Wow, we have made it to week #14! That means that we are over 1/4th of the way through the challenges. Although the first several weeks were laying ground work and foundations, we are really diving into the heart of changes and habits that will make for financial fitness in your family.
We hope that they have been easy enough to keep up, but effective enough to see some major impact on your budget and finances already! It’s so exciting what can happen when you just apply the steps and principles we are sharing.
For those of you just now seeing this, it is honestly going to be best to start at the beginning of our 52-Week Take Back Your Finances Challenge as the weekly tasks are meant to build on top of each other for the best success. We have set it up so that you can join the challenge at any time and we will send you the weekly tasks to your email so that you have flexibility in starting on your schedule!
For those that are at week #14, let’s get to it!
One thing that was key for us, especially at the beginning, was a quick nightly check-in to hold ourselves accountable and to evaluate every penny spent that day. This does not have to be a big deal or a big task; in fact, it is super fast and easy. But the value of doing this is worth every minute. You will find that perhaps your spending habits are a little more than you thought. Perhaps you will realize frivolous spending or you may even realize that you are making purchases that may not be necessary. When it comes to a nightly check-in, it also helps you prepare for the next day – even the next week.
Maybe you ended up eating lunch out because you weren’t prepared when you intended to take a lunch. Perhaps you stopped one extra place during errands (like the Dollar Store – this innocent place claims a lot of budgeting victims. :)) and ended up spending more because you were there and found things that you thought you needed.
Not only is this a way for you to be accountable to yourself and your budget, but when the husband and wife do this, they become accountable to each other for their spending habits. Having someone to be accountable to helps in many areas to help keep you on track and motivated. The area of finances is no different!
Finally, if you have children – checking in is a GREAT example and tool for them to understand money, spending, budgeting andintentional living. They will respect you more for having a healthy spending plan as they witness your financial intentionality. Over time, they will start to gain a healthyunderstanding of money, the need to have a spending plan, sticking to the plan and more. This helps with the “I wants” at the stores, or the desire for stuff as they understand what things are important and what things can be saved up for and more!
What exactly is the task this week?
Now that we have given you a brief summary of a nightly check-in, your challenge this week is to have a 5-minute financial check-up each night this next week. After this week, we will recommend you making this a regular part of your week. We are not necessarily recommending you do it every night but at least as often as you think your family needs it. That could be nightly if you’re in the intense part of paying off debt or less frequently once you get into a maintenance plan with your finances.
Our family has a once a week check-in today, but we did a nightly check-in when we were in the heart of paying off our $100k consumer debt for several months. This helped immensely. Especially when we first started because we hadno wiggle room whatsoeverand had to be so precise with our spending. Remember that we were probably only a week away from bankruptcy when we started!
This is a simple task this week, but it is important! Just do it and you might see both real change and attitude change as you move forward!
Need to catch up? Come join us on this challenge from the very beginning by clicking on the 52-Week Take Back Your Finances Challengeand sign up to start receiving your automated challenge from the very beginning!
One final thing…we also have a Facebook Group where you can engage in discussions, receive encouragement and talk to others that are participating in the challenges too for more ideas! Head to the Be Intentional with The Thrifty Couple Facebook Page HERE and ask to join us there! You can also invite friends and spouses too!
Disclaimer: We are not licenses financial planners. We are only a couple that have been just a hair-breadth away from bankruptcy and found our way out of debt with a goal to now help others. Please make sure to consider any advice given on our site and in this challenge as tips we have used ourselves; they may not work for everyone. If you have questions please make sure to contact a licensed professional.
Break down your living expenses into categories and allocate 75% of your income to cover them.Then include line items for putting 15% of your money into investments and 10% into savings. You might want to try the envelope method or a zero-based budget to plan and track your spending.
The 20/10 rule follows the logic that no more than 20% of your annual net income should be spent on consumer debt and no more than 10% of your monthly net income should be used to pay debt repayments.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals. Let's take a closer look at each category.
One of the most common types of percentage-based budgets is the 50/30/20 rule. The idea is to divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings.
The Rule of 69 is a simple calculation to estimate the time needed for an investment to double if you know the interest rate and if the interest is compounded. For example, if a real estate investor earns twenty percent on an investment, they divide 69 by the 20 percent return and add 0.35 to the result.
Putting the seven percent rule into action is simple: Calculate seven percent of your gross annual income. For example, seven percent of $50,000 is $3,500. Divide this amount by 12 to get your monthly savings target.
The 70-20-10 budget formula divides your after-tax income into three buckets: 70% for living expenses, 20% for savings and debt, and 10% for additional savings and donations. By allocating your available income into these three distinct categories, you can better manage your money on a daily basis.
60/40. Allocate 60% of your income for fixed expenses like your rent or mortgage and 40% for variable expenses like groceries, entertainment and travel. 30/30/40.
In doing so, they miss out on the number one key to success in investing: TIME. The 70/30 Rule is simple: Live on 70% of your income, save 20%, and give 10% to your Church, or favorite charity. This has many benefits in addition to saving 20% of your income.
Do you know the Rule of 72? It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.
As Morningstar noted, Ramsey recommended that retirees invest all of their assets in equities and then withdraw 8% a year of the portfolio's starting value, with each year's expenditures adjusted for inflation. For example, if you have a $500,000 starting portfolio, you would withdraw $40,000 in Year 1.
The 4% rule limits annual withdrawals from your retirement accounts to 4% of the total balance in your first year of retirement. That means if you retire with $1 million saved, you'd take out $40,000. According to the rule, this amount is safe enough that you won't risk running out of money during a 30-year retirement.
Getting by on $1,000 a month may not be easy, especially when inflation seems to make everything more expensive. But it is possible to live well even on a small amount of money. Surviving on $1,000 a month requires careful budgeting, prioritizing essential expenses, and finding ways to save money.
The rule requires that you divide after-tax income into two categories: savings and everything else. As long as 20% of your income is used to pay yourself first, you're free to spend the remaining 80% on needs and wants. That's it; no expense categories, no tracking your individual dollars.
The 90/10 strategy calls for allocating 90% of your investment capital to low-cost S&P 500 index funds and the remaining 10% to short-term government bonds. Warren Buffett described the strategy in a 2013 letter to his company's shareholders.
The 15-15-15 rule suggests investing 15% of your income for 15 years in a mutual fund with 15% annual returns. Compounding is the process of reinvesting earnings to generate more returns. By following this rule, you can achieve long-term financial goals such as accumulating a substantial corpus for future needs.
The 70-20-10 budget formula divides your after-tax income into three buckets: 70% for living expenses, 20% for savings and debt, and 10% for additional savings and donations. By allocating your available income into these three distinct categories, you can better manage your money on a daily basis.
The rule requires that you divide after-tax income into two categories: savings and everything else. As long as 20% of your income is used to pay yourself first, you're free to spend the remaining 80% on needs and wants. That's it; no expense categories, no tracking your individual dollars.
To apply this rule of thumb, budget for the following: 20% down payment: Aim to make a 20% down payment on your new car. 4-year repayment term: Choose a repayment term of four years or less on your auto loan. 10% transportation costs: Spend less than 10% of your total monthly income on transportation costs.
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