Introduction:
You’ve probably heard the saying that personal finance is 10% math and 90% psychology. I couldn’t agree more! It’s one thing to understand the basics—like “eat less to lose weight” or “spend less to save more”—but putting those ideas into practice? That’s the real challenge.
My goal is to give you clear, actionable steps to take control of your budget, spend less than you earn, and build a secure financial future. Imagine having freedom from debt, work-related stress, or even the hassle of unexpected car troubles.
For instance, picture your car breaking down on the side of the road. If your bank account is running on empty, fixing something as simple as a flat tire can feel overwhelming. But if you’ve built a little financial cushion, moments like these become manageable rather than stressful.
So, before we dive into where you want to go, we’ll take a moment to figure out where you are now and define your goals.
We’ll start by understanding your net worth and learning how to calculate it. Then, we’ll set short- and mid-term goals and estimate what it’ll take to achieve them. Finally, we’ll create a budget that aligns with your plans and helps you move forward with confidence.
Sound good? Let’s get started!
The Basics - Net-Worth
What is net worth? Simply put, it’s a way to get a clear snapshot of your financial situation. To figure it out, you start by looking at your assets—anything of value you own, like your home, car, or the money in your bank account.
Next, you consider your liabilities, which are the debts you owe—things like credit card balances, student loans, or other obligations.
Here’s the formula:
Net Worth = Assets - Liabilities
Take a moment to gather your financial details, and use the calculator below to see where you currently stand. It’s that easy! 😊
Now, don’t worry if your net worth turns out to be negative—especially if you don’t own a home yet or you’re still paying off student loans. Trust me, I’ve been there too.
This is just a starting point, a snapshot of your finances as they are today. The good news? Now you have the clarity to identify areas that could use some improvement.
Together, we’ll explore ways to pay off debt faster and boost your assets so that your net worth keeps growing in the right direction.
You’ve got this!
Goal Setting
Where do you see yourself a year from now? How about five years? What milestones do you want to reach? These goals could be financial or lifestyle-related—it’s entirely up to you!
Maybe you dream of paying off your debt, building a solid savings cushion, taking an unforgettable vacation with loved ones, or buying your first home. Whatever they are, take some time to think about and write down all your goals. The more specific you can be, the better!
Once you’ve listed your goals, do a little research.
- If a trip is on your list, check out airfares and hotel rates.
- If buying a house is your goal, look at home prices in neighborhoods you love.
- Get a realistic sense of how much you’ll need to save to achieve these dreams.
Start with your short-term goals—the ones you want to accomplish in the next year or two. These might include saving for a vacation, attending a big event, making a major purchase like new furniture, or even replacing your car.
Next, think about your mid-term goals, which are typically 3 to 10 years away. Perhaps you’re planning to buy a home, start a family, or pursue a new career path.
Once you’ve mapped out your goals, take a few minutes to estimate how much money you’ll need for each one and set a timeline for when you’d like to achieve them.
This exercise isn’t just about planning—it’s about turning your dreams into actionable steps. You’re setting yourself up for success, one goal at a time! 🌟
Now Comes the Fun Part: The Budget!
By now, you’ve likely come up with a few goals that excite and motivate you. You might also be wondering, “How am I going to reach them all?”—especially with life’s everyday expenses in the mix.
That’s where a budget comes in.
I know, the word budget doesn’t always have the best reputation, but think of it as your personal roadmap—a simple plan for spending, saving, and investing that takes you from where you are today to where you want to be.
The first step is knowing your goals and estimating how much you’ll need to save to achieve them. From there, we’ll create a budget that works for you—one that aligns with your dreams and lifestyle.
And here’s the good news: achieving your goals doesn’t have to mean making painful sacrifices. I’ve seen it firsthand in my own life and with others I’ve worked with. It’s all about building smart money habits and gradually shifting your financial picture for the better.
You’ll focus on three key areas:
- Spending less – Learning to prioritize what truly matters to you.
- Earning more – Finding ways to grow your income over time.
- Investing wisely – Putting your money to work so it grows faster.
With the right plan and a little consistency, you’ll be amazed at what you can accomplish. Let’s get started on building a budget that brings you closer to your dreams! 🌟
Building a Budget
Let’s be honest—gathering all your expenses and plugging them into a spreadsheet isn’t exactly thrilling. I’ve done it dozens of times, so I get it! But here’s the thing: a budget is hands-down the best tool to help you stay on top of your finances and achieve your goals.
So, how much should you be spending on expenses, and how much should you set aside for the future? A great starting point is the 50/20/30 rule.
Here’s how it works:
50% – Essentials: This includes your basic living expenses, such as rent or mortgage (which ideally should be less than 30% of your income), utilities, and monthly bills. It also covers regular debt payments, like student loans or minimum credit card payments.
20% – Savings and Investments: This portion goes toward building your future—like contributing to retirement accounts (401(k), IRA), saving in a brokerage or bank account, and creating an emergency fund.
30% – Flexible Spending: This covers everything else—dining out, travel, clothes, entertainment, and other non-essentials.
To get started, you’ll need to know:
- Your net income (what you bring home each month).
- Your fixed expenses, like rent and minimum debt payments.
- Your variable expenses, like groceries, entertainment, or takeout.
As you fill out the worksheet, think about how much more you’d like to save and invest each month to reach your goals. Ideally, you want to set aside at least 20% of your income—or more if you can. But don’t stress if you’re not there yet. This is just a starting point!
What you’re creating now is a snapshot of your spending. Once you’ve got that, you can move to the next step: building a budget that helps you close the gap between where you are and where you want to be.
If your current savings and investments aren’t quite enough to meet your goals, no problem! You can start making small changes—by spending less, earning more, or both.
In our next post, we’ll dive into ways to:
- Pay off debt faster, so it feels less overwhelming.
- Cut back on spending without feeling like you’re missing out.
- Boost your income by negotiating a raise, exploring side hustles, or building passive income streams.
You’ve got this! With a solid budget and some smart strategies, your goals are closer than you think. 🌟
