Simple Financial Lifestyle Budget Busters

Have you decided not to create a monthly budget because every time you create one you always bust it.  Why waste my time when I know I will bust it before the end of the month. Creating a personal budget is important to your personal financial health.  Sticking to your personal budget can be challenging but it is key to living a simple financial lifestyle.  You are  probably asking what do I need to do to stick to my budget.

One key to sticking to your budget is to make sure it fits right. Maybe your budget is too tight or too loose. Make sure you design it just right for you. Once you have had an opportunity to review your budget to make sure it fits.

Here are a few common budget buster you should be aware of to prevent yourself from busting your budgeting:

Splurging or unplanned purchases

We all do it but we must limit it or at least budget for it.  If you know you have a tendency to buy things at the spur of the moment instead of planning just put it in your budget.  Hopefully you are not buying high ticket items every month.  If you are you may need to look at your spending habits. If this is a issue you want to make sure you are budgeting your monthly savings. Your monthly saving should be automatically transferred to another account before you go on your shopping spree.

Medical cost

Unplanned medical expenses are usually something you cannot predict. But you know they will occur each year.   Having adequate medical insurance in place and a reasonable deductible or co-payment will lessen the impact of those unplanned medical expenses. Also establishing a HSA will help with these expenses.

Unplanned repair bills

Similar to having medical expenses you cannot always predict when they will occur.  To lessen the impact on you budget have preventive maintenance performed on your car, appliances and home as recommended. You can schedule these out as well as prepare for them in your budget.  Many  times even if you do preventive maintenance things will still need repairing.  This is why you should have an emergency fund in place so your monthly budget is not impacted.

Eating out

This is a big where I could use some work.  It’s so easy to just go out to eat instead of planning ahead and have dinner at home or even bringing your lunch to work.  Try limiting the times you go to dinner each week. I know what we may spend on a dinner for four we could easily prepare several meals at home.

 Increase insurance expenses

We cannot control how much our insurance premiums will increase each year.  But what you can do so your premium does not bust your budget is to review your insurance policies each year to make sure your coverage is appropriate.  You may want to even shop for another insurance providers if the increase is significant.

Anticipating these potential budget busters will help you stick to your budget as well as put things in place to help lessen the impact on your budget when they do occur.

What are your budget busters and how do you avoid them?

ACTION STEP

Take action by reviewing your spending and think about what is causing you not to stick to your monthly budget.

Til next time take one step at a time to simplify your finances.

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Amanda Abella

 

Welcome to this week’s Simple Inspiration interview series.  This is the first of many Simple Inspiration interviews I plan to offer.  Today I am honored to interview Amanda Abella.   Amanda is a millennial business coach as well as Amazon Bestselling author.  Her book Make Money Your Honey shows individuals how to simplify work and money when you’re an entrepreneur.  It is definitely worth reading if you are a millennial who is try to  find that work life balance and build your business at the same time.  Check it out on Amazon.

As a business owner, Amanda has faced a few challenges when it came to managing her finances.  She has found a balance and continues to improve them.

Let’s see how Amanda has simplified her financial life.

What steps have you taken to simplify your financial life and how has it changed your life?

Automatic saving and investing. Paying myself first whenever I get a client payment. Getting an accountant for the business. Zero sum budget. Paying everything automatically with credit cards and then doing an automatic bill pay on the card itself (I need airline miles, after all).

I spend less time worried about money. I still have to review my finances, but at least I can see them all in one place. I also know that my bills are taken care of and that I’m automatically putting money away and investing every month.

What event lead you to simplify your finances and what areas needed the most simplification?

The first big event was having graduated during the Great Recession and not being able to find a job. I realized that I knew nothing about money and started learning everything I could. I’ve been on a journey ever since. Fast forward a few years and running a business constantly keeps me on my toes when it comes to simplifying my finances.

Definitely my business accounting. Most recently my accountant and I have gotten everything online and streamlined.

What was your biggest challenge or roadblock when it came simplifying?

I run a business so I have varying income. This has been a challenge but also a great learning lesson.

