I am really good at showing up on time, coaching people, planning jam-packed vacations, coming up with creative gift ideas, and breaking down something complicated into the key points that everyone needs to understand. Those are my talents—the things that I do well. Maybe even better than others. And, if I really thought about it, I could probably even think of a few more things to add to my short list.
Now, ask me to make a list of things I’m not very good at—the things I’ve worked hard at but never seem to be able to do as well as others…. Well, that could go on all day! Playing tennis, building budgets, writing in straight lines on a white board, singing in tune…. Seriously, I could fill the page! While practice might make me a bit better, I will never achieve greatness.
And as much as that bugs me, it’s pretty normal. We all have strengths but we have MANY more weaknesses than we have strengths. And that’s okay, because no one succeeds based on their weaknesses.
I wrote a previous blog on money management where I shared some tips on how to identify where you are wasting money and then gave my own personal formula (via an downloadable excel spreadsheet found here) the gauge all of your spending. If you are coming from that blog, then you are in the right place. If you are just looking at this blog for the first time, it may be prudent to go back and check out the previous one I wrote or at least download the excel spreadsheet because you will need it for the next step.
Step 2 – Formulating a simple budget that you will actually follow.
It was told to me early on in life by a very wealthy mentor of mine who I respect dearly that if I couldn’t manage $1, then I couldn’t manage $1 Million dollars. This is so true, I meet people all the time who’s personal finances are garbage even when they are making great money in their career.
It all comes down to money management and budgeting. Again, this is another common thread among all wealthy people I have ever met; they all have a budget based on a formula that uses money as a tool never spending it emotionally. Here is what to do.
Take that excel spreadsheet you just downloaded. (or get it here)
The idea here is very simple. Manage any and all money that you get. EVERY SINGLE CENT! If you know what your monthly income is, it becomes very easy to budget, if you are like me and get paid in lump sums sporadically then disciplining yourself to a system like this is crucial!
Ok so here is how it works: For every dollar I take in, it gets split up and put in to different bank accounts. Each bank account represents a different aspect that I am saving for. In my case I have 8 Bank accounts. I explain what I use them for and the benefits.
Wells Fargo Checking / Savings account – This account is used for daily spending, and paying bills. Think of it as your most active account, all money is deposited here before it goes to other accounts.
For daily spending and bill payment, I like Wells Fargo. The important thing to remember here is to bank with a bank that is convenient to for you with lots of locations and low fees across the board. As of right now, I pay NO FEES with Wells. I think B of A is the worst, and Chase Bank is in the middle when it comes to big banks.
Discover Bank # 1 – Taxes (This is where I said aside money for taxes every year)
Discover Bank # 2 – Emergency Fund account (Save for a rainy day)
Discover Bank # 3 – Long Term Savings (Use for large purchases like a house or car etc.)
I use Discover bank because they give you the highest rate of return for a savings account. 0.95% to be exact and…
No minimum deposits
No Account Fees
Open as many accounts as you want
Capital One 360 # 1 – Annual Expenses account (Money set aside for annual expenses like car insurance, property tax etc.)
Capital One 360 # 2 – Vacation Fund (Saved money for Vacations)
I use Capital One 360 because they pay a pretty good rate of return on money in savings and my account doubles over as my top pick for a travel debit card that has
Now take some time to look it over the excel spreadsheet. If you need to open a couple accounts, don’t worry, this can literally be accomplished in an hour, follow the links above to use my recommendations, or feel free to open up accounts where your want to.
Keep in mind that I am a 1099 independent contractor that means I pay my own income taxes each year. If you are a W-2 employee, then you can zero out the taxes line because your taxes are collected before you get paid. Personally I set aside 18%-20% a year for myself, you may pay less or more depending on how much you make and what your tax liabilities look like.
Enter all of your monthly and annual expenses. (You will see some numbers starting to populate)
Replace my bank accounts with your banks and match them closely as possible, meaning if you have a normal B of A or Chase Checking and savings account, that should be your main account at the top. If you have an E*TRADE, Schwab or IRA, replace my Wealthfront account with yours etc.
If there are some areas where you will need to set up new bank account, leave them blank for now
Now enter in your monthly income at the top in the yellow (total monthly Colum)
By now you should see some of the boxes populating. I will explain what’s happening here
The Breakdown.
Ok by now you probably have a good idea of what I am driving at here, but I will explain anyway. This formula is partitioning all of your income into different savings columns to give you a well rounded and financially savvy money management system.
The breakdown as seen in my excel sheet looks like this.
I earn $100
$20 (20%) is saved for taxes and taken right off the top (Skip step if you are a W-2 employee)
Now I have $80 Left
$40 (50%) Goes to my living expenses, i.e. rent, mortgage, car payment, food, gas etc.
$10 (10%) – To the emergency fund, after all shit happens.
$10 (10%) – Long-term savings fund. This could be for a future large purchase like a car or house down payment.
$8 (8%) – Annual Expenses Account – Like car registration or medical/life insurance. Things that get paid once per year
$7 (7%) – Vacation Fund – To broke to take a vacation, do this for a year, and I promise you that you will have enough to take a vacay!
$10 (10%) – Long-term investment account – YOU NEVER TOUCH THIS MONEY! This is for your retirement. You may be thinking I’m way to young to start saving for retirement, but the difference between starting this habit at 20 years old compared to 30 years old will mean a difference of hundreds, yes I said hundreds of thousands by the time your retire. So don’t fuck around with this one, set the 10% aside and forget about it.
$5 (5%) – For me it goes to an active trading account that I personally trade. If you have no desire to learn how to actively trade, you can simply put this money towards some other kind of investment short term to medium term, but this money is not for bullshit, it’s money set aside for short-Medium term investments with a bigger return on the short side.
