Creating a Balanced Budget: Mastering Basic Budget Percentage Allocation

Creating a Balanced Budget: Mastering Basic Budget Percentage Allocation

Creating a balanced budget is a crucial step toward achieving financial stability and freedom. It allows you to track your income and expenses, make informed financial decisions, and work towards your financial goals.

One effective approach to budgeting is using the basic budget percentage allocation method. Let’s walk through the process of creating a budget based on the following categories:

1. Security
2. Shelter
3. Sustenance
4. Self/Family
5. Social
6. Society
7. Soul

Let’s dive in!

Step 1: Determine Your Total Income

To create a budget, you need to know your total income.

This includes your salary, freelance earnings, rental income, or any other sources of income. Having a clear picture of your earnings is crucial for accurate budgeting.

Step 2: Understand the Categories

Each category in the basic budget percentage allocation method serves a specific purpose:

1. Security (15% of Income): This category encompasses emergency savings, insurance premiums, and contributions to retirement funds. Building a safety net is essential to protect yourself and your loved ones from unforeseen financial challenges.

2. Shelter (30% of Income): This category covers housing-related expenses such as rent or mortgage payments, property taxes, and utilities. Ensuring stable and comfortable living arrangements is a top priority.

3. Sustenance (15% of Income): Allocate this portion of your income to cover grocery expenses and other essential items required for daily living.

4. Self/Family (15% of Income): Invest in personal development, education, and family activities within this category. It includes expenses related to health, fitness, and personal growth.

5. Social (8% of Income): Use this category for entertainment, dining out, hobbies, and socializing with friends and loved ones. Maintaining a healthy social life is essential for overall well-being.

6. Society (10% of Income): Giving back to the community is crucial. Allocate a portion of your income to charitable donations and contributions to causes you believe in.

7. Soul (7% of Income): Nurture your inner self through experiences like travel, vacations, hobbies, and spiritual pursuits. This category is all about personal fulfillment and enriching your soul.

Step 3: Apply the Percentage Allocations

Now that you have a clear understanding of each category, calculate the percentage of your income that should be allocated to each one.

For example, if your total income is $4,000 per month, the allocations would be as follows:

  • Security: $600 (15% of $4,000)
  • Shelter: $1,200 (30% of $4,000)
  • Sustenance: $600 (15% of $4,000)
  • Self/Family: $600 (15% of $4,000)
  • Social: $320 (8% of $4,000)
  • Society: $400 (10% of $4,000)
  • Soul: $280 (7% of $4,000)

Step 4: Monitor and Adjust

Creating a budget is not a one-time task; it requires continuous monitoring and adjustment. Track your expenses regularly and compare them to your allocated percentages.

If you find that you’re overspending in certain categories, consider cutting back in others to maintain balance.

Mastering the basic budget percentage allocation method empowers you to take control of your financial future.

By dividing your income into specific categories, you can build a budget that aligns with your goals and priorities. Stay disciplined, make informed decisions, and watch as your financial health improves over time.

Remember, a well-structured budget is the foundation for a secure and prosperous future.

Happy budgeting!

 

 

 

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A Roadmap to Financial Independence: 11 Steps to Achieve Your Financial Goals

A Roadmap to Financial Independence: 11 Steps to Achieve Your Financial Goals

Financial independence is a dream many people share, but not everyone knows how to achieve it. The journey toward financial freedom requires dedication, knowledge, and the right mindset. In this article, we will explore 11 essential steps to help you achieve financial independence and take control of your financial future.  (more…)

Embracing Financial Self-Care: 5 Ways to Refresh Your Finances and Cultivate Abundance This Spring 🌸💸

Embracing Financial Self-Care: 5 Ways to Refresh Your Finances and Cultivate Abundance This Spring 🌸💸

The Spring Equinox marks a time of renewal, growth, and longer days filled with sunshine. As nature starts to awaken from its winter slumber, it’s the perfect opportunity to take a fresh look at your financial life and make the necessary changes to ensure a prosperous and stress-free year ahead. In this blog post, we will explore how to “spring clean” your finances by replacing financial stress with financial self-care and wellness.

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4 Ways to Shift Your Money Mindset and Raise Your Financial Frequency now!

4 Ways to Shift Your Money Mindset and Raise Your Financial Frequency now!

Anger, depression, and anxiety keeps you financially stagnant.

That’s a pretty bold statement right? Hear me out. 

