A Bodey in Motion

Building momentum, one step at a time

Break the Chains! Free Yourself From Debt

B is for Bondage. Nothing ties up your income and locks up your dreams more than the bondage of debt. If you want to turn your finances around, escaping those chains must be a priority.

The borrower is slave to the lender. - Proverbs 22:6

Truths about debt:

  • Debt is a product being sold. Credit is the most aggressively marketed product in the country. Remember that “Life takes VISA” is an ad slogan, not a fact.
  • Debt limits options. Lenders must be paid. Any job that covers all of those bills is a requirement, no matter what. And an underwater mortgage can turn a home into a prison.
  • Debt increases risk. Being able to pay today doesn’t guarantee tomorrow. Failure to repay leads to threats and legal action, and can result in losses of property and wages.

How to escape:

  • Get intense. You can’t passively drift out of debt. Escaping requires passion. It’s time to get angry. It’s time to get focused.
  • Stop borrowing. No more new debt. Draw the line here, and get ready to fight.

What do you think? Are you living without debt? How did you escape? What should be my word for Q? Let me know in the comments below!

[image from publicdomainpictures.net]
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September 24, 2013 Posted by | Work and Money | , , , , , , , , , | Comments Off on Break the Chains! Free Yourself From Debt

Don’t Be Lazy! Get Up and Make Your Money Work

I’m starting a new series of posts today. I’m calling it the “ABCs of Personal Finance.” The word for the letter A is Action, because succeeding with money in your home requires action. Your financial situation isn’t going to get any better while you sit idly by and ignore it. So, it’s time to get moving and make some changes. Ready?

He sure looks comfortable, though. Poking him with a stick might be a bad idea. Like irritating my wife before her morning cup of coffee.

  • INCOME – GET TO WORK. Everything worth doing is going to be hard and take a lot of effort. If you want a career that gives you a sense of purpose and pays you well, you’re going to have to take action.
    • Truth: Any job that you can get with a 10 minute interview in a booth at a fast food restaurant is unlikely to pay a lot, and will never be a great career. If you want a bigger paycheck, you have to make yourself more appealing to better employers, and that takes work.
    • First Step: Start Reading. Read books written by the best in the business you want to be in. Read classic business books. Read books about how to get a better job.
  • BUDGET – MAKE A PLAN. Having any income is great, but paychecks have a nasty tendency of looking bigger than they actually are, and spending more than we make has become a national crisis. Planning is an essential part of winning. Even if this month’s budget fails, you learn and fix what failed next month. If you’re not budgeting, you’ve robbed yourself of that opportunity to improve. Take action and give every dollar you make a purpose.
  • GROW – SET GOALS. Once the income is coming in and the bills are all covered, it’s tempting to breathe easy and relax. That might work, if all you ever want to do is just cover the bills. If you have bigger dreams, if you ever want something more than what you have right now, you have to make conscious decisions about how to get there and set some goals. You have to take action.
  • FIGHT – DON’T GIVE UP. Remember, everything worth doing will be hard and take a lot of effort. It’s going to be tough, but as long as you’re breathing, there is always hope.
    • That job may be all you can get right now, but it’s not forever.
    • That budget may be so tight it scares you, but it’s a start.
    •  That goal may seem so out of reach, but you’re still growing.

What do you think? What parts of your finances could use a little less conversation and a little more action? Did I cover it all or miss something important? And what should be my word for X? Let me know in the comments below!

[image from publicdomainpictures.net]

September 17, 2013 Posted by | Work and Money | , , , , , , , | Comments Off on Don’t Be Lazy! Get Up and Make Your Money Work

5 Steps to Make a Budget That Works

Sitting down to write your first family budget can feel overwhelming. Like you’re attacking a wall of expenses.

I'll need to use this graphic again. That was a lot more work than I expected.

Facing a wild mix and match pile of costs like that, and feeling sure that you haven’t even thought of all of them, can make most normal people stop, drop their pencil, and walk away. Let me tell you, I have been there and I understand. You have my sympathy.

As a financial coach, though, I’m not going to let it end there. You have a responsibility to manage your money, and ignoring that is just going to make things worse. Walking away is not a realistic option. You need to scale that wall, climb that pile, and overcome your fears and frustrations about budgeting.

Like any problem that seems overwhelming, the answer is breaking it up into smaller steps.

Step 1: Determine Your Income. For most of the five people reading this, that’ll be easy. A fixed, regular income is still pretty common. How many paychecks are you going to receive in the next month? Total those up, write down the number, and label it “INCOME.” Done.

If you’re one of the lucky few who receives an irregular income, this seems like more of a challenge, but you can’t skip this step. The best general advice I have is to take your worst average month’s income and use that as a baseline to budget from. If more comes in, excellent! You can put it to use in one of the next steps.

We can’t spend more than we have coming in, and we need to put every dollar to work, starting with…

Step 2: Pay for Your Necessities. Your first priority is to take care of those things that keep your household functioning. I’ve covered this ground before, in explicit detail, so I won’t spend a lot more time on it. The big point of this step, though, is to make sure that you have enough income to cover the basics, and see for yourself how much is left over once those basics are covered. In most cases, that margin way bigger than you’d think.

