Take a Step Back From the Edge

What would you do if your transmission went out tomorrow?  If your identity were stolen and your credit frozen, would you be taking the bus to work?  If your uncle offered to sell you his mint condition Ford Mustang for only $5,000, would you be able to come up with the cash?

We’re apt to take many of the great things in our life for granted, up to and including out income.  In our culture, it’s acceptable and a common practice to live right the edge of our income, spending 90, 100, or even 110 percent of our annual income each year.

100_0297 - Copy (isujazzdog@gmail.com)

A Valuable Heritage

But for centuries (maybe longer), wise people have practiced the discipline of saving money for a rainy day.  Because we don’t know the future, it is necessary to save an emergency fund to have the options and choices we want.

In today’s article we’ll outline what the emergency fund is, why it’s important, and what it’s to be used for.  If you’ll make the decision to adopt this important discipline, you’ll reap the great rewards that wise men and women have been enjoying throughout history.

What’s It For?

The purpose of the emergency fund is to cover expenses that may come that you can’t predict.  Anything you can predict should be included in your monthly budget.  When I first began budgeting, I was tapping my emergency fund every other month, but as we get better at predicting what’s coming, there are fewer times when we need to use the emergency fund at all.  The goal is to have a full emergency fund that is never ever used, but just sits there “just in case!”

Can you estimate how much you spent on car repairs last year?  Take that estimate divided by 12 and this is how much you should allocate each month toward car repairs.  So maybe you’ll allocate $100 to car repairs in your February budget, even if you don’t take the car in.  But if your check engine light goes on in February, you have $200 sitting there, all ready to pay the bill.

If It Can Be Predicted, Figure It Out

Similarly, let’s say you know you want to upgrade your car by $4000, six months from now.  Just divide it out and you’ll find that you need to save $667 per month.  Again, it’s predictable so include it in your budget, not the emergency fund.

Overcome the Little Kid Inside

The tough part is saying no to all the things we’d like to do until the emergency fund is complete, totaling three to six months of your household expenses.  But it’s worth it to have the security; when you really need it and you have the money sitting there, it takes a lot of stress out of the equation.

Spend It All

We’re new and improved!  The latest version of ThriveWealthy is now available, and you can start using it today, for FREE, to create more options and less stress for yourself!

What can this tool do for you?

Good Advice

Here’s a statement you might not expect from a financial expert:   you should spend all your money!  In fact, you should spend the entire month’s income, even before the month begins.  You should spend it on purpose, by creating your cashflow plan before the first of the month.

Now, some of your money should be spent into your savings account.  Some should be spent paying down debts.  Some should be spent by investing into your retirement.  But it should all be spent.  Your income needs to exactly zero with all expenses, including savings and investments.  Why?  Because it isn’t until you lay out all income for January with all expenses in January that you  can make educated decisions about how much to allocate to the various competing uses your money can have.

You’re in Control

The beauty of using a cashflow planning tool like ThriveWealthy is that it puts you more in control of how your money is spent!  Since you are now making educated decisisons and prioritizing the things you value as most important, you are actually able to achieve more, and enjoy some of the better things in life.  Why not give this great free tool a try today?

ThriveWealthy Cashflow Software

Insisting on Balance

Guess what’s coming soon?  Christmas!!  Even though it’s the same date every year, it sure can sneak up on us!  Christmas is a wonderful time, full of joy and celebration.  We give gifts to each other in honor of God’s gift to mankind:  the baby Jesus, born in Bethlehem, that we might be reconciled to God.  It’s good to get carried away in the spirit of the season, but one area we must work hard not to get carried away in is our FINANCES.


Say Yes to Great Gifts

Before you call me Scrooge, let me say that I do want you to have a wonderful Christmas, to make a special time for those you love, and to elevate the day through special activities and make great memories.  I just don’t want you to experience the January hangover that so many of our friends will have once the presents are all opened.

When You Are Blessed, Bless

If you are experiencing financial success this year, don’t be afraid to spend a little more money on people this year.  In particular, do you know anyone who may be struggling to make ends meet this Christmas?  Why not bless them with a big gift or a big check?  You could even give it to them anonymously for an extra bit of fun!

Borrowing Is Not For the Wise

If, on the other hand, you didn’t experience an overflow of income this year, you may be like many across our country—facing the temptation to go big on Christmas with money you’ve borrowed on a credit card.  Like many short-sighted solutions, this decision would be easy on the front end, and hard on you in the months to come.

Think of it this way:  if you can’t afford to pay cash for presents now, how will you afford the full amount, plus the interest?  Or, put another way, what choice will lead you to have the best gifts for your family for Christmas 2014?  Racking up debt now?  Debt that will deplete your resources from January through July?