To get your money moving in a positive direction you’ve got to get your emotions moving in a positive direction How many depressed rich people do you know? 

How many of your angry, depressed, low vibration friends are making $100k or more? Notice the trend? 

Happiness = Health and Wealth

Too many people are holding on to their depression diagnosis like a bone. It’s become their identity.  News flash! You weren’t born depressed. Most of us were born healthy and satisfied.  Our default setting is joy and we look for fun and interesting things to discover as a baby and child until the system manipulates it out of us. 

Depression and other mental illnesses are learned or result from physical and hormonal imbalance. It is treatable and recovery is possible.  When you decide you’d rather be happy, healthy, and wealthy you will do whatever it takes to treat and cure your depression. 

The only reason the medical community or your therapist says depression is something you have to live with is because they want you dependent on drugs that treat the symptoms and not cure the problem. 

But I digress. This is not a post about how to cure your depression but about how depression keeps you broke or financially stuck/ stagnant. 

Financial Feelings, Vibration, and Frequency

When I was depressed I could never get above a certain financial level.  My income was limited because my vision was limited to only seeing my problems, financial or otherwise.  I was only motivated to pay the bills but not much else. Because homelessness was not an option.

On the financial feeling scale I was a 3/4 out of 10.  To be a 1 is complete financial despair while a 10 is financial exhilaration! That’s the place where everything is possible 🙌. 

We can also call it a financial vibration or financial frequency scale. The level you are vibrating at determines your financial success level.  The happier you are determines how financially secure, capable, or free you are. 

But Rich People Get Depressed Too!

Of course rich people get depressed but not at the same rate as poor people.  However, statistically, only 15% of rich people have been diagnosed with depression compared to 31% of poor people saying they have been diagnosed. 

Middle class people are diagnosed at a higher rate than those at the top and bottom according to Columbia School of Public Health.  There are many factors that lead to depression from nature to nurture.  It’s exacerbated by messages from toxic religious, family, media, government, and social media influences.  All are focused on problems instead of solutions. 

Happiness, the Unicorn of Emotions

Happiness is often ridiculed and viewed as an unattainable or a unicorn state of being. How can anyone be happy with the state of the world?  This school of thought is what holds society down so they are drowning in depression.  From the state of the economy, the state of your bank account, to the rising cost of… well everything.  It looks impossible and feels improbable that anything will change.  Ironically this cycle of thinking is what keeps the majority of people low in the financial vibration scale. 

Is this is why the 1% retains the majority of wealth? 

While the 99% is angry, worried, or depressed the rich are on vacation, giving to charitable causes, and/or enjoying life in general. They are happy.  They are not listening to religious leaders, politicians, or the latest podcaster rant.  They are making news, living life to the fullest, and making a difference. 

Get Busy Being Happy

Despite what the media tells you, rich people are not thinking of ways to oppress you. In fact they are not thinking about you at all.  They are not losing sleep over their haters.  So why should you remain in that low vibration place for one more day? 

If you encounter snobbish or classist people it’s probably their kids or the help aka employees of the wealthy.  They don’t have the actual wealth but feel entitled because of proximity. 

It simply takes too much energy to be rude, obnoxious, and obtuse. True custodians of wealth have more important things to do. 

4 Ways to Raise Your Financial Frequency

If you decide you are tired of vibrating as a low financial frequency individual, you must learn how to think, behave, and feel differently.  You literally have to get over yourself, release toxic beliefs, and look to your future instead of the past and present circumstances. 

1. Read Financial Frequency Raising Books

A few books and audiobooks I recommend are:

Read them in the order I’ve listed to get maximum results. I also recommend the Financial Fresh Start Kit

2. Change Your Circle of Influence

You have to release people who are content to complain and be depressed. If you want to stop hanging around low vibration and low financial frequency people you have to change your thoughts.  

3. Adopt the Gratitude Habit

Gratitude is a great remedy that will raise your vibration at least two levels.  The more grateful you are, the more gleeful or happy you become.  Low vibration people resent grateful people so you may find they begin to disappear from your life.  When you are no longer commiserating with them they move on. After all, misery loves company. 

4. Commit to Raising Your Financial Frequency

Becoming a high financial frequency person takes time and commitment to your greater financial good.  The amazing thing is you have the power to choose this path. You have all the resources at your fingertips.  As you learn and grow happier, so does your bank account. 

