Financial Reality Check and the Dreaded “B” Word

You can find the first four parts of this financial preparedness series here, here, here, and here.

Last week, we talked about where you want to go financially.  What are your financial goals?  This week, we’re going to talk about…….

Where Are You Now?

How much do you make?

Knowing where you want to go is incredibly important.  But you still can’t get to where you want to go if you have no idea where you are now.  Pull out your last 2-3 months of checking account statements, or pull them up on your bank’s website.  Do you get paid the same amount each month? Record what you get paid on a monthly basis.

Does your income change on a month-to-month basis because you work with commissions or tips or something else along those lines?  If you have the ability, go back a year if this is the case and if you are able. Write down your highest paying month, your lowest paying month, and the average monthly income for the year.  Do you make more going into the Christmas holidays, but less in the March and April? You need to know these things in order to plan.

How much do you spend?

This is the tougher one.  There’s a great deal of reality check involved with this one.  We use a budgeting software called You Need a Budget or YNAB.  The first month that we used YNAB, I couldn’t believe how much money we spent on eating out!  We only go out as a family once or twice a month – that’s expensive enough! But when you add in occasional lunch trips for my husband, my weekly night out with my Mom and sister, trips to Starbucks, and pizza every now and again, it really adds up.  Talk about a reality check!!

When I went to Kansas City and then turned around and went to Texas with my husband to see his sick Mom this month, we spent almost $800 on gas the month of August!  Yes, you can pick your jaw up off the ground. I couldn’t believe it, but the figures were right in front of me.

Break your spending down

So once you have access to your check statements or accounts online, spend an hour or so with your spouse and look honestly at things.  Take out seven papers. At the top of each page write a different category.

Housing  

Start with housing.  On the page marked housing, write down any areas of spending that fall under housing including rent or mortgage, electricity, natural gas (not gasoline), trash, water, wastewater, internet, phone, any landscaping charges (like True Green), insurance, property tax payments, housing repair or improvements.  Once you have each of the areas of spending that fall under housing then put down how much you spend on each category regularly.  Do this for each of the categories.

Insurance

What insurances do you pay or contribute to?  Do you pay for your health insurance or Alfac?  How about dental or life? Is your homeowner’s insurance separate from your mortgage payment?  Auto insurance? List them all out and how much your premiums are.

Subscriptions

On the top of the next page, put down your subscriptions.  Subscriptions? Yep. Do you pay monthly for Netflix, Hulu, HBO or cable?  Do you order monthly through ThriveLife?  I order monthly through Ammo Squared and  Young Living Account.  I signed up with Healthy Wage, so that’s a subscription.  Do you have a monthly subscription to a website like ABC Mouse?  Do you pay for your children to take music lessons?

We tried to get our credit repaired because the water company didn’t turn the water off to our house when they were told to and our house flooded.  Insurance wouldn’t pay to repair it, so we had to give our house back.  This was a monthly fee that we paid to a credit repair company. Anything that you are automatically charged for monthly which doesn’t fall under the category of housing, utility, or insurance.

Yearly subscriptions could also fall into this category.  Do you pay for a magazine yearly? What about an Amazon Prime subscription?  Do you have a monthly or yearly gym subscription? Do you have to pay dues to a group?  I know that some organizations like barbershop singers will have to pay a yearly fee to belong to the group.

Living Expenses

Living expenses would include items like groceries and eating out.  Household needs is another category. In it, I would include items like curtains, small appliances, furniture, patio items, etc. Preparedness goes under this category for us.  Gasoline, fun money, eating out, car maintenance and repair, and clothing also go under this category.

Giving 

Do you give to any organizations on a monthly basis?  Some popular things to give to are churches, non-profit organizations, missionaries, or even radio stations.  Do you give financial contributions to non-profit organizations?

Debt

Do you have any debt such as medical debt, educational debt, car debt, or credit card debt?  They would all fall under this category.

Savings

How much do you put into savings?  It is a hit or miss thing or is it something that you budget for monthly?

Priorities 

Now that you have an idea of how much you spend, determine your priorities.  I mentioned in last Saturday’s newsletter that we’ve decided that all our children will learn to play an instrument.  We’ve decided that we need to make that a priority for us.  Savings is a big priority for us until we reach our goal, then paying off our mortgage will be a focus.

Determine your top four priorities.  Then compare them to your spending categories.  Do your priorities match up with what you are spending money on?  That’s always the rub when they don’t.  You have to figure out how to make the money match up with your priorities.

Eating is important to us, but the question that we need to ask is should we be eating less expensively than we currently are if it doesn’t match up with our highest priorities.  I’m not saying don’t spend adequate money on food.  I’m talking about overspending money on food.  Should we as a family of seven be spending $1000 or more a month on food?  That’s only a decision our family can make for ourselves.  You need to make that decision for your family.  I have found that food is often an area that we easily overspend on if we aren’t careful – especially because I’m a prepper and stocking up on food is in my blood.

Start from the Ground Up

Start with the amount of money that you make each month.  Since you’ve determined your priorities, put an actual figure as to how much you want to put toward each category monthly.  I know…………this is the dreaded B word –  BUDGET.  I know I already said it once, but I do highly recommend YNAB.  It makes budgeting……..dare I say it……….almost fun?  I know it sounds quirky, but it’s true.   But whether you use YNAB, Every Dollar, or another budgeting software, make sure you create a plan that starts from the ground up with your priorities.

The Richest Man in Babylon

This is the best financial book I’ve ever read.  It’s fast, enjoyable, and has great information.  The premise is that the richest man in Babylon teaches seven lessons on how what made him that man and how others can do what he did.  It’s actually told in story form.  The whole book took me less than two hours to read.  I highly suggest reading it.

What About You?

Do you use a budget consistently, or do you hate budgeting?  Do you feel like it cramps your style?  I’d love to hear!  Leave a comment on this post and let me now.

Remember, knowledge isn’t just knowing something.  It’s living it!

There are links in this post.  Some of the links may be affiliate links.  Some of the links may not be.  My promise to you is that I will only recommend the most economical version of the best quality of items to serve you. These are the items that I have bought for my own family.  You can feel free to use my affiliate links, of which I will get a small amount in compensation, or you can choose to search out your products on your own.