When you’re getting started with budgeting the first thing that people think is being restricted. The term “budget” just has such a negative connotation to it. But, that couldn’t be further from the truth.
A budget gives you permission to spend because you know you have the money.
The only thing a budget does is tell your money where to go and if it can go there. The reality is, you need to align your budget with the life you want to live. A lot of money gets sucked out of us for low joy purchases, which doesn’t make any sense.
For example, I would run out for lunch every week. It tasted good and it was my way to escape for a bit. The reality was that I was losing time at work, spending way more money, and eating food that wasn’t even good for me. Now, I eat lunch at work, am saving a lot of money, eating healthier, and no longer bring any work home (this is huge as a teacher).
For me, running out to buy lunch was a low joy purchase. This was one of the first things I cut from my spending. Of course, I go out to eat for special occasions, but I no longer get food out of convenience, I do to connect with friends and family.
Something I also cut from my budget was any kind of personal spending money, meaning self care was gone. For about 3 years, I would get 2 haircuts a year and that was it. I stopped getting my nails done, stopped getting hair cuts. I was determined to pay down my debt.
Now that I have gone this long, I’m burning out. It’s a long journey and I just want it to be over with already. So, I gave myself a bit of spending money for self care and I am so glad that I did.
Your budget should include you and some personal money.
Personal finance is never going to end. That’s why you need to think about long term goals when you budget, so budget in some personal money! Your budget should reflect you, the things you value, and the things that are important to you.
That means you need to remember yourself and put some money for yourself in your budget. Personal money doesn’t need to be some crazy number. My number changes every single month depending on my current situation. I typically roll my personal money over from month to month as well. This way if I feel like I want to treat myself to a massage, I will have the funds. Same thing goes for getting my hair done.
Yes, this is taking away from my debt pay off, but it’s really not too much money each month and if I decide I don’t want to use my personal money and send it to debt, I can.
This is the money that will keep you from feeling restricted.
Especially when you first start, you’re going to feel restricted. It’s just the nature of the beast. It’s an adjustment period and with time, it will feel more natural. You’ll realize what you value and when you’d rather be using the money to reach your goals.
Personal money is for those hard days. When life completely falls apart and the unexpected happens. You can use your personal money in whatever way you want. For me, I know I need to spend some time and money on me, I enjoy getting manicures and my hair done.
This is what I use my personal money on. After 3 years of not having these items in my budget, it feels wonderful to put them back in. It was hard for me to add them back in at first, but I remind myself that I went totally intense for 3 years. That’s a long time and I got a lot accomplished!
Personal money will help you spend less.
Personal money allows you to spend. This prevents you from going on a spending spree when you’re burning out. Trust me, it will happen, if you’re restricting yourself too much. It just depends on when it happens. It’s important to take care of ourselves on our journeys.
Personal finance is a life long journey and it’s important to keep this in mind when you’re budgeting. You can do anything for a season, you can cut your personal money for a period of time, but it’s important to adjust and change your budget through the seasons of life.
I realized I was starting to fall off of my goals and feeling drained from my long journey to debt freedom, so I added in some personal money. I’m glad I lasted as long as I did, but I’m so happy to be spending some money on me now.
Evaluate where you are currently and plan your personal money accordingly.
The great thing about budgets is that they can change so easily and they should change to reflect where you are in your life. If you’re close to meeting a goal, you can cut some personal money, if you’re struggling with spending, you can add it back in. It all is based on priorities and what you want to do with your money. How do you budget for personal money?
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Cash envelopes are a popular method of budgeting in the personal finance world. It makes sense, you give yourself a certain amount of cash for a time period and once it’s gone, it’s gone.
This allows you to have complete control over your money and actually have to hand it over to pay for things. The physical exchange of money is felt and it allows you to change your mindless spending when it comes to a card.
I get it. This is a great way to budget and I think it allows a lot of people who use it to make significant change in their spending habits. I recommend this method to a lot of people because it is proven to work and has worked for so many people.
It just doesn’t work for me. And here’s why.
Cash envelopes don’t work for me because I’m a natural saver.