Have you established an emergency fund, if so how did you determine the amount needed to fund it?

Yes and I actually just had to replenish it because of a surprise gum surgery I had to get done a few months ago. The base is at least $1000. Once I have that I put away a percentage of each deposit into that account and also do some automatic saving. I just keep putting money in there as time goes on, there really is no set amount.

 How long did it take you to simplify?

I’m still simplifying and I started this journey over four years ago! Truthfully though 2014 has been a major year of simplifying my finances – especially in my business. It’s taken a few months to get everything up to date.

What app or tool helped you the most when it came to simplifying?

Mint is great for seeing the entire financial picture in one place.

Are there any areas of your finances that you still need to simplify and what are current goals?

Well I feel like this will be a constant journey so I’m sure I’ll come up with something soon enough!

Double my net income.

 With your business, how do you simplify the management of your business finances as well as your personal finances?

Always keep everything separate. I definitely don’t co-mingle. Quickbooks Online is a fantastic tool that my accountant and I use.

What book, blog, or podcast would you suggest to someone who is looking to simplify or improve their finances?

The entire Financial Blogger Conference community has great blogs and podcasts that I follow all the time. If you go to their website and look through the attendee list you will find a goldmine of resources.

What advice or tips would you give to others who want to simplify their finances?

Just do it. It may seem difficult at first but it’s well worth the effort.  The sooner you do it the better :)

I would like to thank Amanda for taking time out of her business schedule for this interview. She has offered some very good advice.  If you would like learn more about Amanda you can read her blog Amanda Abella or you can follow her on Twitter @amandaabella.

If you are interesting in business coaching she is currently offering free Make Money Your Honey mini sessions.  In these sessions, she helps online business owners get clear on their next step and improve their money mindset. How you perceive money is more than half the battle so it’s important that we deal with our emotions and thoughts around money if we are to really live in prosperity.  To schedule a free session with Amanda click here to schedule .

If you are interested in sharing how you have simplified your financial life, send me an email.  Have a great week.

 

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Budget Fit

 

Budgeting is a key tool to help you simplify your finances. It helps you see where your money is going and coming from. Making a few small adjustments to your budget can have a significant impact on your future.
You are probably saying yes I know having a budget would help my finances but my issue is not creating the budget its sticking to the budget. That’s where I am failing. If that is the case you should look to see how you have designed your budget. How you design your budget may be preventing you from sticking to it.

Consider how your budget fits you. Finding the right budget for you can be similar to finding the right pair of jeans. Think of your budget like a pair of your jeans. How does your budget fit you? Some jeans may fit too tight, some may fit too loose and some may fit just right.

So let’s determine your budget is designed:

Tight Fitting

If you try on a pair of jeans that are too tight it’s unlikely you will wear them because you feel crammed and cannot move around comfortably.
Your budget maybe designed a little too tight. If your budget does not allow you much room to move around. It’s not a comfortable feeling. You feel trapped by it and not enjoying yourself which causes you to not stick to your budget. This type of budgeting usually does not leave much room for error. If you make one simple miscalculation for the month your budget is shot. You put so much pressure on your budget it cannot breathe. You have your fingers crossed at the beginning of each month hoping that your budget does not pop.

Loose Fitting

If you try on a pair of jeans which are too baggy and loose. They may keep falling off and you have to constantly pull them up. You don’t like to wear them either.
This type of budget allows you a lot of freedom. It’s loose and baggy. There is a lot of room for error just in case you do plan to overspend one month and you probably would not even notice the impact on your budget. But it does cause you to overspend in some area since you just pool all of your money in to one large category. It enables you to hide your overspending in some categories since its loosely maintained. But you will never break your budget since it loosely maintained.

Just Right Fit

But if your jeans fit just right your comfortable you usually want to wear them as often as possible.
This budget is perfectly maintained. It fits just right in all categories. There are no worries if you overspend in one category because you have a planned for it. You are not pulling your hair out at the end of the month wondering where you money was spent or your fingers are not crossed hoping that you use This budget allows you to relax and not stress. It fits perfectly and helps you achieve the goals you set for yourself.

