Financial Literacy - STEP ONE

The most important factor to achieve financial progress is often the most neglected. A Budget.

Your immediate disinterest in the rest of this article is evidence of the apathy we have toward the tedious and restrictive life we associate with budgets.

The fascinating truth about committing to a real budget, is the amount of peace it can bring to you everyday. We imagine a budget as “sucking the fun out of life.” But the reality is, a budget is your most powerful tool toward financial freedom and wealth accumulation— and forces you to prioritize your fun, and time, toward the things you value most. The impact this will have on your general mental health cannot be overstated.

There is a common misconception that budgeting is for low-income earners only— but this is a massive misnomer. High-income earners suffer from the exact same human behavior blunders as everyone else. It’s the Goldfish Effect— it’s said that a goldfish will grow to the size of its bowl. In western civilization this means our lifestyles often grow to the size of our paycheck.

Consider this, 40% of Americans making $300,000+/year are living paycheck to paycheck. How can that be? It’s simple, when I couldn’t afford steak, I didn’t buy it. When I could, I did. That’s the goldfish effect.

If you want to get serious about wealth accumulation and truly experience financial peace— start here. Do not miss out on this opportunity. Take control of your financial future by taking control of your financial present. You are the Keeper of the Card, and only you can do this for your financial journey.

Step 1: Discovery

This is the tedious part— but also the most revealing. You need to go through your past 3-months financial statements. Checking account and credit cards. It won’t be as tedious as it sounds if you use the spreadsheet I’ve created. Simply go one month at a time and enter each expenditure into the sheet— the formulas in the sheet will do all the math for you— or, let’s do it together— get in touch with me and I’ll help you work through it. Whatever it takes— Do not procrastinate this step. Get it done. This is the first step in the Budget process, and the first step into financial literacy in action.

Step 2: Discernment

Often step 1 leaves us shocked at where some of our money goes. When I first went through this process with my wife we were blown-away to discover that we spent significantly more money dining-out than we did on groceries. We were also floored by how much those impulse Amazon purchases added up— not to mention my affinity for breves. The Discernment step is all about getting purposeful— it means working toward your financial future goals by living within—or below— the means of your current future reality. Step 2 is about taking what you’ve learned about your spending habits in Step 1, and creating your purpose-driven plan for each dollar before it comes in the door. Think of it this way— You are the CEO of your life and these are your limited financial resources—it’s up to YOU to allocate them wisely.

First, you need to allocate the fixed expenses as they exist- mortgage / rent, utilities, etc.

Next, you need to allocate the necessary expenses— food, insurance, fuel, etc.

Finally, you need to allocate elective expenses— Netflix, dining-out, vacation savings, etc.

To help you with this process, I’ve created a worksheet as a guide. Take note of the “Mad Money” category— this is yours to spend as you see fit— fancy latte, doughnuts for the office, a cool hat, whatever floats your boat.

Step 3: Discipline!

This is pretty self-explanatory. Stick To The Budget! It isn’t about how you feel, it’s about how you have purposed your finances to work the way You want them to. This is the plan you created to benefit your present, and your future. By creating a budget you have accounted for every expense. This means you can live with the financial peace of knowing you don’t have to worry about expenses as they arrive— you’ve been counting on them.

By staying disciplined with your spending each month, you know there’s enough money in the account to cover your life’s needs— and future fun. You are on The Path to Financial Freedom.