 

 

6 Budgeting Tips for a 2021 Road Trip

6 Budgeting Tips for a 2021 Road Trip

By Molly Barnes, Digital Nomad Life

Road trips are a blast, but they can also be complicated, especially with kids in tow. Unless you’re flying by the seat of your pants (so to speak), you’ll have to set an itinerary, work out the details of how long it’ll take to get from one place to the next, and, of course, budget and save for the whole thing.

Budgeting can be the most difficult part of planning — a fact that became even more true in 2020, with fluctuating prices, limited options, and safety factors all put into play by the pandemic.

There’s a lot to juggle when you’re budgeting for a vacation, but it’s far from impossible, and you don’t need to let money concerns spoil your fun. When planning for your road trip, take the following steps to make sure it’s a success — and not a source of financial stress.

1. Save up ahead of time  

If you’ve got a tight household budget, you may not have much wiggle room — unless you’ve got a vacation savings plan built in. Which you should.

Set aside a little each month to save up for your road trip. It’s impossible to know exactly how much it’ll cost far in advance (especially with gas prices fluctuating and the cost of accommodations in flux). But you can map out a general budget, then set aside a little extra in case of emergencies.

When you leave will likely depend on how much you save, so if you’ve set a specific target date (or scheduled your vacation with the boss), you’ll have to be diligent about sticking to your pre-trip budget. Otherwise, you might have to shorten your trip, pick a different route, or, worse, wait ‘til next year. 

2. Map out your route  

How much you budget (and spend) will depend at least in part on where you plan to go. Road trips are great because they can cost less than buying an airline ticket, and you can see a lot of things you’d just be flying over otherwise.

Many of the most eye-catching and beautiful sights are visible from the side of the road, or with a short detour. There are many scenic highways from which to choose, all across the country, with plenty of opportunities for “oohs” and “ahs” and making photographic memories.

Take your camera (or camera phone) and be on the lookout for breathtaking overlooks from mountain roads, historic bridges with majestic arches — even in this U.S., some are nearly a century old — timeless forests, or gigantic rock formations.

3. Give your vehicle a checkup

The last thing you and your budget need on a road trip is to have your car break down, so make sure its service record is up to date before you go. 

Check the tread on your tires (you can use a coin to see where you stand) and replace them if any are too bare. Also, get an oil change and/or a tuneup — even if you aren’t quite due yet. You don’t want to have the oil light go on halfway through an extended trip and make you interrupt your fun with a few hours at a service station. 

Take along an automotive tool kit, just in case you run into trouble despite your preparations. While you’re at it, make sure your car insurance is up to date and covers everything you need it to cover. Also, having a roadside assistance plan isn’t a bad idea for long trips.

4. Have a credit cushion

No matter how carefully you plan, something can always go wrong. Be prepared to roll with Murphy’s Law by making sure you’ve got enough credit to handle the unexpected. You may even have credit problems, but don’t let that stop you from taking your trip. 

You can secure a fixed amount of credit on a card by depositing a few hundred dollars in an account to cover emergency expenses, if need be. With this kind of card, your deposit amount will be your credit limit, so you can’t go over. It’s another form of budgeting that helps you build your credit as you go.

5. Stock up before you drive off

Taking your own supplies on the road became a common practice during the pandemic. Disinfectant wipes, masks, and hand sanitizer became must-have supplies. It’s also become routine to stock up on food, water, and other essentials before departing — since the fewer stops you make, the less likely you are to come into contact with someone who has the virus.

Even as conditions improve and restrictions are lifting, these are good habits to maintain. Grabbing granola bars, water, soft drinks, snacks, and essential items before you leave will save you time and money: It’s a lot cheaper at your home grocery store than at a convenience store along the way.

6. Look for deals on gas, lodging

Discounts are always worth pursuing, regardless of your budget. Why pay more than you have to? There are plenty of tools to help with that. Download an app to find the cheapest gas and qualify for deals, or grab a loyalty discount card from a chain you trust.

Hotels offer preferred-customer deals, too. Some travel apps give you a free night after you’ve reserved 10 nights through their service, and hotel chains offer similar deals for repeat customers.

Budgeting for a road trip doesn’t have to be a headache. Just the opposite: It can save you headaches down the road. If you know how to find deals, prevent trouble, and put yourself in good financial shape ahead of time, there’s no reason your road trip can’t be full of awesomeness.