I’ve never been one to blow a ton of money. I’m naturally the type to save my money and then buy what I want. I’ve always been this way since I was a kid. I loved seeing my Pony Club account grow (the kids bank account they offered at my local bank).
I’ve never been in credit card debt, yes, I use them for the rewards, but I always have the cash available. Since I’ve never really had a spending problem, it was much easier for me to start budgeting. I didn’t need to have that hard money mindset change around spending.
Cash envelopes don’t work for me because I’m a nerd.
I love tracking my spending and budgeting my money to work for me. I didn’t start budgeting until the summer of 2014, but I always kept tabs on my spending and knew how much was in my accounts.
Cash is hard for me to track, I don’t do well with it. I like to streamline my systems to be easy for me to maintain, cash takes time and is hard to track for me. I like to be able to look quickly at my accounts and see where I am at any given point in time, that can be tricky with cash on hand.
Being a nerd, I like to account for every penny and give it a job, with cash, that gets a bit messy at times. For me, there are just too many moving parts with cash.
However, I do love paying cash when a discount is offered and I’m all about that.
What I do instead of cash envelopes.
Ultimately, you need to find whatever method works best for you. It’s going to take time, but once you find a system that works, you’re going to see great progress in reaching your financial goals.
For me, I use Mint to track my expenses loosely throughout the week. This allows me to quickly check in with myself to make sure I’m on track.
On the weekends, I put all of my spending into my spreadsheet for tracking expenses and update my budget for the month. This allows me to see where I’m at with my spending heading into the new week.
Because I have so many side hustles, I zero out my budget at the end of the month. All of my side hustle money, and most of my teaching salary, goes directly to debt. By the end of the month, all of my money has gone somewhere, mostly debt, for now.
Find a system that works for you.
You need to spend the time finding what naturally works for you. If cash envelopes don’t work for you, don’t try to force it to work. Spend some time trying out different methods and find the one that feels the most natural to you.
And it’s not going to happen over night. I’ve been doing this since 2014 and I’m still reworking it to figure out better ways. It can absolutely be difficult to get started, but that’s why I’ve created email coaching to help you get started. If you’re someone that is struggling to get going on a budget, then that is absolutely for you.
Once you have a system in place that works for you, it will be much easier to budget your money. It’s worth it to spend the time finding a system that feels most comfortable for you. By finding a system that works for you, it will allow you to more easily manage your money. What system do you use to manage your money?
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It can be difficult to start a journey with the Internet at our finger tips. On one side you have so many people that have been working their butts off for years and it can be hard to see yourself in that place when you are in such a different place. Change is hard and it doesn’t help when you see people posting about how great their life is now that they get their finances together.
The most important thing to keep in mind is that most of those people were right where you are now. You can’t compare your start with their middle, it just isn’t realistic. After years of working towards their goals, of course they’re in a better place. If they weren’t then they weren’t working towards anything.
Use those stories to motivate you to get to where they are and even further. Starting is hard, but the work is so worth it. I wanted to share with you all my financial breaking point and what caused me to completely change my life in a matter of months.
Summer of 2014: My financial reality smacked me in the face.
In May of 2014 I graduated from Syracuse University with a bachelors degree in Inclusive Elementary and Special Education and a lot of student loans, roughly $180k. Now, we all know that teachers don’t make the best salary starting out in most parts of the country. At this point, I did not understand student loans and was told they were a necessity in order to get my education.
I had no idea the reality of my student loans and what it would mean for me upon graduation. So, I decided to go straight into grad school full time and get my degree in 1 year, I’d be going for 4 semesters. I was going to get my masters in early childhood and special education. I assumed this would be a good path for me because it got me 2 more certifications, bringing my total to 4. That would make me more marketable, right?
About 2 weeks after starting my masters program I got a phone call from my Dad saying my first bill for my student loans from undergrad came. They hadn’t received my paperwork that I was still in school full time, which meant they billed me. The bill was for $1,200 and yes, I cried.
