Category Archives: finance

Steps to Budget Based on Your Values

Are you finding yourself struggling to stick to a budget? Many clients and Millennials that I talk to are always excited once we are done talking about how to budget. I’ve realized that, like myself, we missed out on not just financial literacy but how to view our money. I have four ways that will help you start to think of your money as a tool to create a better life where you spend your money according to what you value. Here are my four steps to start.

What Are Your Values?

Often I’ve found myself in the past spending money on items that I didn’t use for very long or were poor quality. I’ve learned over time that if we develop an understanding of our values we can learn to spend money with a wiser purpose. When we spend wisely, our budgets become easier to manage and we start to control our finances without them controlling us. (For more from this author, see: 5 Ways to Improve Your Finances Throughout Life.)

From Values to Goals

Our values will lead to our goals in life. If you value family, I am guessing you may have a goal of starting a family or spending more time with your family. If you value travel, you may have a dream travel goal. Aligning our spending according to our values will help us reach our goals because we’ll be spending according to the values that help us reach our goals.

Work on Filtering Out Distractions

Every minute we are being advertised to – whether online, in Starbucks, on our drive or even during the podcast we are listening to. Ads are everywhere trying to get us to buy something that we probably don’t value and won’t help us reach our goals. Learn to look past these ads and stay focused on items that bring long-term value and move you closer to your goals.

Give Time to Major Purchases

Most goals are large purchases or expenditures of some sort. I encourage you to think through the purchase. Purchasing plane tickets because they are cheap for a trip that wasn’t even on your radar may be filled with regret. Just because an item is on sale doesn’t mean it is the right time. Save for what you expect but you can be ready to take advantage of discounted items if it’s the right time and you’ve been planning on the purchase. Impulse buying is what gets most people into trouble, even myself.

Our everyday decisions cause ripple effects. Make smart purchases that are aligned with your values and you’ll be on your way to achieving your goals in no time. My favorite budgeting tool, YNAB, is based on a budgeting philosophy that most people can resonate with. My wife and I love the tool because it creates better communication in regards to our finances.

Budgeting a Success in the New Year

At the end of each year – and the beginning of the new one – most of us think about things we’d like to accomplish in the coming year.  It’s a time we engage in self-reflection, ideas for self-improvement, and new – or ongoing – resolutions and goals.

One of the most common resolutions is losing weight, but we all know how that goes: crowded gyms in early January, inevitable drop-off when February rolls around. In fact, a study done by the University of Scranton shows that only about 8% of people actually achieve their resolutions.

Financial resolutions often include starting – or finally sticking to – a budget. Unfortunately, that resolution is all-too-often hard to stick to as well.

Why do so many people have trouble sticking to their resolutions? One of the main reasons is having unrealistic expectations. Overconfidence doesn’t just affect fitness goals, it affects investors’ behavior as well.

How can you make this the year you stick to your goals?

Take Baby Steps

Be reasonable in assessing where you are with your finances and don’t try to tackle everything at once. Start by listing all the areas of your financial situation you would like to improve. Then prioritize the individual elements in order of importance to you, and start by taking on one or two at a time.

If one of your goals is to start – and stick to – budgeting, don’t give yourself super-strict boundaries. Instead, start by creating good habits one at a time. If you want to pay off all of your credit card debt, for instance, take a look at how much debt you have and create a realistic weekly or monthly plan to start paying it off.  If you want to buy a house in five years, you could decide to spend less now on something that you currently enjoy.

Focus on one or two goals at a time, see how it goes, and make progress – and adjustments – to stay on track.

Be Specific

Instead of saying “I am going to save more this year,” or “I am going to save $5,000 this year,” try to specify exactly how you plan to do it. Start with something like: “I will take $100 from each paycheck and put it into a savings account.” By giving yourself a tangible – achievable – steps, you’ll be better able to track how well you are sticking to it.

In addition, try to think about what it is that you are trying to accomplish. Why do you want to save an extra $100 each paycheck? Are you saving up for a car? Trying to pay off debt? Building up an emergency fund? When you add purpose to your goals, it makes it more compelling and easier to accomplish.

Stay Accountable

Know yourself: accept who you are and what that means. Are you someone who might let things build up then feel too overwhelmed to jump back on track? Think about sharing your goals with a friend or family member and set times to check in with them and go over your progress. If you want to go to the gym three days a week, think about getting a workout partner. If you want to save an extra $100 from each paycheck, see if there is a friend that has the same goal and you can do it together, comparing how it’s going throughout the journey.