Next…

Step 3: List Your Goals. What is it that you want to do with your money? What’s on the top of your list? Do you want to pay off debts? Save up a cushion for emergencies? Invest for the future? Build up a college fund? Go on a huge vacation? I know the order that I’d advise you to do them in, but ultimately you get to make the decision. So, pick one.

You’ll be using the margin you have from Step 2 to fund this goal (including any unexpected irregular income), but you have one more step before you’re ready to go…

Step 4: Say “No” Everywhere You Can. That big goal, and all of those necessities, probably didn’t account for every expense in that massive wall from before. For everything that’s left, you have to ask yourself this question: “This month, is this thing more important than reaching my goal?” For a lot of items, the answer will be a frustrating “Yes.” For example, you might find that the pets get a little bitey if you don’t feed them often enough. Not to mention that your children do need new clothes now and then. And it’s really hard to say “No” to debt payments.

Still, there will be a bunch of things you can say “No” to. Like Cable TV, or eating out. Plus, it gives you the chance to take a hard look at how much you’re spending on those “Yes” items. Maybe your kid doesn’t need new school clothes from the mall. Who knows? You might even find a few ways to cut back on your necessities.

By now, you should have a budget that works for the upcoming month. Finally, you get to…

Step 5: Do It Again Next Month. There is no such thing as the perfect budget. Every month is different, and every month’s budget should reflect that. Each time you sit down with a pencil and write it out, you give yourself the opportunity to learn from mistakes and develop good spending habits.

This isn’t a one time deal. It’s a lifetime deal.

What do you think? Did I skip a step? Let me know in the comments below!

September 10, 2013 Posted by | Work and Money | , , , , | 1 Comment

How to Build Your Financial House

When you’re first beginning the process of trying to take control of your finances, it can be totally overwhelming. In a world as complicated as ours, you find yourself having to juggle so many payments and fees and bills that it’s hard to know where to start.

But those who won’t care for their relatives, especially those in their own household, have denied the true faith. Such people are worse than unbelievers.

1 Timothy 5:8

The right way to start is by building your financial household first. Get to know what your core basic needs are and take care of them before you worry about anything else. Unfortunately, our complicated world has begun to confuse what a need is, so let me elaborate. Basic needs can be limited to three categories, which make up our roof in the picture below.

I usually scratch this out on a piece of paper for the people I'm coaching. You have the benefit of Photoshop to clean it up and make it legible. You're welcome.

Healthy: The stuff that keeps your family alive and in reasonably good condition. This will include groceries and any medicine your family must take. (i.e. medicines for high blood pressure, diabetes, chronic depression, and the like. My acid-reflux medication wouldn’t make this list.) It might also include health insurance and/or co-pays.

Safe: The stuff that keeps you out of the elements and a reasonable amount of security. This will include your basic utility services (such as electricity and water) and your mortgage or rent. You might want to include the cost of necessary home repairs here as well. Don’t include every possible security measure, though. No amount of money can make you 100% secure.

Productive: The stuff that keeps you generating an income and ready to work. This will include transportation, which could be a car, a bus pass, or a good pair of shoes. It will probably also include a phone of some kind. It might include Internet access and an email account, a reliable cellular phone, and a reasonable clothing budget.

In all cases, the goal is to determine a reasonable number for your basic needs. Keep your numbers realistic, and don’t overload any of the categories with fluff you really can do without. For example, a young couple, just married, probably shouldn’t be spending $800 each month for groceries. A $200 per month cell phone contract with all the bells and whistles doesn’t qualify, either. And an Xbox will never be a necessary component to maintain productivity, no matter what anyone says.

Also, you’ll have to plan for different types of expenses.

My simple picture just got all complicated. "Expenses?" "Variable Cost?" What is this madness!?

A good example of a fixed cost expense would be your mortgage or rent. It’s a bill that’s due every month, and the amount owed doesn’t change very often, if at all. They’re predictable costs, and we wish that every core item was a fixed cost expense. Unfortunately, they’re not.

A variable cost expense would be things like gasoline for your car, or your electricity bill. Each month the amount spent on this item is going to change, either because the price of the good is constantly under change (gasoline), or your use varies (electricity). The is the simplest thing to do is put down a number that represents a high average for that item that month. It’s rare that you’ll find yourself at risk of going over.

Items like car maintenance or clothing would be a non-monthly expense. It’s a cost you know will be coming eventually, and you’re socking money away for it now so it won’t break the bank later. Use a savings account and put a little aside every month for each of these types of expenses.

Making sure that you’re covering your basic needs gives your budget a foundation to build on. It shows you that, no matter what else happens, you can keep the lights on, put food on the table, and stay employed. And if you’re not covering your needs, then it’s clearly time to improve your income. Without any margin, you’ll never be able to move beyond the struggle of living paycheck to paycheck. Every dollar earned above that core is the fuel to be used for reaching financial goals, but you have to build your financial house first.

This is the form I built based around the information in this post. I’m using it to help people start getting their finances in order when they’re struggling. Feel free to share it, or this post, with others.

The total you figure from your core needs can be used as a base number for your emergency fund. How many months can you live off of your savings when you’re just taking care of your basic needs? How many months do you want it to be?

June 24, 2013 Posted by | Marriage and Family, Work and Money | , , , , , , , , , , , , | 2 Comments