I didn’t cry because I didn’t have the money at the time. Of course I didn’t have the money, I was working at a day care making minimum wage, living in an apartment with my bills I had to pay every month. I knew I would get my loans put into deferment because I was full time at school.
I cried because I was in a masters program, taking out even more student loans, and just my private loans from undergrad promised a $1,200/month bill upon graduation. And I was going to school to be a teacher.
This is when I got serious about figuring out personal finance and decided to make major changes to my life in order to try to fix this hot mess I had created for myself.
Summer of 2014: The changes I made to get myself on a better path.
The easiest thing I could have done at this point was to drop out of grad school, but I knew the job market for an elementary teacher was tough. So, I decided to stay in grad school. Plus, at this point my plan was to stay in Syracuse and work there and in New York, you need a masters degree to get your standard certification.
So, I set up a meeting with one of the best people I met at Syracuse, who at this point had become a mentor to me. She had been the undergrad recruiter and I had worked with her in undergrad mentoring new freshman. Now, she was the grad recruiter and I knew she would be honest with me and spend time trying to figure out a plan with me.
I walked in to meet with her and laid everything on the table for her, my entire financial position at that very moment. She immediately started asking me questions and brainstorming solutions with me.
I walked out of that meeting with a to do list and my entire future changed. I credit this meeting to the beginning of my financial journey because without this meeting my life would have been so much different.
She had me apply to a new grad program, literacy education, which was less credits and made me much more marketable after graduation as a reading specialist. She emailed the person in charge of scholarships and asked if there was any available funding for me, someone who had done a ton of volunteer work for the School of Education in my undergrad and grad programs. A new job application for a preschool that offered 4 credits to Syracuse in the fall and spring semesters each for me. A babysitting job lined up that her daughter could no longer do because of a new job and a meeting scheduled with the financial aid office.
We also talked about my plan for after graduation and I told her I was planning to stay in Syracuse and teach. She immediately told me this was not a good idea. She pulled up the teaching salaries in the area and told me my salary here would not support my loan payments and that doesn’t even include cost of living.
She encouraged me to move back home with my parents and teach in New Jersey, where teaching salaries are much higher due to the high cost of living. I never even considered this option, but the reality was that it might be the best choice to get my finances in order.
Fall of 2014: Everything falls into place.
After that meeting, I immediately got to work. I applied to the preschool for a fall teaching aide position and I got it! This gave me a higher hourly pay than the day care and gave me 4 credits for the fall and spring semesters. The family hired me to babysit for 10 hours every week and she was flexible for when I came because she worked from home. I would go over there between my preschool hours and my night classes. A scholarship did come through and I managed to get additional TEACH grant funding for grad school. My entire tuition for the fall and spring semesters would be paid for.
I couldn’t believe that all of this was actually happening for me. With all of these new plans for myself, I still made sure to continue doing my research on personal finance. I got myself on a zero based budget, I got strict about my grocery budget, and since my jobs were all close to home, I really didn’t spend much money month to month.
While I was in grad school, I was averaging about $1,100 in income every month and shockingly, I managed to pay off some debt while in grad school. It wasn’t much, usually about $200/month, but it was still something. I felt so much more relaxed and at ease when it came to my finances once I got things under control. I was still nervous about what would happen post grad, but I felt so much better about it all.
Spring of 2015: Post grad reality sets in.
I knew I was going to have a hefty student loan payment each month. I estimated it to be about $2,000/month. So, I made myself an estimated budget for after I graduated. By this point, I had shared my plan with my parents and had officially decided to move home after graduation and started finding schools to apply to that met the requirements for my TEACH grant.
I knew it was going to be tight with my estimated budget I made, even with living at home and getting a higher salary because it was in Jersey. I was committed to getting side jobs tutoring and babysitting when I moved back home though. I figured I could get more income this way and there would be possibilities of more income at the school I’d work at.
I walked at graduation in May from my masters program with 6 credits to complete for my degree. Reality started kicking in, a lot of my friends in my program were getting job offers, and I still hadn’t heard anything. I knew it was still early and I knew the job market was tough in New Jersey, but I really needed a job if I was going to pay these loans back.