Take Action Step

Now it’s time for you to review how your current budget is structured and decide if you have a tight, loose, or just right fitting budget. Then be honest with yourself and make some adjustments where needed. By designing the perfect fitting budget it will enable you to more likely stick to your budget and stay on course.
Remember take one step at a time to simplify your personal finances so you can live the financial lifestyle you desire.

Copyright: fberti / 123RF Stock Photo

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Simple Financial Lifestyle How to Prune Finances

 

Have your personal finances become overgrown?  No matter what you do you can not  get a handle on  your personal finances.   Do you have a hard time keeping track of all of your banking and investment accounts?  Are you overwhelmed with all of the financial information you hear every day and not sure where to begin to get your finances in order?  Have you ever thought about pruning your personal finances to help them grow?  Why not?

According to Wikipedia:

Pruning is the practice of removing unwanted portions from a plant, but may also refer to:

Pruning (algorithm), a method of simplification of a decision tree
Pruning (microeconomics), the removal of “excess” items from a budget
Pruning your personal finances will help you get rid of the unnecessary or excess  that make your personal financial life more complex than it needs to be.  Pruning will help your personal finances grow and expand as well as help you  simplify your financial life.

So what should I prune?  Here are four things you can prune in your financial life to help you simplify your financial life and reduce your financial stress:

Prune your accounts

A simple easy way to simplify your finances is to prune your banking account and investment accounts. Do you really need more than one or two bank accounts?  Think about the time you would save by not having to keep track of multiple bank accounts.  Reducing the number of accounts you have enables you to do a better job of tracking your spending and savings.

Reduce your investment accounts.  Do you really need multiple brokerage accounts with similar assets in them?  Consolidate them into one account if you can.  You may not be able to combine  some retirement accounts.  But the ones you can combine its worth combining. Having less accounts enables you to monitor your assets and have a better understanding of your overall investment performance of your assets as well as overall asset allocation.

Prune your financial information

Where do you receive your financial information from magazines, news, radio, or your financial advisor?  Receiving multiple messages from multiple sources can be overwhelming at times.  Many times you are not sure what advice to follow.  The best way to reach your goals and objectives you set is to limit your information or trim back the sources of information you receive.  Find a few of sources of information you find reliable and that fit within the goals and objectives you set out to achieve and stick to them.  By doing this you are able to process less information and then make quicker decisions that help you accomplish your goals and objectives.

Prune your debt

Is your debt holding you back? Do you feel tied down and unable to move forward because of the amount of debt you have.  Develop a plan to reduce or eliminate your debt.  You have to find a debt reduction system that works best for you. The quicker you prune your debt the quicker you will be able to grow financially and increase your net worth.

Prune your spending

Are you spending more then you earn each month?  Are you living pay check to pay check each month wondering where your money has gone?  Review your spending and determine where you can cut back.  If you do not have one put a budget in place.  There are many free budgeting templates you can use to started. Reducing your spending will enable you to have some extra cash at the end of each month which you can use to save or can be used to reduce your debt.

By pruning these four components of your financial life you will be able to improve your personal finances as well as create a simplified financial lifestyle.  So take action now by reviewing your existing accounts, debt, spending, and financial information sources.

WHAT AREA OF YOUR FINANCIAL LIFE DO YOU NEED TO PRUNE?

If you enjoyed this post please share it with others by tweeting it on Twitter, sharing on Facebook or pinning it on Pinterest.

If you are looking for some quick easy steps to simplify your finances, sign up for my weekly newsletter which offers steps to help you simplify as well as receive a free e-book which provides 9 Simple Steps to Help you Simplify Your Finances in 30 day.

Take one step at a time to simplify your finances.

Til next time have a great week.

 

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Simple Financial Lifestyle - Standing Financially naked

If you want to simplify your personal finances make sure your covered. What I mean by this is you want to make sure you have the appropriate amount of insurance coverage. You do not want to be left standing naked when a medical, natural disaster, or other financial situation occurs which can place a significant financial burden on you.