 

 

 

How to Regularly Stress Test Your Finances in a Global Pandemic

How to Regularly Stress Test Your Finances in a Global Pandemic

A Global Pandemic is a Good Reminder
to Stress Test Your Finances on the Regular

By Kimberlee Davis Host & Founder of The Fiscal Feminist

Not to prematurely declare the current public health and economic emergencies over, because it’s not, but the reopening of some businesses this summer presents a good time for many of us to reflect on our finances. It’s a practice we self-reliant women should be doing all the time anyway, and now there is a unique opportunity to assess and learn. With four grueling months of health scares, social distancing and financial instability, let’s look at how we did.

Specifically, there are four key pieces of our fiscal puzzle that should be analyzed in a post-mortem evaluation: retirement, budget, investments, and career. Each plays a critical role in our overall strength and well-being, and each was stressed during the turmoil known as the first half of 2020. Without these four pillars of security, it is virtually impossible to provide for your family, secure peace of mind or simply enjoy your financial independence.

1. Retirement Stress Test

If it seems like we’re starting backwards by beginning with the funds that will be used last, that’s because reverse-engineering can be the simplest way to getting the answers you need. Your retirement savings, whether it’s an employer-sponsored 401(k), individual retirement account (IRA) or something else, should never be taken for granted due to its long timeline. In fact, it’s one of the best barometers we have for our own financial health.

Think of your retirement as the proverbial canary in the coalmine. If the nest egg cracks, it will likely impact everything else tenfold. Everyone’s risk tolerance varies, but a retirement portfolio should be set up to reduce risk and exposure in your investment strategy, the closer one gets to her retirement date.

A loss of retirement funds just before that critical milestone as a result of a pandemic or other economic calamity really can be the nightmare scenario for women of a certain age.

It’s also one of the more obvious wealth sources that can be tapped during an unforeseen emergency like COVID-19. Under the CARES Act, Americans can take a withdrawal of up to $100,000 from their 401k or IRA without the typical 10 percent early withdrawal penalty; however, the distribution will be taxed at ordinary income tax rates. The total amount of the distribution is treated as income and taxed accordingly. The CARES Act gives you three years to pay the taxes on the withdrawal (normally, it is a one-time lump sum tax payment) or you can repay back what you withdrew to your 401(k) or IRA and receive a tax refund.

Although the CARES Act enables us to take a withdrawal to help us during this unprecedented time, before you take the step of dipping into your retirement, it is better to explore all other alternatives first. The permanent loss of principal from withdrawing early and the long-term benefits of compound growth is extremely detrimental to your retirement outlook. The worst time to withdraw investment assets is in the middle of a downturn and extreme volatility; investments will be worth less and, hence, investors will have to withdraw a greater percentage of their account and will turn temporary paper losses into permanent realized losses.

Even if you try to replenish later, you will have lost all the compounding of growth from the withdrawn principal and the concern is that if you take advantage of the CARES Act provisions and withdraw, there is a good chance that you will not replenish the withdrawal which will be a permanent reduction.

We all think that retirement is somewhere out in the future, but it does ultimately arrive sooner than we think, and without retirement funding, retirement can look bleak. Women live longer than men and need to understand the longevity of their retirement funding.

2. Budgeting Stress Test

The unexpected fall out from the pandemic involved many women losing their jobs. This is obviously very stressful, and although stimulus checks may have been forthcoming and unemployment compensation may be available, there could have been long delays in receiving these payments.

It is essential that every woman has a budget. Have an honest conversation with yourself about how you spend your money and track it! Even if you are the only one in your household, it is important to review your savings and fine tune your budget. Determine what is necessary and what expenses can be cut.

There are many free budgeting apps that can help you to create and monitor your budget and your savings. It’s best to track your finances in real time using a spreadsheet or tech-enabled tool such as Mint so you get the best read on where your money is going. Make sure to scrutinize your fixed costs such as rent, mortgage, utilities, cell phone, food and all insurances, including health insurance. List all credit card payments. Review all discretionary expenses and line item what you are spending that are non-essential. Eliminate or severely reduce online shopping, clothing and subscriptions. Re-evaluate your take-out food purchases. The more you understand, the easier it will be to find a way to save.

Every woman needs to prioritize having an emergency fund which equals three-six months of living expenses that can carry them through unforeseen circumstances such as job loss or illness. Regardless of your income, an emergency fund is essential! Women of all income levels need to have an emergency fund – it is the life raft when there is turmoil.

The sequence of solid budgeting is to track spending, pay down all credit card debt and establish an emergency fund. Once you do that, you can move on to investing.

