Money Talk
Those who know me very well know that I’m passionate about financial stewardship, and I desire to see others thrive in this area. Given that, I would like to share a few tips that have helped me move closer towards achieving my financial goals in hopes that it will help you as well!
Create a monthly budget and stick to it. Many people cringe at the word “budget,” because they are intimidated by the idea of creating one or feel that a budget will prevent them from spending their money on the things they enjoy. What about you? Have you ever felt this way about a budget? If so, don’t be discouraged. A budget isn’t hard to create nor is it restrictive. A budget is simply a plan for how to spend your money — which means you’re in control and tell your money where to go.
Each month, I sit down and create a budget for the following month. What I like most about budgeting is that I can account for every dollar that I earn. If someone were to ask you how you spent your last paycheck, would you be able to tell the individual how each dollar was spent? If not, I encourage you to start creating a budget, so that you can be more intentional about the way you are spending your money. Another thing that I enjoy about budgeting is that it limits surprise bills or expenses, because it forces you to think about all potential expenses (i.e. tax services, birthday gifts, license/tag renewal, etc.).
If you’ve never created a budget and are unsure where to start, below you will find the categories that I use to develop my budget. Beside each category you will also find a recommended percent range. This range represents the percentage of your monthly income that should be allocated to each category. (Note: I learned my budgeting techniques from Dave Ramsey’s Financial Peace University, a course that I highly recommend!)
Charity (i.e. tithes, offering, charitable donations): 10-15%
Saving (i.e. emergency fund, known/upcoming expenses): 10-15%
Housing (i.e. mortgage/rent, homeowners/renters insurance, household goods): 25-35%
Utilities (i.e. gas/electricity, phone/mobile, internet, cable): 5-10%
Food (i.e. groceries, restaurants): 5-15%
Clothing (i.e. adults, children, cleaning/laundry): 2-7%
Transportation (i.e. gas, general maintenance, license/taxes): 10-15%
Medical/Health (i.e. doctor bills, vitamins, etc.): 5-10%
Insurance (i.e. life, health, auto, disability): 10-25%
Personal (i.e. toiletries, cosmetics, haircare, mani/pedi, pocket money, gifts, miscellaneous, etc.): 5-10%
Recreation (i.e. entertainment, vacation, etc.): 5-10%
Debts (i.e. car payment, credit card, student loan): 5-10% (Ultimate goal: 0%)
This list may not be exhaustive, but it’s definitely a great start. Feel free to add more categories, if needed, and tailor it to your needs. Remember, you’re in control and tell your money where to go. Simply be sure to prioritize your spending according to need. Another important thing to remember is that a good budget is only effective when it is implemented. This doesn’t mean you can’t reshuffle money between categories as needed, it simply means you shouldn’t spend more than what you budgeted for the month.
If you’re new to budgeting or plan to start, be gracious with yourself because it definitely requires discipline. I have faith in you though…you’ve got this!
Save for unplanned events and the future. Earlier I mentioned that a budget is simply a plan for how to spend one’s money. Well as we all know, life has a way of throwing us curve balls at times and there are some events we simply can’t foresee. While we can’t predict them, we can most certainly plan for them by creating and regularly contributing to an emergency fund. This is a savings account used to cover unexpected events such as a flat tire, the loss of a job, etc. Essentially, it’s your rainy day fund. Having an emergency fund reduces chaos when large, unexpected expenses arise and prevents us from experiencing major financial setbacks.
If you don’t currently have an emergency fund, I encourage you to create one and begin contributing to it monthly. If you’re unsure what your goal should be for this account, most people suggest having a minimum of 3-6 months of expenses saved in this account. It may not seem like having an emergency fund is that important, because we don’t often face emergency situations; but trust me, having one has spared me on a few occasions. Let’s be honest, no one likes having to spend money on things like flat tires, unexpected medical bills, etc. However, it’s much better to be in a position to cover these expenses when they occur than to not have anything on hand and wonder how you’re going to take care of the expense as well as your normal monthly expenses.
In addition to saving for unexpected events, we must also save for the future. For example, I desire to own a home by 30, retire well before the average age of retirement, fund my children’s college education, and leave an inheritance for my family. In order to achieve these goals, saving and investing are key. I’m sure you have financial goals and may share some of those mentioned above. If so, are you positioning yourself to achieve them? If you desire to purchase a home, are you saving for a down payment? If you desire to retire, are you taking advantage of your company’s 401K plan and/or contributing to an IRA account? If not, I encourage you to begin taking the necessary steps towards achieving your financial goals.
Lastly, if you don’t have any financial goals, I challenge you to think about and document your short- and long-term financial goals. Establishing goals will help you become more intentional about the way you manage your money.
Maintain a good credit record and eliminate debt. Most people require credit (i.e. a loan) to cover the expense of a car, house, business investment, etc. Before making a loan, lending agencies will check your credit or FICO score to determine your ability to repay the loan. Of course the higher your score, the more likely you are to be approved for the loan. Therefore, it is very important to maintain a good credit record. This means paying your bills in full and on time. Another good reason to maintain a good credit record is to position yourself to qualify for lower interest rates — which will save you a lot of money during the term of the loan.
If you’re currently in debt, one of your primary financial goals should be to become debt free. I know it is one of my goals, and it is my desire to do so as quickly as possible. Most people that I talk to aren’t in a rush to get out of debt; but I realize that the quicker I get out of debt, the quicker I can shift more of my attention and resources towards my long-term financial goals. I also desire to be in a position to give as God leads me and to take advantage of unique financial investment opportunities as they arise.
If you’re feeling discouraged by the amount of debt you’re currently in, I’m hear to tell you that you that you can become debt free and you don’t have to be making loads of money in order to do so. Not convinced? Let me share a quick testimony. Last week I moved one step closer towards become debt free by paying my car off. Not only did I pay it off, I paid it off in half the length of the term. You may be wondering, how is that even possible, especially at your age? Well let me just start of by saying that it would not have been possible without God’s provision — which I am forever grateful for. But it also required something of me — discipline.
Personally, I seek God for direction and wisdom in every area of my life, including finances. By no surprise, God gave me a strategy for how to budget and manage my money. And as a result of practicing discipline and sticking to the plan, I was able to pay my car off in half the length of the term. So again, if you’re currently in debt and feeling overwhelmed, know that it is possible to become debt free and it doesn’t have to take a lifetime. It simply requires wisdom, patience, sacrifice, and discipline.
Before you begin practicing any of the tips I’ve shared, I encourage you to pray and seek God for wisdom about how to manage your money. I promise that He will lead you in all of your financial decisions and give you the discipline to stick to the plan, if you invite Him in.
Be encouraged,
Imanne