Often times we may cut corners or look for cheapest insurance coverage.  This results in not have  proper insurance coverage because we say hey its not going to happen to me. But you never know its always better to be prepared for the situation than unprepared. Think of it this way can you afford to rebuild your home if it was significantly damaged without having adequate insurance coverage? Probably not. So why put your financial future at risk to save a few extra bucks each month.

Here are a few steps for you to take to make sure you are not left standing financially naked:

Annually review your insurance policies

Dust off that old policy to determine the amount of coverage you have as well as determine what is covered.  Have you purchased an insurance policies and never reviewed the policy until you needed to place a claim and then find out what you thought was covered is not covered.  Often you may have established your policy several years ago and your financial situation was different than it is today. So remember to review your policies to understand your coverage and make sure you have adequate coverage.

Review your deductible

Know your deductible amount and make sure it is adequate. An easy way to lower your lower insurance bill is to increase your deductible or reduce the amount of coverage you carry on the policy. Before you decide to increase your deductible consider the impact this can have on your financial situation. Yes it can lower your monthly or annual payment but what will happen when you need to file a claim will you have the funds to cover the repairs. For example, you may be able save money by increasing your deductible from $1,000 to $2,000 but do you have the additional funds saved in your emergency fund if something does occur. Look at the worse case and if your able to cover yourself without putting yourself in a significant financial burden if something does occur go for it. Just think before you do something just to save a few bucks each month.  If you do decide to increase your deductible to save each month consider put the additional saving in your emergency fund. The long-term consequences can be more damaging than the short-term relieve you will receive.

Financial stability of insurance company

How stable is your insurance company will the company be able to cover your claims. From year to year the financial stability of your insurance company can change which may impact their ability to pay your claims. What you don’t want to happen is your insurance company to go out of business when you need them. Trust me it does happen. Luckily, my claims were paid. So check on your insurance company’s rating to find out their financial situation.

Adequate coverage

Review your current financial situation and determine your appropriate coverage. For example, has your home increased in value and you may need to increase the coverage. Have you made improvements or additions to your home which were not originally covered. Do you have significant cash or emergency fund to cover a higher deductible or do you need to lower your deductible due to lack of cash reserves. Do you have additional drivers in your household and need to review your current auto insurance.  You have a new addition to the family and you need to review your medical coverage. Make sure you are covered for your current situation. What was sufficient last year or several years ago may not be sufficient coverage today.  Make sure you coverage meets your current needs.

Simple Financial Lifestyle - Pay Premium

Pay your premium on time

One of the worse feelings is finding out your insurance has been dropped because you did not pay your premium on time. Most insurance policy premiums have 30 day grace periods, which allows you to pay your premium within 30 days of its due date. However, if you forget to pay it within those 30 days you could be dropped and it is possible you may have to wait 30 days or longer to be reinstated. This means you will not be covered during this period so you may want to cross your fingers and hope nothing happens during that time. An easy solution to this is to set up an automatic debit from your bank account to pay the premium or have the premium automatically charged to your credit card.

Here are six insurance policies depending on your situation you should consider so you are not left standing financially naked:

1) Homeowner’s / renter’s insurance
2) Medical insurance
3) Car insurance
4) Natural disaster insurance
5) Life insurance
6) Disability insurance

If you want to live a simple financial lifestyle take action now by reviewing your existing insurance coverage to make sure your adequately covered so your not left standing financially naked wondering what to do now or how am I going to pay for

When was the last time you reviewed your insurance policies to make sure your coverage is adequate for your current financial situation?

Til next time take it one step at a time to simplify your finances.

If you enjoyed these tips and would like to manage your finances better, sign up for Simple Financial Lifestyle newsletter for more great ideas and tips to simplify your finances.

 

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4 Simple Number - Simple Financial Lifestyle

Do you know how financially healthy your finances are? Do you know what numbers can help you determine your financial health?

There are four numbers you can calculate to help you determine your financial health. Similar to a health check knowing these four numbers will help you improve your financial life as well as help you simplify your finances.

