I Can Be A Millionaire!

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Budgeting your money

This is the most important area we cover on your road to financial security. Without good budgeting skills the goals that you set will be very difficult to achieve. In today's culture we are bombarded with marketing telling us we need their product today and we will never be happy if we don't. We all give in to some of this. I like things as much as the next person. However, I have taught myself with the help and support from my wife that patience has its rewards. If you can learn to be patient you have the game won. I know it is painful to think of putting the things you want now off until sometime in the future, but the ones that have made it, sacrificed in the beginning. Remember keep telling yourself "I Can Be a Millionaire", until the urge goes away.

Setting a Budget

You can set up a budget using a piece of paper or by using financial programs like Quicken, which we use. This budget can be fairly simple or as complex as you need. It really is a matter providing the amount of structure that you need so that you keep your spending at or below the budgeted amounts.

When you set up your budget you should have priorities in what gets paid first. Here are the priorities we use:

• Food
• Housing - rent, mortgage, Electricity, water, and basic phone service.
• Basic Transportation (gas and car payments)
• Clothing
• Basic Entertainment
• Savings
• Extras (better transportation, entertainment, hobbies et.)

The example on the right can be used as a starting point to making your budget. I have included an Excel version in the reference section below. Programs like Quicken and Money both have sections where you can set up and track your budget.

Notice that credit cards are not listed above. The reason for this is that credit in itself should never be considered a budget item. If you budget wisely you will not need credit cards or will use them judiciously. We cover debt reduction in more detail on the Handling Debt page.

Some people sit down with their paychecks and place the budgeted amounts in envelopes to keep them on track. We prefer to use our checking account. We used direct deposit of my paycheck to our credit union and 401k. Below is how ours works:

• Contributions for 401k direct deposited into account
• Savings for short and medium term needs deposited into credit union savings account
• Car payments or home equity loans are subtracted directly from the deposit each paycheck
• Money to meet monthly expenses was deposited into checking account. (Mortgage and Utilities)
• Wife's paycheck was cashed to use for weekly expenses including food, gas, clothing and entertainment.

The trick is that we were limited to what money was available after everything was paid and we always made due. If you can setup as much as you can so that you never get the money in your hands, to keep from being tempted to spend it you will be much better off. It can be painful at times, but its worth it.

Spending Wisely

To keep your spending in budget, we suggest thinking outside the box. Think of what it is you need or want as a challenge as to how to get it for the least amount of money. The possibilites are endless and you get extra joy and gratification when you accomplish your goals. We have prided ourselves in being able to find bargains where our friends thought there were none. While most of what we have done is just common sense, it is following through and using what you know is right for you that counts.

To make my point I like to refer to the definition of a "Wise Man":

A wise man learns from the mistakes of others.

A smart man learns from his own mistakes.

A fool never learns.

Below we cover a few of the areas and give some suggestions as to how to spend your money wisely. Keep checking back as we will be adding more in the near future.

Housing:

The American dream of owning ones home is the corner stone of our way of life. We believe that this is one of the best investments and the most rewarding purchase one can make. If you are finding it difficult in finding a home you can afford, be bold and look into assistance for first time home buyers. Government assisted purchasing through FHA or VA has got many a person a good start. Look at existing housing, as it usually is better built and will be in established neighborhoods,. This way you will know what you are getting into. Also look into a handyman special. These can give back big rewards over the long term, but only due this if you know what needs to be done and can do it or learn how.

When you go to buy, please avoid innovative financing where points and closing costs are rolled into the loan. You are rolling things of no value into the loan and if you have to sell in a year or two you could in upside down. If that is what it takes to get the house you want, it means you are trying too soon and you need to hold off until you can afford these items. The salesperson is out to close the sale and they are not working for your interests, you are.

If you live in an area that prices are sky high and way out of your reach, look into moving to more affordable areas. Some of the most affordable areas are also in better climates and good wholesome communities. We prefer the south as winters are milder and not only is housing cheaper, but heating bills will be less.

The problem with many people when it comes to improving their situation is thinking what they can't do rather than taking control of their lives and fulfilling their true dreams.

If you already own your home take a look at what your house is now worth. If the amount you still owe is less than 80% of what it is worth you can save a percentage point of your payment by canceling the mortgage insurance (PMI). Don't think this is done automatically it is not. You need to do it.

Another thing we suggest is that every 2 to 5 years you look at your insurance and ask for quotes to see if you can save money. You will be surprised, especially if you can get discounts for having you home and cars insured by the same company. The biggest misconception many have is that they have been with the same company for 10 years and because of this their company will not drop them. Just ask the thousands of home owners in Florida that have been dropped by their carrier and forced into a state backed insurance program. The point to take to heart is you are responsible for your well being. To leave this to someone else is asking for heartaches and disaster.

Do your own yard work. You save money while getting the satisfaction of creating your own atmosphere and surroundings. This can also be a family affair where everyone chips in and gets the work and pleasure from taking care of ones castle.

Do your own repairs, maintenance and updates. With the advent of home centers like home depot that offer free seminars on everything from paint to ceramic tile, it just makes sense to make this part of your plan. Also everything you do that improves your property, also can improve its value when you go to step up to your next house.

Transportation:

Good transportation does not mean the largest SUV on the block. While it is nice to be top dog, it usually fades to despair when you find it hard to meet your basic needs, because you spent your wad on the big truck. I love nice cars too, most men do, it part of our nature.

If you are already financially sound then to splurge a little is fine. But if you are like most who have joined, you are trying to get on the right track so here is what key things to look for when looking for a new car.

Never buy new or lease a car. You build little or no value during the lease and if you exceed the milage limit these cost can exhaust any money you will need for your next car. There are a lot of great cars that can serve as basic transportation for under $3000 - $10000.

If you can afford more look into getting cars or trucks coming off of lease, many are low mileage and well maintained. Also pick from the more popular models available in this market as many are very reasonable priced and these tend to hold their value longer.

The best deals come with popular models that are about four years old. We pick models that do not change looks very often.

We tend to hold onto cars as long as possible. We also take great care in maintaining the cars looks. A good looking car with high mileage will sell quicker and for more money than one that has been neglected. I can not tell you how many times someone has gotten into my Jeep and said "What year is this? It looks like new." By taking the time and making that effort to take care of what you own will pay you back not only in the pleasure, but in the wallet too. And you can take that to the bank.

Clothing:

Most people take care in how they look a lot more than in the past. Maybe this is due to the emphasis placed on looks by the media. This is a good thing. Good appearance can go a long way to improving your position at work and at play. It does not have to cost a lot of money. Cloths that go together in style and color go beyond a name brand label. If you lack style then spend some time reading quality fashion magazines or attend a class at your local community college.

When it comes time to purchase clothes do not be afraid to look in consignment shops. My wife calls this "Fun Shopping" in that it is an adventure to find a leather jacket that looks new for five dollars. If you have not tried this, believe me you will not be disappointed if you approach it with a positive attitude and sense of adventure.

Garage sales can also be a source of great bargains not only for cloths, but for furniture, tools, sporting equipment and other things you need for your home. Just be cautious, set your spend limits and only buy the things you need at the moment. There will always be that sale next week or next year.

Conclusion:

This leads me to my next point buying things you do not need is what gets most people into trouble. We have been there, be a wise man and do not make the same mistakes. Also do not spend money just because you can get it on sale. When you need a pair of shoes and find a pair $50 on sale for $40, buying 5 pairs does not save you $50 it costs you $160 more than you should have spent.

Remember to take some of your savings like these and apply them towards your long term savings.

References:

Click here for Excel Version Budget

Click here for PDF Version of Budget

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