Most importantly, understand that this is a process. Some weeks will be better than others, but, if you can follow these three steps – set realistic goals, set specific goals, be accountable – hopefully you will be part of the 8% that gets it done this year.

Key Tips for Budgeting Your Money

It’s almost a truism that budgeting is a critical step for anyone looking to get serious about money management. After all, you have to know where your money is going in order to make plans for the future. But if you haven’t ever tracked your spending, how do you get started?

Here are three tips that will help you set up a budget and start managing your money.

Determine Wants Versus Needs

The first step towards creating a budget is determining which expenses are wants and which are needs. Housing, utilities, groceries, transportation, clothing and childcare are generally considered necessities; entertainment, travel and dining out are thought of as “wants,” or what are known as discretionary expenses. That being said, there often is some gray area between a want and a need: You may need a car to get to work if carpooling or public transit is not an option, for example, but a flashy sports car may be a want. Everyone must buy clothes, but designer clothes are not requirements. If you can afford or have already purchased a luxury version of your necessary expenses, remember that downgrading is always an option if you decide that type of expense no longer fits with your lifestyle.

Figure Out Fixed and Variable Expenses

Fixed expenses – which, as their name implies, remain the same every month – are the backbone of every budget and should be the easiest to plan for. Examples of these might be your rent, car payment and student loans, which are likely to be the same, month in and month out. Variable expenses, no surprise, are the ones that change every month. Your grocery bills, consumption-based utilities (like oil/gas, electricity, phone service), clothing expenses, travel and car maintenance expenses are all variable expenses.

Budgeting for variable expenses, of course, is one of the harder parts of creating a spending plan. Here are a couple of tips to help make it easier:

  • Track your spending for three to six months, figure out the average over that period and, in the future, aim for the average every month.
  • Instead of tracking variable expenses monthly, try setting a six-month or annual budget goal. This is especially useful for expenses like car maintenance or travel, which might not crop up every month but still need to be considered in a budget as they can be big-ticket items.

Decide What Type of Money Manager You Want to Be

It’s important to determine whether you are a big-picture or a detail-oriented money manager. Some people like to know generally where their money is going but don’t want to have to track every coffee they buy; others like to know exactly how much they spend on their latte habit. Determining if you prefer a detailed or broad view of your money will help you decide what type of budget system will work for you. The one caveat: If money is tight, you may have to use a system that tracks every penny. Once your finances are more flush, you may be able to switch to a less detailed tracking system. Here is a closer look at each type of budgeting.

• Detail-oriented budgeting. This system helps you control the outflow of your funds and sometimes alerts you to wasteful spending that you weren’t aware of. You know the popular “you spend enough on coffee each year to buy a used car” scolding? This system will help you figure out exactly how much you spend on things like your java habit, and where you actually want your money to go – including into savings and retirement accounts.

While you can create a detail-oriented budget manually with receipts and spreadsheets, many people choose to use automated tracking tools such as those found at Mint or Personal Capital. These programs will track and categorize all of your spending, which makes it easy to see if you are overspending in different categories. An additional benefit: If you have expenses for your work that should be reimbursable (travel expenses, office supplies), an automatic tracker can help you keep them organized and make sure you get the full reimbursements you are due. 6 Best Personal Finance Apps will update you on good tools to try.

• Big-picture budgeting. If you have more financial wiggle room and less tolerance for tracking details, you may want to develop a big-picture budget. Create a list of all of the regular expenses that you consider “needs,” and include categories for savings, retirement, emergency funds, charitable giving and travel (if you travel often). If you choose to use a big-picture budgeting system, be sure to give yourself a sizable cushion for savings and an emergency fund. (For more on this, see Building an Emergency Fund and Why You Absolutely Need an Emergency Fund.)

Once you have determined your monthly necessary expenses, plus the additional categories included above, you can then spend the remainder of your monthly income however you choose. The only thing to track is the total spent from this “miscellaneous” fund, but you don’t have to track how much you spend on clothes or coffee. To make tracking easier, it can be helpful to have one bank account or one credit card that you use for your “miscellaneous” expense fund so that you can easily keep an eye on your total expenditures.

The Bottom Line

Budgets are a critical tool to help with money management, but ultimately they are just a general set of guidelines. If your current budget isn’t working for you, try another approach. The most important thing to do is to make a plan that works for you, and once it’s in place, to stick with it.