Solutions Are Out There

Something funny happens when you insist your budget must balance.  Your brain goes to work.  Once you’ve made the decision that you won’t go negative in December, your eyes suddenly see opportunities all around you.  You notice that stack of DVDs that you haven’t watched lately and you decide to put them up for sale.  You see the snow fall outside and take a few hours to shovel driveways in the neighborhood.  You eat peanut butter and jelly instead of fast food on your lunch break.  All these things may seem small, but when you add them together, you’ll be amazed:  you really can make things balance.

Supernatural Gifts

Another funny thing happens when you make a commitment to keep your budget in balance, particularly when you commit to prayer for the Lord’s help.  God loves to reward those who trust in Him, who rely on Him, and who live His way.  Call on the Lord, and keep your eyes open—you will find Him when you earnestly seek Him, and He is more loving and gracious than you can possibly imagine.

Get More of What You Want

What if there were a way that you could have more of the things you want in life? A better car, more time with family, better and more frequent vacations, or anything else you can think of. Would you be willing to make a few changes in your life in order to get these things?


Have You Lost Your Dreams?

Most people are good dreamers when they’re young. We imagine what life could be: the things we’ll do, the places we’ll go, the people we’ll influence. But, as we get older and become part of “the real world,” the temptation surfaces to deny or suppress our dreaming. There are a few big reasons this happens. One, that’s what people around us do. As you know from being a reader of this blog, that’s never a good reason to do anything! But a second reason is that often the practical cost of all the things we’d like to do adds up to a great deal more than we earn in income. This is a real limitation, but I have some good news: it can be overcome in two ways.

Owning Your Priorities

The first way to overcome the gap between what your dream life costs and the money you have available is to eliminate things which are not essential. For example, I may dream of owning a top-of-the line road bike, but don’t currently have the $1,500 in the bank to purchase one. However, owning the bike of my dreams is actually within my reach. I can get the $1,500 I need if I will simply commit to cutting $1,500 from other areas in my life. Maybe I collect $200 by abstaining from buying coffee from Starbucks for a year. I can collect another $300 by canceling cable TV for three months, and get $150 more by selling an old stereo that I never use. What I’m doing here is sacrificing the things that aren’t important to me in order to obtain that which is important to me.

We often let statements like, “I wish I could afford that,” or, “someday I hope to be able to…” come out of our mouths. As in our example above, the fact of the matter is that we can afford the things we’re dreaming about, but we refuse to give up the other things in our life that we need to sacrifice in order to get it.

Instead of Shrinking Your Dreams, Expand Your Income

The long-term way to overcome the gap between the life we imagine and the life we can afford is to develop an asset. One of the best definitions of an asset, especially in the context of what we’re discussing here, is Robert Kiosagi. In his book Rich Dad, Poor Dad, Robert defines an asset as something you own that produces a stream of income for you. By this definition, a house you own and live in isn’t really an asset, because it moreso takes your money, through taxes, interest, and upkeep expenses, than it produces in capital appreciation for you. An asset by Robert’s definition would be ownership in a growing company, a stock or bond, or creating a franchise. What assets do you have currently? What opportunities do you have to develop an asset?

We’ll Show You How

If you don’t know where or how you could begin to create an asset for yourself, you are in the right place! Part of what we do as part of our ThriveMart business is something called, “personal franchising.” We help people to do what we’ve done—start a business that they own without the risks and financial investment typically required to launch a business. Visit our ThriveMart facebook page and send us a message to learn more, and remember what Zig Ziglar says, “you can have anything you want in life if you’ll just help enough other people get what they want!”

Driving Blindfolded, Looking in the Rear-view Mirror, or Looking Ahead

What would you think of a person who drove his 2013 Corvette convertible around while wearing a blindfold.  How about someone who kept his eyes glued to the rearview mirror as he blazed down the highway?  Would you think that person is nuts?  Would you consider that person dangerous?  Would you be surprised if I told you this is exactly the way most people operate a major aspect of their life?

nice car!

The illustration above is the way many people operate their finances.  Ask 10 of your friends and neighbors if they keep a budget and you’re likely find few who do so.  Of those who keep a budget, many do not truly have a budget (forward looking) so much as they have a spending tracker (backward looking).  You would never drive a vehicle this way, so why would you operate your finances this way?

Not that fun?

Ok, few people are delighted to sit down with a spreadsheet and map out their spending for the month.  Even fewer people like to say no to themselves and restrict their spending on superfluous items.  But, if you will give advance cashflow planning (budgeting) a chance, I promise that the rewards will be worth the small investment of time, and you may just save yourself from careening off the road!

Having Financial Agility

When you’re sitting down with all the information in front of you, you’re more apt to see roadblocks and curves in the road ahead.  You can look at your home improvement fund or your vacation fund and get a gauge foe whether it’s on track for the upcoming expenses.  This lead time allows you to respond to financial challenges earlier: for example, skipping meals out for a few weeks early in the month so you can afford to buy new tires for your car when they’re needed later in the month.

