currently paying higher than normal rates on any of these, it may greatly benefit you to refinance or consolidate them. Credible is a great source for those looking to refinance and save on their student loans. However for those with credit cards, auto, and other loans that have high interest, I highly recommend that you understand the ends and outs of credit first, and to learn about the factors that make up your credit score. This is because the stronger your credit is, the more success you are going to have with refinancing and being effective at lowering your rates. Head on over to my post: Using Credit to Your Advantage: What I Need to Know about How Credit Works. In the meantime, know that lowering rates is great, but there is nothing more important and more powerful than slaying your debt head on by budgeting, reducing expenditures, and using as much of your surplus money to throw at it as you can. You can also check out The Money Grove’s How to Tackle a Mountain of Credit Card Debt for some strategic assistance around debt reduction.
My goal is that you find a lot of value in many of the budgeting tips and strategies I share that have helped to make me successful. I love today’s technologically driven world because there are now numerous money and finance apps that are rad and that make consolidating your accounts really easy. My absolute favorite is one called Personal Capital. Personal Capital is a free app that consolidates all you accounts and allows you to control them from one place. Not only does it track your spending habits, but the amount of detail provided in the personally tailored charts and graphs allows you to set and achieve your own specific financial goals.
“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” – Robert Kiyosaki