Woody Harrelson Is a Terrible Debt Collector

He was bad at his paper route. And not a great hype man for a lame gym. But as the actor tells Wealthsimple, he’s gotten better at money over the years, partly by not needing to spend much of it.

I was 9 or 10 years old when I got my first job, delivering the Houston Chronicle. Here was the problem: I was good at delivering newspapers, but I was terrible at collecting money from my customers. When I did my collection rounds, a lot of people would be like, “Hey, can you come back tomorrow?” And I’d say, “Sure, no problem. Sorry to bother you.” But day after day they always had an excuse or they’d pretend not to be home, and as a little kid, my collection efforts had no real teeth.

The way it worked, I’d buy the newspapers in bulk from the publisher as an independent contractor, and once the customers paid me, I’d turn a small profit. But despite all my hard work delivering papers, with my ineffective collection efforts I’d usually have a net loss. I’d hoped to make a little spending money, but I didn’t make money — I lost it. Sometimes in life, the middleman gets squeezed. On the other hand, that paper route sure got me a lot of exercise. I always try to find the silver lining.

The least expensive things can be the most personally rewarding. My wedding, for example. The whole event cost a total of $500.

In my early 20s, I was living in New York City, and I’d take just about any job I could get. I waited tables mostly, but I also did all kinds of weird side gigs. One time a friend of mine started working at a cheap local gym that happened to have some famous members, like Madonna and the guys from Kool & the Gang—this was 1983, and their song “Celebration” was all over the airwaves. The owner of the gym wanted to do some grassroots advertising and hired my friend and me to ask other neighborhood businesses — bars, coffee shops, laundromats — if we could place ads for the gym inside their store windows. The lure for them was that if they let us put up a poster, they’d get a free membership to the gym and might catch a glimpse of Madonna or Kool & the Gang. For us, we got a couple bucks for every poster a business owner agreed to hang. It was a lot of door-to-door hustling. Fortunately, my people skills had improved since I was a kid with a paper route. But the posters didn’t seem to make a difference: Even with Madonna, “Celebration,” and all our grassroots energy, the gym didn’t survive. That said, I met a lot of interesting people around the neighborhood, and the money in my pocket helped me get by, so I don’t count any of it as a wasted effort.

Wealthsimple is investing on autopilot

Over the years my relationship with money has shifted in some ways, but in other respects, it has stayed the same. These days, when I go into the grocery store, I’m not calculating the cost of each item. I don’t need to be as penny conscious as I used to be — I just grab and go. But I was raised to be conservative in my spending habits, so I always seek a balance: I don’t want to be a spendthrift, but I also don’t want to be needlessly lavish.

Every once in a while I treat myself with a special purchase. The most extravagant I’ve been is when I bought a Tesla not too long ago. I like the way it drives, and I really like the idea of reducing my carbon footprint. But often, I’ve found, the least expensive things can be the most personally rewarding. Take my wedding, for example. The whole event cost a total of $500.

Are You Living Paycheck-to-Paycheck?

A large number of American households live from one paycheck to the next. This number has gone down since September 2016, according to a survey conducted by McKinsey & Company, where consumers expressed more confidence in their financial stability compared to the last eight years. But about 24% of the participants in McKinsey’s study still lived paycheck to paycheck. This means they struggled to cover their basic expenses and had empty checking accounts until the next pay period. With families to support and unexpected additional expenses, this can be a very difficult experience for anyone to go through.

The problem can arise for several reasons, but the main driving factor is not having enough financial knowledge. When you are financially knowledgeable, you understand the essentials of budgeting and how managing your money will help you be stable and reduce anxiety and stress.

Creating a Budget Can Help

If you are living from one paycheck to the next, the first thing you need to do is make a budget. What are your expenses? What are necessary and what are extraneous? How much do you need to have every month for your required expenses (rent, food, insurance, etc.)? When are these payments due? Cash flow also can affect payments significantly and your stress level. If you are getting paid only on the 20th but your payment is due on the 1st, you are always going to be behind.

The first step you can take to budgeting and healthy money management is to monitor your expenses. You must know how you are spending your money, down to the dollar. It is essential that you know how you are spending your money and on what.

Begin by monitoring your spending for a couple of weeks to gauge your habits. Keep track via an online software system such as mint.com, or at the very least, a notebook. Use a method and tool you like. The most important thing is that you are aware of all your transactions.

Handling Additional Expenses

Budgeting will also help you prepare for unexpected expenses, emergencies and seasonal expenditures. You can see from your prior spending where your dollars are going. The more you prepare, the better it will be. You can also include gifts, holidays, vacations and other expenses. Budgeting early on prevents headaches later!