Taking Control

Rather than creating unpleasant restrictions, a budget like that recommended in our ThriveFit page actually makes your life easier and more hassle-free.  While your friends are busy worrying and hand-wringing about how they’ll pay for the medical bill they didn’t plan for, you’ll be peacefully executing your spending plan for the month.  Although planning ahead doesn’t create more money for you from thin air, when you get your spending under your control, it often feels like you’ve gotten a raise.  Anyway, what do you have to lose?  If you hate the feeling of being in control and looking in front of you instead of behind, you can always go back to the chaos method….  😉

Making a Plan That Lasts

Why make a plan  for your money?  Isn’t it more fun to just grab what you want whenever you want it?


Growing Up

Living your financial life with the foresight of a 3rd grader may be fun in the moment, but to have what you want next week and next month, a longer term vision is required.  Problem is, even when people become convinced of the value of budgeting to their peace and financial freedom, their first attempt to make a budget sets them up for failure.

Make it Today, and For Today

If you’re like most people, the first time you sit down to work up a budget for the coming month, you try to create a generic, one-size-fits-all budget that will represent all future months.  You’re planning for the perfect month from heaven, problem is, that month never really happens here in the real world!

The key in building a successful cashflow plan is to spend this month’s income on this month’s expenses.  Some expenses will be nice and consistent, such as your house payment or water bill.  But if you make your budget too generic, it won’t work in real life, and you’ll be tempted to just give up money management altogether.

Get Started

Today’s always the perfect time to start planning your budget for the coming month.  If you haven’t tried the latest version of ThriveWealthy, click the tab above to find the page and download the tool.  Read over the instructions briefly, then start entering your expected paycheck amounts and dates.  Allocate how you’ll spend all of next month’s income in the different categories provided, changing category names as needed to make the budget fit your life.

Enlist Our Help!

Don’t be discouraged when things come up and you have to revisit your allocations several times throughout the month.  As you continue to plan your spending before the money is spent, you’ll improve at predicting your actual expenses, and you’ll also notice that your money will start to be spent on those things that are important to you–with less “falling through the cracks” or getting spent on things that don’t really matter to you.  Feel free to post successes, hardships, or questions to the comments section below; we’re all in this together, and we are all here to help each other thrive!

What’s Important to You?

What would you think if I told you that you have two sets of priorities?  Or that you have two sets of values?  Perhaps you will deny it—“of course not!  I know what’s important to me, and my values are clearly sorted in my mind.”  Maybe so, if you’re like many people, your bank statement will demonstrate quite a disparity between the list of priorities in your head and the true priorities according to which you spend your money.

Your Treasure and Your Heart

Jesus taught this principle quite clearly in Matthew 6:21 when he said, “where your treasure is, there your heart will be also.”  For example, if I look at my bank statements and notice that I spend 5% of my household income on golf in an average month, this demonstrates that golf is important to me. Conversely, if I say, “international missions are very important to me,” yet none of my money is given to support international missions, I’ve demonstrated that my imagined priorities are quite different than my actual priorities.  Your treasure will go to that which your heart values.

An Eye-Opening Experience

Now, if you’re anything like me, the first time you sit down to look at where your treasure went, you will be very disappointed with yourself.  I remember the day, years ago, when I sat down to start getting my finances in order.  I first developed an imaginary budget, allocating something like 2% of my salary to entertainment.  This made my budget work out very well, apportioning a solid sum of money towards saving and paying off debt, which I thought were high priorities to me (my imagined priorities).  Then, I looked at the previous month’s bank statement.  To my chagrin, I found that my actions demonstrated a high priority of enjoying activities with friends and buying drinks at the bar.  Instead of working toward a place of financial strength, I placed high value on having fun with money now.

If you find yourself in a place like I did—with “real” priorities rather far from the ideal you imagine, take heart, for change is quite within your reach.  Start by creating your budget for next month, using your bank statement as a template.  Then, adjust down slightly the categories that you think are too high (entertainment, in my case) and increase other more desirable categories by the same amount.  The trick is to not go “scorched earth” in your first month.  If you try to reduce entertainment from 5% of your budget to 1% on the first try, you’ll be tempted to “forget the whole thing” a few weeks from now.  Instead, focus on incremental progress, one month at a time.

Some Practical Steps

Herein lies the beauty of a zero-based budget.  Before the month begins, spend all the income you expect to receive on all the categories of expenses that you will have.  Allocate every dollar to the appropriate category, then get several blank envelopes.  Write the category name on each envelope, and withdraw the appropriate amount from the bank after each paycheck is deposited.  Now, if you will restrain yourself to only spend from your envelopes, you have no choice but to follow your budgetted plan. 

