Finances play a crucial role in you life. If you're going to live the kind of life you want, you need to create a financial plan to help you achieve it. In this Part 2 we're going to discuss the specifics of creating a financial plan.
Where do you start?
- The foundational plan for managing your money is called a budget.
- A budget is the foundation of your financial house upon which you will build your financial life.
Objections to budgeting
People are opposed to budgeting for two main reasons
1. They believe it will limit their ability to live their lives and enjoy it.
2. Someone’s used a budget to control them.
- A budget provides freedom.
- Equips you to make good financial decisions that keep you out of bondage and help you reach your goals.
Budget as a Fence - Schoolyard Example
- It’s the vehicle to help you stick to and accomplish your goals.
- Tells you how much you can spend and where you spend.
- Takes the emotions out of financial decisions.
- Helps you to avoid buying on impulse.
- Give you the freedom to spend guilt free.
3 Parts Of Your Plan
1. Monthly Budget
- Zero based, meaning that every dollar you earn is assigned to a category
- Having the written plan in place before the month begins and assigning all the money to various categories so that no money is left floating around….because money is currency… it rides the current and will flow away if you leave it floating around.
- No matter how you get paid, we are encouraging you to make an annual plan that you manage monthly.
2. Main Categories
3. Sub-Categories - Housing
Spending Guidelines for your categories
- Developed a guideline based on successful people
- It’s just a suggestion, but will help you start strong
- 100% of your money
- 60% rule (Housing, Food, Transportation
Yearly vs. Monthly Budget
- We manage monthly because it’s easier, but we need to have an annual plan.
- Gives us the view of non-monthly items.
- Each month is connected to the next. If you have extra money in a category at the end of the month, it rolls into the next month and grows.
- Good month's cover for bad months
Visit https://leosabo.com/resources to gain access to the budgeting forms discussed in this episode.