Next, do the math. What is essential? See where you can trim. This is easier if you have a salary. You may be getting a fixed amount every month you can work with. Look at your pay stubs to figure out your average income after tax.

After you subtract your essential expenses such as rent, food, insurance, etc., do you have any money left over? This is money that will need to go towards savings and also can be used for discretionary spending.

Lowering Personal Spending

See where you can lower your spending. Budgeting takes time. No one is a pro at it immediately. You have to adjust that budget based on your lifestyle and what you’re learning about your spending habits through tracking over time.

Find ways to increase your income through an extra job, extra hours at your current job or other ways to get paid.

Finally, be realistic. If you are too drastic in your spending cuts, you will find it hard to stay motivated and may miss your target goals. Give your budget some flexibility so you can stay on track and keep going forward.

 

Financial Tips

Keys to Financial Success Although making resolutions to improve your financial situation is a good thing to do at any time of year, many people find it easier at the beginning of a new year. Regardless of when you begin, the basics remain the same. Here are my top ten keys to getting ahead financially.

1. Get Paid What You’re Worth and Spend Less Than You Earn

It sounds simplistic, but many people struggle with this first basic rule.

Make sure you know what your job is worth in the marketplace, by conducting an evaluation of your skills, productivity, job tasks, contribution to the company, and the going rate, both inside and outside the company, for what you do. Being underpaid even a thousand dollars a year can have a significant cumulative effect over the course of your working life.

No matter how much or how little you’re paid, you’ll never get ahead if you spend more than you earn. Often it’s easier to spend less than it is to earn more, and a little cost-cutting effort in a number of areas can result in big savings. It doesn’t always have to involve making big sacrifices.

2. Stick to a Budget

One of my favorite subjects: budgeting. It’s not a four-letter word. How can you know where your money is going if you don’t budget?

How can you set spending and saving goals if you don’t know where your money is going? You need a budget whether you make thousands or hundreds of thousands of dollars a year.

3. Pay Off Credit Card Debt

Those little pieces of plastic are so easy to use, and it’s so easy to forget that it’s real money we’re dealing with when we whip them out to pay for a purchase, large or small. Despite our good resolves to pay the balance off quickly, the reality is that we often don’t, and end up paying far more for things than we would have paid if we had used cash.

4. Contribute to a Retirement Plan

If your employer has a 401(k) plan and you don’t contribute to it, you’re walking away from one of the best deals out there. Ask your employer if they have a 401(k) plan (or similar plan), and sign up today. If you’re already contributing, try to increase your contribution. If your employer doesn’t offer a retirement plan, consider an IRA.

5. Have a Savings Plan

You’ve heard it before: Pay yourself first! If you wait until you’ve met all your other financial obligations before seeing what’s left over for saving, chances are you’ll never have a healthy savings account or investments. Resolve to set aside a minimum of 5{54b029a5ca0a1b2a6802487bc2bca822a59ec715333e1a02eb6833dc8d8a033a} to 10{54b029a5ca0a1b2a6802487bc2bca822a59ec715333e1a02eb6833dc8d8a033a} of your salary for savings BEFORE you start paying your bills. Better yet, have money automatically deducted from your paycheck and deposited into a separate account.

Should You Pay in Cash?

Articles and books on personal finance generally pack in as many tips as possible in an effort to make at least a couple essential ones stick. This shotgun approach is worth it if it helps readers learn to pay themselves first, spend less than they make, and so on, but saying too much sometimes means explaining too little.

In this article we’ll focus on just one technique to improve your finances, by taking a close at how making purchases with cash can contribute to your ability to budget, save and invest.

There is also the security advantage with debit and credit cards. Debit cards are protected by your personal identification number (PIN) and credit cards by your signature (and for some cards, a PIN number too). Cash is only protected by your ability to defend it should someone else want to take it from you.

Moreover, cards are as widely accepted as cash – with the exception of a few mom and pop shops. And yet, from a personal finance view, cash is almost always the better choice for making a purchase. Here’s why:

Overpaying

One of the drawbacks of credit and debit cards is that they encourage you to spend more than you intend to by giving you easy access to more capital. With cash, spending more than you intended requires going to a bank or ATM to get more and then going back to the store to complete the purchase. While some businesses have in-store ATMs, all charge fees, in addition to whatever fees your bank charges. For most people, these factors will cause them to reconsider whether their budgets can handle any extra strain.