Conclusion
This whole idea was adopted after first reading the age old book The Richest Man in Babylon. When done correctly you will learn to pay yourself first and then save and invest the rest of it leaving a little hear and there for having a good quality of life.
My parents generation saved about 20%-30% of there income on average. My generation saves a measly 5%-10% and knowing that we are going to need a least a cool million to retire on (4 times as much as my parents will need) we need to get on this today. There is literally no time to waste.
Again, if you are in debt, or not making a lot of money, apply this formula anyway. Rework the numbers to make them fit your situation. If you are in some serious debt, check out my blog on &^%&^%&*^%&* if you are just not making that much or spend money stupidly, then I challenge you to try this for 90 days. If after 90 days you don’t feel like you have a better handle on your finances and that you are heading in the right direction, comment here and I will jump out of an airplane to promote what ever you want me to.
Money is a tool. It is only emotional when you don’t have enough of it. It controls you, or you control it, simple as that.
I have written many blogs on personal finance, today I am going to speak specifically about investing, but not investing from the standpoint of a 40-something somewhat wealthy person with savings in the bank, a house and a stable career he or she has been in for over a decade.
This blog is aimed towards Millennials. If you a person age 18 to 34 then listen close because applying the small techniques that I am going to share in this blog could mean the difference between your financial success and failure later on in life.
Before I get in to the Nitti gritty of this, I want you to know that if you feel like you are broke at the end of each month, living paycheck to paycheck or simply just not making enough to meet your monthly nut and save a little bit at the end of each month then this blog is for you.
You could also be one of the thousands of recently graduated college students on the job hunt drowning in school loan debt wondering how you are ever going to get ahead.
Or, maybe you are doing ok financially and you are just looking for more ways to become savvier with your money.
Whatever category you fit in, what I am about to share is going to help you tremendously! Enough said, lets jump in to it.
Step 1 Gauging where you are.
I have never met a wealthy person who did not know where they were at financially. People who have built real wealth have some type of formula they use to save, invest, pay taxes and to live. This has been one constant that I have experienced with every wealthy person I have met that didn’t inherit the money or get lucky.
What you need to do is figure out where all your money is going. I think you would be surprised to find out that you probably waste about $20 a day on bullshit. What I mean is you may have a daily Starbucks Frappuccino habit, or maybe you never cook at home and eat out 3 times a day. What ever it is everyone has their vices and they are costing you greatly.
So, first thing is first, write down all of your expenses. Everything. From monthly fixed expenses like Rent, mortgage payments, car payments utilities etc. right down to your varying miscellaneous expenses. This will allow you to see where all of your money is going.
Remember we cannot fix a problem until we can recognize there is one, and this is going to help you gauge where you are at financially.
In part 2, I am going to share with you the simplest budget you have ever seen that anyone can follow even if you think you are to broke to save. In fact, I am going to share with you my own personal excel document that you can use to do this exercise.
Make America Great Again. This is the slogan of Donald Trumps campaign that I have to keep hearing again and again as the 2016 election looms over our heads.
The 2016 election cycle is shaping up to be just like 2012 and 2008 with fewer options and far worse choices across the board.
In 2008 I was working on the Ron Paul Campaign. I got behind Dr. Paul because he was the only candidate that stood out to me who in the very least was telling the truth and had 8-term congressional voting record to back it up. His ideas resonated with me. Talk of limited government, conservative economics and internet neutrality seemed were important matters to me and a lot of other Americans.
Unfortunately, in both those elections, Dr. Paul lost. In fact he didn’t even come close. People would ask me why I was working on a losing campaign, and told me I was throwing my vote away. I simply replied that I was going to get behind and vote for the person I believed was best for the presidency and that I didn’t care about what the news was saying or any of the bullshit you hear from people who only talk politics every 4 years when it’s on the T.V. everyday.
I remember all of the blatant tactics the media used to skew the polls for Dr. Paul, and the last minute changes by the RNC to keep him off the debate stages. I remember Dr. Paul barley won the Ames straw, then won the CPAC straw poll and then when he poled higher in the preliminary debates, FOX News decided just skirt the issue. Below is just one of many videos that outline just a couple of the events that took place.
After watching the Republicans tear themselves apart in the months following and ultimately losing the presidency to Obama for another 4 years, I was convinced that there was no place left in American Politics for anyone that was going to attempt to defy the establishment.
Now without getting all conspiracy theorist on you, I think when we look back at the case of Dr. Paul, most people would agree that the media snuffed him and that his attempts to bring subjects to the light like blowback, foreign intervention, auditing of the FED and the out of control budget deficit were not met with kind regard by the RNC, media and virtually the “establishment” as we know it.
What I learned during this time was that if the establishment (AKA media, RNC, Democrats super PACs etc.) could simply get the message across to the American Public that Ron Paul couldn’t win, then it would come true and it most certainly did.
The most common thing I would hear back in 08 and 12 when speaking and or advocating about Ron Paul was the logic behind the idea that Paul didn’t have a chance to win, therefore I would be throwing my vote away, and hence I am voting for someone else.
Well Clinton and Trump are among the most disliked Candidates to ever run for President according to this poll.
History is repeating itself once again and we are seeing it play out right in front of us with Gary Johnson. In the next couple of weeks I am going to release a series of blogs as these event unfold, and it should get pretty interesting.
Keep this in mind when you are reading these…..
I have voted both republican and democrat evenly since I could vote
I am registered as a democrat currently, but have been registered as a republican, democrat, independent and libertarian in the past.
I usually follow the money and that leads me to the real answers.