3. Investments Stress Test

This pillar has to do with the more active aspects of wealth creation. Stocks can be a sizeable part of an investment strategy, but diversification of asset classes – whether its mixing bonds, alternative investments (such as liquid hedge funds, hedge funds, private equity or REITs), real estate or art – is a key component of long-term financial independence. It aims to maximize returns by investing in different areas that would each react differently to the same event. If one portion of your portfolio is declining, it may ensure that other portions are not declining or not declining as much.

With that in mind, ask yourself, ‘how did my strategy fare since all hell broke loose in March?’ Did you have a diverse allocation, and did you make decisions during the volatility from fear or rationality?

A good stock selection strategy is to focus on the fundamentals of companies issuing the stocks. Remember that buying stocks is buying ownership in a company. Does the company have cash flow, too much debt, good management, and are they allocating funds for capital expenditures, shareholder return and dividends?

With the return to a lower interest rate environment, the dividend yield opportunities available within the equity market are at more compelling levels relative to fixed income securities than the historical norm. Investor income requirements will likely result in greater demand for dividend-paying stocks. More than half of the S&P 500 stocks yield greater than the 10-year Treasury yield, as of the end of last year. During such times, high dividend growers have outperformed high dividend yielders and the S&P 500. Dividend growth stock investing focuses on companies that pay dividends and grow dividends annually.

Regardless of price dips, dividends will be paid, and this especially helps investors who are living off their portfolios in retirement. Companies may change their dividend policies, so be mindful of that. Also, be mindful of over concentration in one stock – probably prudent not to have one stock make up more than 5% of your portfolio.

With respect to bond investments, consider varying elements such as maturities, credit qualities, and sensitivity to interest rate changes to diversify within that asset class.

Once you have your mix of stocks, bonds and alternatives, on a regular basis check the weightings of each allocation to make sure that they still make sense given current market conditions; from time to time you should rebalance your allocations.

Additionally, do not try to time the market or execute short-term trades as an investment strategy. Market timing can be very risky. If you have a long-term, diversified strategy, don’t let fear motivate you to cash out during dips in the market – that will result in permanent capital loss. If you stay the course over the long-term, you will benefit from the ultimate run-up and recovery.

It takes discipline and consistent investing to build wealth as well as patience and unemotional decision making. Make regular saving and investing a priority by setting up automated, regular deposits.

Reviewing your strategy shouldn’t be done only in times of crisis. It is helpful during bull markets and periods of personal and professional success as well. Keep in mind, though, that stress testing finances isn’t merely checking up on your investment accounts. Rather, it’s a holistic view of your entire financial picture.

4. Career Stress Test

The same look at how your money fared during the crisis should be applied to your job as well.

Were you able to keep your job during the quarantine? Were your salary and/or benefits cut? Is working from home something you’d like to continue?

Perhaps your career trajectory wasn’t as solid as you thought it was prior to the outbreak and some pivoting in the form of additional education and training or an entirely new professional endeavor are in order. Times of stress are not fun nor avoidable, but they can be a useful reflection tool. If it wasn’t for the disruption of the pandemic, it’s possible that you wouldn’t have found the flaws in your career – and then made the necessary self-improvements.

Unfortunately, more than 21 million Americans lost their jobs as of June, and reflection might not be a luxury all of us can afford at the moment. A crisis of that ilk requires character to persevere.

The good news is if you are smart with your finances, you have options. In addition to federal economic stimulus – and likely subsequent waves of stimuli – private companies have demonstrated leniency. From utilities and car payments to mortgage forbearance and credit card interest rates, there could be a deal to be struck somewhere. Additionally, there are always the 0-percent credit card options, either as a balance transfer or a place to temporarily park debt for free until your finances are right-sized.

Whatever it takes, you will do what you have to in order to feed those who depend on you and rise another day. With this unique opportunity for reflection – and the ongoing stress-testing of your finances every three to six months – we’ll all be stronger when we come out the other side.

Kimberlee Davis is your host of The Fiscal Feminist, a show about women and their relationship with money and finances. Her mission is to help all women of all ages and wealth levels –to embrace their responsibility to themselves to achieve solid financial footing in both calm and turbulent times. Kimberlee Davis has more than 25 years of finance, legal and corporate experience, her career has included being a corporate securities lawyer, investment banker, and Chief Financial Officer. Currently, she is Managing Director and Partner at The Bahnsen Group, a private wealth management firm. She specializes in personal wealth advising and oversees financial and retirement planning solutions.