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Do you have less money in savings than you’d like?
You may have lofty goals, but don’t have the proper tools to approach how to really make your hard-earned money work for you.
Before I get to the Budget and Tracking Spreadsheet, I’ll discuss the misconceptions between earnings and savings and the driver behind improving your overall financial picture.
Let’s get started!
Earnings And Savings Misconceptions
First, let’s entertain the concept that the amount of money you make has a small impact on your future wealth equation.
Let’s take a quick quiz!
Don’t worry, answers are given.
#1 – Increased income = Increased savings potential
True. The potential to save more money as your income increases makes this a true statement.
This may not translate to reality. Let’s say, my take-home pay is 100k a year. I have the potential to save $100k minus my expenses, but what if my expenses were $110k? ($100k – $110k = $10k deficit)
#2 – Reduced income = Reduced savings potential
True. The potential to save less money on less income makes this a true statement.
Again – there are variables. Let’s say, my take-home pay is 50k a year. I have the potential to save $50k minus my expenses, but what if my expenses were $40k? ($50k – $40k = $10k surplus)
You will notice that with the $100k income there were no savings. In fact, there was debt! With the income cut in half to $50k, there was still a $10k savings.
This goes to show you that even with increased income, it does not equate to more savings – only the potential…
Of course, it depends largely on your circumstances, but a good step forward is knowing that just because someone makes more money than you doesn’t mean they are in a better financial situation.
Alternatively, just because someone makes less money than you does not mean that they are living paycheck-to-paycheck.
#3 – Increased expenses = Less money saved
True. The more the expenses go up, the less money that makes it to potential savings.
If my take-home pay is $50k a year and I spend $45k when I could spend $35k, I’m leaving $10k on the table that could be saved and invested to build wealth. ($45k – $35k = $10k that could grow into a much larger amount…)
#4 – Reduced expenses = Increased savings potential
True. If expenses are reduced, more money makes it to potential savings.
If my take-home pay is $50k a year and I choose to spend $35k when I could spend $50k, I’m leaving $15k to be saved and invested for the future. ($50k – $35k = $15k)
The moral of the story here is that any amount of money that is set aside from being spent will make a difference.
A chunk of money like $10k or $15k today, if properly executed in an investment vehicle will compound year over year.
Compound interest is the interest earned on both the original contributions and any growth thereafter.
Using an investment calculator, $10,000 contributions yearly over a 30-year time horizon earning a conservative 4% annual rate of return will yield $583,050.
That’s the effect of saving + investing and doing it consistently.
- Money Mindset: Conquer Your Financial Goals
- 5 Steps To Better Finances In The New Year
- Money Challenge: 30 Days To A Better Financial You
Which leads me to the next part…
Budgeting & Money Goals
Now that you have an understanding that your potential savings are directly correlated to how much you spend (and not how much you make), you are ready to start budgeting your money!
Budgeting is a method of controlling expenses, where money is set aside for a particular purpose.
The process is more than just accounting for your take-home pay and expenses.
With budgeting, the goal is to pre-plan your expenses to preempt overspending.
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|Category||Monthly Budget Amount||Monthly Actual Amount||Monthly Net Income/(Loss)|
In this example, the budget for the month was just under $3k. Although, there’s a variance of ($5) – it’s perfectly acceptable. Think about it like this. How might it have fared if there was NO budget in place? There might have been a larger variance.
Before putting a budget in place, it’s important to set savings goals.
If you don’t have money goals, it will be more difficult to stay on track.
Ask yourself. What are your savings goals?
—Is the extra savings for your future so you can have fewer money worries? Smart!
—How about a future purchase that you need extra funds for? Yes!
—Is it to pay down debt so you can demolish it once and for all? There ya go!
—You work in a cyclical job and you may get laid off, so you want to make sure you have money to pay the day-to-day bills. We are on the same page!
Though I don’t have to be motivated to save, I know that it varies greatly from one person to the next.
Set yourself on the path to success by coming up with a plan centered around the reason you are saving and set out to meet that goal.
For a more thorough action plan refer to Set Goals The Right Way And Succeed Every Time.
For now, let’s discuss the topic at hand, which is getting your hands on the budgeting and tracking tool that is going to help you change your financial life…
Get Your Own Monthly Budget Tracking Spreadsheet
I’ve been budgeting my money since my mid-20’s. Now that I am in my early 30’s, I can look back at all the data from the prior years – see how much was spent, what I spent money on, where I shopped…and so on.
My spending has been maintained at a reasonable level, even when my household salaries increased (and decreased). This is all from budgeting and tracking my money.
This budget spreadsheet will help you, too!
The great thing about this spreadsheet is that you can customize it to your preferences.
You can change the colors, the categories, buckets, labels – everything to fit your lifestyle.
Are you ready to start using the 2020 Budget & Tracking Spreadsheet that is packed with features and step-by-step instructions?
The spreadsheet is available in Excel and Google Sheets. Both are available for download in the FTD Library – available as an added bonus for subscribers (when you sign up for full access)!
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Ways to stretch your money further + manage finances
Ebates – receive $10 when you spend $25 (online/in-store shopping)
Ibotta – receive $10 as a welcome gift (grocery in-store shopping)
Personal Capital – free service that allows you to track all your balances with an A+ interface