Budget Essentials

• 🧠 Know the difference between a BUDGET vs. LEDGER

• 📊 Build a budget that is ACCURATE TO REALITY.

• 🏦 Know the 3 ZONES OF CASHFLOW.

• ♟️ Treat financial stewardship LIKE A GAME.

Finance literacy is so low, and many face unneeded stress over the subject. If you know someone who would be helped by this content, please forward this newsletter to them!

Budget v Ledger 🧠

BUDGET - Your PLAN for monthly spending. A snapshot of what you expect to spend and save.

LEDGER - Tracks spending IN REALITY. Reveals what your actual cashflow is.

You need both, otherwise you’ll be frustrated by a bad budget, and you’ll bleed money.

Build an Accurate Budget 📊

Time to make a simple spreadsheet. Or download mine for free!

Here are the MUST HAVE zones for your budget:

• 💵 INCOME - What do you bring in on an average month.

  • Tip - If there is some variance month-to-month, always build your budget around the lower number.

• 🧾 MONTHLY BILLS - These are monthly expense amounts that don’t fluctuate.

• 🪣 MONTHLY EXPENSE CATEGORIES - Different from bills, these amounts fluctuate (food, utilities, car gas).

  • Tip - Plan this part of your budget on the higher side, so it’s prepared for the hard months!

• 🗓️ ANNUAL EXPENSES - These are either annual bills (car registration, prime membership), or annual estimations for various expense categories (house or car maintenance, medical)

  • These are totaled up for the year and divided by 12 - So each month you are accruing savings in preparation for when those expense hit.

3 Zones of Cashflow 🏦

Know where to keep your money so it is WORKING FOR YOU!

IMMEDIATE USE

Every month you have expenses, those expenses require spending, and so you need cash on demand. For this zone you need…

• 🏦 A Good Bank Account

  • Get a bank that doesn’t charge you fees and gives you a good interest rate while your cash is waiting to be spent.

    • Most people are still getting a measly pennies in interest (Around .01%)

    • Join a bank like SoFi that gives .5% for checking and 3.8% for savings.

      • Check it out HERE to get some free cash when you open an account.

• 🤑 A Means of Getting Cash-Back

  • If you have to spend money, you might as well get a percentage given back to you.

    • Credit Cards are good so long as you are disciplined and don’t go into debt. There are some debit cash-back options but they don’t compare to a good credit card.

LONG TERM SAVINGS

A holding place for cash to be utilized for items that occur 10+ years from now. For this zone you need…

• 📈 Individual Retirement Account (ROTH IRA)

  • All you need is to be 18 and have received your first paycheck.

    • Check out an interest calculator and see how dedicated savings is a powerhouse play!

• 👨🏼‍💼 Other Retirement Accounts that offer “Matching”

  • Wherever you are employed, see if they have a 401k matching program (403b for Nonprofit). “Matching contributions” = Free Money.

• 💹 Index Funds

  • Most people don’t have the time and skill to analyze business metrics and pick individual stocks. But that’s okay, you could just invest in the market itself (S&P 500)! Stocks boast an average return of 10% (when assets are held long-term)… and that is taking into account two World Wars and the Great Depression.

  • Check out $SCHX (Matches S&P 500 ET), $SCHD (Dividends), $SCHG (Matches QQQ ETF).

You can get both an IRA and start investing in Index Funds through an app like Robinhood. If you use my affiliate link you’ll get a free stock (as will I 🤝🏼)!

SHORT TERM SAVINGS

Cash that you don’t need now, but you need within 10 years. Options here are slim if you already have a good bank. For this zone you need…

• 🐖 High Yield Savings Account

  • If you don’t already have a good bank you can snag a separate high yield savings account.

    • I would use Nerdwallet to track something down.

• 👨‍👩‍👧‍👦 Private Family Bank

  • Most people don’t know what this is… it will eventually get its own issue of T+P. Essentially, a PFB is leveraging a Life Insurance Policy as a piggy bank that allows you to access cash when needed, while still keeping the compounding interest of the cash within, typically growing at a rate of 5% each year.

  • Do some research, read this book HERE 

Treat Stewardship Like a Game ♟️

You can always do better, and getting better is always rewarding!

Don’t fear the Scoreboard

Would you rather bowl through a curtain, not seeing what pins you knock over, without any displayed score… or bowl in a traditional game where you can see your results, adjust your shot, and improve? If you can’t see how you’re doing the game is really boring… Everyone will leave the bowling alley after just a few throws.

I realize looking at the “scoreboard” of your finances is more intimidating than a casual game of bowling. But if you don’t face reality, then you can’t improve! Ignoring reality to the point of going broke is a worse reality. Face reality now and celebrate every improvement that you work toward!

2 Simple Practices

👀 Look at the Scoreboard

• See what your overall cashflow is every month (using a ledger / digital is easier), figure out how those results occurred.

• Compare your ledger with your budget periodically so you can make sure that you’re actually planning for reality.

1️⃣ Find One Thing to Make Better

• Start a grocery comparison project - See if you’re maximizing your savings on the things you need.

• Find a subscription that you can drop, and save that money.

• Find ways to use the same dollar, twice.

  • If you buy things that are going to be reimbursed you can use a card that will give you cash-back! This means you will have MADE MONEY buying those supplies (work purchase, HRA for medical expenses, something your friend offered to pay you back for).

  • Join rewards programs for the things you purchase regularly, this enables you to build up points and cash them out.

🌟 TOP PICKS

At this point, I want you to get out there and start putting this into practice! So, to equip you and send you on your way, here are my top books for increasing financial literacy.

Why Does the Stock Market Goes Up
Simple read with great visuals. This is investing 101.

Rich Dad Poor Dad
Gain a keen eye for what bleeds cash from your accounts, and what truly adds value.

Choose FI (Financial Independence)
Learn from the tact and zeal of the Financially Independent Retire Early crew.

🎬 BEHIND THE SCENES

If you have any specific questions on todays topic, please send a reply and I’ll get back to you 😎🤙🏼

Giveaway Results!

The one and only Eli Sabbagh has won our first giveaway 🎉

Way to go! You’re just out there helping others hop on the Toil + Profit productivity train 💪🏼

Respond to this issue of T+P with the specifications of which item you would like for free from the store, and I’ll get it to you!

ℹ️ Links in this Newsletter may be affiliate links. If you make a purchase through this link, I may earn a small commission at no extra cost to you.