So you ask what numbers will help determine my financial health. Here are the four numbers you should monitor regularly to help you simplify your finances no matter how unhealthy they may look at first.

Simple Financial Lifestyle Net Worth

Net Worth

What is my net worth? How do I calculate it?

Your financial net worth is simply your financial assets minus your financial liabilities. Knowing your net worth is an excellent way to measure your financial health. Calculating your net worth will help you track your financial progress from year to year or from month to month.

When you calculate your net worth you want this number to be positive not negative. If you have a negative net worth this is an indication you have more liabilities/debts than assets. So review your liabilities to see what liabilities you can reduce to show a positive net worth. A simple way to improve your net worth is by reducing your debt and accumulating appreciating assets.

Simple Financial Lifestyle Debt to Income

Debt to Income

What is my debt to income and why is it important? Debt to income measures the amount of income you earn versus the amount of debt you have outstanding. It’s another good indicator of your financial health.

You calculate it by totaling up all of your monthly debts then dividing it by your income. Using your net income is a more accurate calculation because it is the actual amount you take home which is available to service your debt.

The lower number means your finances are health and indicates low amounts of debt. A high number will indicate a high level of debt. A healthy debt to income number would be less than 35%. As you reduce your debts this number will be lower.

Simple Financial Lifestyle Score

Credit Score

The next number you should know to help you gauge your financial health is your credit score. Your credit score determines your credit worthiness which is based on your history of managing to payment of your bills in a timely manner.

Credit score can range from low 400s to mid 800s. Here is a break down:

• Excellent credit score 720 and above
• Good credit score 719 to 680
• Average score 679 to 620
• Poor score 619 to 580

Maintaining a good to high credit score has its financial benefits because you will usually receive better interest rate as well as financing terms when you are financing a purchase. This will save you money long term.

When you have a low score you may not be able to obtain financing or offered a higher rate and less favorable terms. Knowing your number helps you during financing process because if you have a good score you can use to your advantage.  If you have a low score, it will not be a surprise if the terms are not favorable.

Obtaining a copy of your credit report along with your credit score is the best way to determine why your score may be low. There are several reason why you may have a low score. When you obtain your report review to make sure the information is accurate and then look to see what can be done to improve your score.

Simple Financial Lifestyle What is your savings percentage

Saving %

Yes you may save some money. But do you know what percentage of your income you actually save annually?

Having a healthy savings has significant benefits and is another indication of your financial health. Calculating your saving percentage is simply dividing your gross income by your savings amount. When calculating your total saving take into consideration the amount you saving for retirement, emergency fund and any other general savings.

Knowing your financial numbers will help you simplify your finances. So take action by determining your:

Net Worth
Debt to Income
Saving Percentage
Credit Score

Setting a goal to improve your just one of these number will help obtain the financial life you desire. Once you work to improve one of your numbers the others are likely to improve as well.

So which number will you work to improve so your finances can become healthier?

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Avoid those Financial Teasers

by B Simple Mindset

As the holiday season quickly approaches, now is the time of year we maybe tempted to take one of those financial teasers as we shop.  We all see them and we are all tempted by them. But in order to simplify your personal finances you must say no thank you  and avoid falling for the […]

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4 Action Steps to Take Now to Prevent the Christmas Hangover

by B Simple Budgeting

Yes, I am aware it is only October.  The temperature is beginning to drop and leaves are beginning to change depending on where you live.   It also means you only have about 13 more weeks before Christmas is here.  But that is more than enough time for me to purchase gifts and decorate the house.  Right? Yes […]

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Ask Before You Make a Switch

by B Simple Banking

  In my recent post  Is Rate the Only Thing That Matters, I discussed how if you are looking to simplify your finances you can not just look at the rate you will receive.  You have to ask yourself a few questions before you open the new account.  If you open a new account just to […]

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Is Rate the Only Thing That Matters?

by B Simple Banking

  We make financial decisions all of the time.  Are you making your financial decision solely on the rate that you will receive? Are you considering other factors when making financial decisions?  If you are trying to simplify your finances, don’t let the interest rate be the determining factor in your decision: New Deposit Account You see […]

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