Generally speaking, only carrying the cash you are prepared to pay for a given product will prevent you from buying the next level up and paying for features you don’t need. This works for small-scale purchases, but buying a computer or a car can involve large amounts of cash that probably shouldn’t be carried around. If a check can’t be used, a debit card is better than a credit card because you are spending money you have rather than money you don’t.

Over-Shopping

Just as cards encourage overpaying for one item, they also allow you to buy more items than you mean to. Stores are set up to make products appealing in order to persuade shoppers to buy more. Sometimes a shopping list isn’t enough to protect you from impulse buys.

According to the article “Cards Encourage You to Overspend” on Soundmoneytips.com, people will spend more with a credit card compared to cash. In fact, a Dunn & Bradstreet study found that people spend 12% to 18% more when using credit cards than when using cash. And McDonald’s found that the average transaction rose from $4.50 to $7 when customers used plastic instead of cash.

So what can you do to avoid this? Only carrying enough cash to buy the things on your list can limit the damage. This is the best way to keep shopping within your budget. If you are motivated, you will find discounts or cheaper alternatives to your regular brands to make that cash go further and maybe earn yourself a luxury item.

Cash Vs. Credit Cards

Cash, for the purposes of this article, is strictly limited to money you have already earned and is sitting there for you to use. Using your Visa to take a cash advance and then carrying the cash with you will not solve the essential problem of using high-interest debt to cover your expenses.

Cash has one very clear advantage over using a credit card: If you buy something on your credit card and end up carrying a balance, or only make the minimum payment each month, you will incur interest at a rate of 15% or more of your purchase (which can have you paying $15 or more for every $100 you spend). If you save up enough cash for the same purchase, you are giving yourself the equivalent of a 15% discount by not using your card. Before you even sign up for a card, make sure you know what you’re getting into.

Idea Staycation Your Summer

As the kids finish school and the weather heats up, many people are getting excited about long-awaited summer vacations. Summer vacations are a time to relax, unwind and spend some quality time with loved ones. Big vacations, however, do require quite a bit of planning and, of course, can end up costing some serious cash, especially with a whole family in tow.

If you haven’t gotten around to making summer vacation plans, or it’s just not in the cards this year, you might be the perfect candidate for a summer staycation. (A staycation can be just as enjoyable as a vacation, and can enrich your life for the whole year.

A staycation is like a vacation, only you spend it at home. Instead of spending lots of money on airfare and expensive hotels, you can take advantage of the attractions your area has to offer that you never get a chance to enjoy. This includes your house – when was the last time you relaxed at home?

Get Out

Outside, that is. National parks, state parks, county parks, metro parks and nature centers all provide a place to run around and enjoy nature. As an added bonus, many are free. You can easily spend a day hiking, swimming and picnicking in your local park.

A rainy day during your staycation is a terrific opportunity to visit a local museum or two. Art museums, aquariums, planetariums, science museums and natural history museums can be enjoyable and interesting. You can search for museums at the American Association of Museum’s website

Get Active

Take advantage of the local swimming pool, tennis courts, golf course or skating rink. Go for a bike ride, a walk, or try a new sport. Dust off the old baseball mitts, soccer balls and Frisbees and have fun.

Get Festive

Summertime is usually ripe with festivals in one form or another. Your local newspaper or Chamber of Commerce can keep you up to date with goings on. In addition to daytime festivals, many locales host free music nights during the summer months.

Learn Something New

Have you always wanted to learn how to throw pottery or paint with watercolors? How about cooking Cuban food or home-brewing beer? Your local recreation department or community college probably has a great choice of classes to get you started. Many of them will be one-day introductory classes that won’t require a huge investment.

Be Pampered

With all the money you’re saving on your staycation, you just might be entitled to a trip to the local spa for a massage and facial. Most spas do require advance reservations, and many offer specials and packages so be sure to ask.

Tell Ghost Stories

Pitch the tent and build a small fire – in your back yard. Camping in the backyard is a fun and easy way to camp. You can chase fireflies, sing songs, look at the stars and roast marshmallows (or make s’mores: roast a marshmallow until golden brown, place between two graham crackers with a piece of chocolate and squeeze together).

 

A Few Financial Basics

1. Create a Financial Calendar

If you don’t trust yourself to remember to pay your quarterly taxes or periodically pull a credit report, think about setting appointment reminders for these important money to-dos in the same way that you would an annual doctor’s visit or car tune-up. A good place to start? Our ultimate financial calendar .