Staying Flexible

When something unexpected comes, as it always seems to, you may have to go back to your budget mid-month and reallocate.  This is perfectly acceptable, so long as you reduce one category by the amount that’s needed in another category.  Just make sure to do this with all your numbers in front of you, so as not to start the month with 2% allocated to clothing and find at the end of the month that you gradually ratcheted up to 7% by not paying attention.

All in all, this practice of advance cashflow planning is a great tool for spending your money on things that are truly important.  The sense of accomplishment and satisfaction that comes with switching expenses which bring you little value for those that you truly care about is magnificent, and will serve you well on your path toward the thriving life.

Planning for Unusual Expenses

Last week, we discussed the importance of including unusual but predictable expenses in your budget.  Items on this list include things like car repairs, home improvements, large gifts, or vacations.  By allocating a fixed amount each month, these big expenses don’t have to catch us off guard.  For example, my wife and I set aside $60 each month for car repairs, which has been plenty for the minor repairs and maintenance that our vehicles have required.

This brings up a small wrinkle in your budget, though, since you’ve allocated money to be spent on a certain day, but since you likely won’t have a $60 car repair this month, your account will be out of balance if you don’t correct for this.

Thankfully, this feature is built right into the ThriveWealthy advance cashflow planning program.  If you’ve not downloaded a copy yet, be sure to head over to the ThriveWealthy page and download the latest version.  Start budgeting next month’s income in the colored boxes, along with the dates your paychecks come.

Once you’ve entered your income and expenses in the appropriate categories, notice the orange box in the upper left part of the screen.  This section is called, “pending expenses” in the example tab, and is used to balance your budget with your current bank balance.  This section is also where you’ll keep track of your car repair fund, and any other “funds” for big items that you’re saving for.

Keeping with our example of $60 per month for car repairs, let’s say that we’ve reached the 15th of the month, which is the date we entered the car repair fund to be spent.  But, since we’ve not needed any repairs or maintenance this month, that $60 is still sitting in our account.  To ensure that the budget matches the actual bank balance (ascertained by logging into your bank’s website), we need to enter the $60 as a pending expense.  Next to the value of $60 that we enter in the orange box, we need to title the expense as, “car repair fund.”  The spreadsheet will automatically adjust the budgeted balance, and the “difference” value in cell C25 should drop to 0.

Next month, we’ll have the same thing happen, and assuming no car repairs are needed by the 15th of that month, we’ll follow the same procedure.  On the 15th, we’ll replace the $60 value in the orange box with a value of $120, and so on and so on, month after month.  Anytime money is spent at the auto repair shop, simply reduce the pending amount by the total amount spent.  So, if on the 18th of that second month, you spent $20 on wiper blades, simply reduce the pending amount from $120 to $100.

Following this plan will bring you such a sense of peace–bring ahead of these unusual expenses instead of getting knocked down by them.  Please enter any questions or clarifications you have in the comments section, and as always, remember that we’re here to help you thrive!

Overcoming the Unexpected

Most of us have been through the following story at some point in our lives: We resolve to “do better” with our money. That credit card company has taken advantage of us for the last time! We’re angry that we let ourselves get into such a vulnerable position and we’re angry that the credit card company hit us while we were down.

So, we get out the yellow pad or the computer spreadsheet and we get to work on a budget. We allocate our money carefully, taking our best estimate at what we’ll spend in the following month on groceries, gas, and utilities. Everything’s going fine until the 9th of the month…

That sinking feeling

On that day, two tires go flat on our usually-reliable family car. Your dentist sends you a second bill for the work done last month to resolve a clerical error. And your electricity bill is $30 higher than usual. What in the world is happening?!? Why is this all hitting at once???

Unfortunately, these unexpected things do seem to hit us just when we think we’re getting it all together. However, even though they seem like a string of improbable flukes, the root of the issue closer than the mechanic’s garage or the dentist’s office–the problem is us!

When we get used to living life without an advance financial plan (a budget), we quickly lose touch of what we really spend each month. Ask me before I started budgeting what I spent on groceries each month, and I would have said, “like $150 or so.” (reality = $400) Or ask me how much I spent on car repairs per year: “like $450 I think…” (reality = $60 per month)

The point is, our perception of reality is quite different than the truth of the situation, and we tend to underestimate how much we spend each month on these “unusual expenses.”

So be encouraged–you’re not alone when you’re hit by a “string of flukes,” in fact almost all of us have been there! If you’re starting (or restarting) budgeting for the first time, be generous with your grocery budget, and include $60 per month or more for car repairs. You may not need it in the first month, but soon you will, and having $180 sitting in your account waiting to be spent on car repairs makes that phone call from the mechanic a great deal less stressful!

If you haven’t yet downloaded the most recent version of ThriveWealthy, please spend a few minutes trying it out for yourself now. And as always, let us know of anything we can do to improve your experience at TotalThriver.com! Remember, we exist to help you Thrive!