2. Check Your Interest Rate

Q: Which loan should you pay off first ? A: The one with the highest interest rate. Q: Which savings account should you open? A: The one with the best interest rate. Q: Why does credit card debt give us such a headache? A: Blame it on the compound interest rate. Bottom line here: Paying attention to interest rates will help inform which debt or savings commitments you should focus on.

3. Track Your Net Worth

Your net worth—the difference between your assets and debt—is the big-picture number that can tell you where you stand financially . Keep an eye on it, and it can help keep you apprised of the progress you’re making toward your financial goals—or warn you if you’re backsliding.

4. Set a Budget, Period

This is the starting point for every other goal in your life. Here’s a checklist for building a knockout personal budget .

5. Consider an All-Cash Diet

If you’re consistently overspending, this will break you out of that rut. Don’t believe us? The cash diet changed the lives of these three people . And whenthis woman went all cash, she realized that it wasn’t as scary as she thought. Really.

6. Take a Daily Money Minute

This one comes straight from LearnVest Founder and CEO Alexa von Tobel, who swears by setting aside one minute each day to check on her financial transactions. This 60-second act helps identify problems immediately, keep track of goal progress—and set your spending tone for the rest of the day!

7. Allocate at Least 20% of Your Income Toward Financial Priorities

By priorities, we mean building up emergency savings, paying off debt, and padding your retirement nest egg. Seem like a big percentage? Here’s why we love this number .

The Path to Financial Abundance

There are many paths to financial abundance: inheritance, marriage, lottery, business success, just to name a few. For most of us, however, the path to financial abundance will be paved with savings. It is a method based more so on self-discipline than luck. In that regard, it can be gratifying. The essence of saving is to spend less than what is earned. Yet this simple concept is easily lost in the complex world of digital money. Quite simply, it is very easy to over-spend.

To manage this potential problem effectively, it helps to look back to simpler times, remind ourselves what worked then, and adapt those strategies to today’s realities. As a young adult in the 1980s, I lived for years in a cash-only manner. I would cash my paycheck on Friday afternoons. The cash was then allocated to a series of paper envelopes labeled rent, truck payment, utilities, food and extra. Each of the first four would receive 25% of the required monthly obligation. Any cash left over went into the extra envelope. At month’s end my bills were covered, provided I remained faithful to the system week after week. Then my bills would be paid either in cash or by money order. I had no checking account, only a savings account.

Limiting Discretionary Spending

Any discretionary spending had to be paid from the extra envelope. This placed limits on my spending, a form of self-discipline. On those occasions when an unexpected necessity exceeded the contents of the extra envelope, I would “borrow” from one of the other envelopes knowing it had to be repaid from the next paycheck. With no credit cards on which to accumulate debt, my net worth grew over time.

With the benefit of hindsight, what made the envelope system work so well is that I always had a clear awareness of my cash flow. With that awareness, I had the information needed to make sound spending decisions throughout the month. My bills were covered and I knew how much extra was available at all times.

Tracking Personal Cash Flow

To bring that clear awareness and real-time management into today’s environment of credit cards, checks, automatic debits, etc., a different tactic is needed. There are some digital tools available, but I am a pencil-and-paper kind of guy. So, that was my challenge. My solution was to divide my monthly spending into two categories: normal and discretionary. Normal encompasses the recurring monthly bills which once upon a time had their own envelope such as mortgage, truck payment and utilities. This is the relatively fixed or inelastic portion of my household budget. I have those items listed on a monthly spending sheet along with the total amount required each month.

With this number in mind, I decided on an all-in spending number (normal plus discretionary) that was below the household income. This ensures a positive cash flow situation, the essence of successful savings. From the all-in spending number, I subtract the normal value leaving what represents the amount that would be in the extra envelope. The last bit of math is to divide that number by 30 so that I have a daily spending target. This discretionary spending of extra money gets tracked on a notepad every day. A running tally of the over/under is also tracked daily. It may sound overly-simplistic but I have been using this method for years. It really works! (For related reading from this author, see: What Are the True Costs of Your Household Expenses.)

Financial abundance is within reach for all of us. To achieve it, one must get and stay cash-flow positive on a consistent basis. With a clear awareness of income versus spending coupled with diligent tracking and management, everyone can succeed in this important quality of life issue. For more details and insights into this and other important financial topics, please see my book, “The Game Changer’s Guide to a Better Financial Life,” available through Amazon.