The Monday after I walked at graduation, I got a call from a school district 20 minutes from my parents house for a 5th grade position. I set up an interview for later that week and they hired me on the spot during my interview. I was so relieved and I was happy that my starting salary was $56k, about $10k more than I would have been making if I stayed in Syracuse.
I remade my estimated budget with my salary included and realized it would still be tight, but it would be manageable, something would not have been possible if I moved out of my parents house.
Fall of 2015: Pay back begins.
In August, I started my new job and the school year began in September. I was so excited to have my first classroom and to be teaching. I had my budget all ready for September and I began searching for ways to make more money. It definitely wasn’t easy as a first year teacher, I was exhausted and spending every minute doing work, but I was determined to find a way.
I officially started paying back my loans in November 2015, I had made payments in the months prior though. This helped me a lot because I had already made a small dent in my loans and helped me build the habit of paying more every month. I didn’t let my first salary go to waste, I put everything extra right to my student loans. My minimum payment was roughly $2,000/month when I started and it was hard at the beginning. I wasn’t seeing much traction because it was hard paying additional.
I eventually got a tutoring job and this freed up some cash flow for me allowing me to send even more money to debt.
Spring of 2016: First student loan paid off.
One year after I walked at graduation, I paid off my first student loan and I absolutely loved the feeling of getting that debt gone. I decided on the avalanche method because I had some crazy large balances with some crazy large interest rates. My student loans were all monsters, there would be no quick wins in the beginning for me. That was why I decided to go with the avalanche method.
It was hard waiting so long to pay off my first loan, but the reality was that I was going to need to wait regardless in my situation. I would have mini celebrations every time I paid off $5k though, this kept my motivated in that first year.
Spring 2019: Where I am now.
Over the last 3 years I have stayed in the same school district, moved teaching positions, added a ton of side jobs, and crushed $118k of debt out of $201k. I never thought I’d be here when I completely broke down in the summer of 2014. I had read so many blogs about others doing it, but I never thought I would.
Through some sacrifices, budgeting, and increasing my income, I have done it. Of course, I still have $83k left, but I am damn proud of what I have accomplished so far. I am still living at home, still working side jobs, and still teaching. Is it hard living at home at almost 27 years old, of course, but I wouldn’t be able to reach my goals if I wasn’t still here.
I also refinanced my private loans to get a lower interest rate of 4.97%. This isn’t a good option for everyone, but I’m so happy I did. I had $45k left in private loans when I refinanced and in 7 months I am now under $30k. That never would have been possible when I was at 7% interest. Refinancing allowed me to put more of my money towards my principal, which is saving me money in the long run. If you want to refinance your student loans, you can use my link to get $200 when you refinance.
Don’t compare your beginning to someone’s middle.
Any change is hard and it’s even harder if you aren’t giving yourself some grace. When you’re first beginning, it’s going to be hard, but it’s so worth it in the long run. I am so happy I started my journey and have paid off as much as I have. I know that if I didn’t decide to start, I never would have been where I am now. So, what’s stopping you from changing your life?
Cash flow is ultimately what you are managing when you are budgeting. The amount of cash flow you have, determines how quickly you can reach those big financial goals that you have. If you have great control over your cash flow, chances are, you are going to reach your goals quickly. When you have to send your money to a specific line item, you are giving up that control of your money.
Ultimately, you want to have an even cash flow. What that means is that the same amount of money that goes in, also goes out.
Now, that doesn’t mean I’m telling you to spend every dollar of your income. But, I am saying that you should be doing something with every single dollar that you get. This makes your cash flow equal, everything that comes in, gets a job going out.
When you have a negative cash flow, you are spending more than you have coming in. That’s a major problem and one that needs immediate attention. This is when debt racks up and makes it incredibly difficult to make any kind of financial movement.
When you have a positive cash flow, this is a good situation to have. It means you have more coming in, then you have going out. However, if you just let this positive cash flow sit in your account, you’re not improving your financial situation.
This is why you need to have equal cash flow, everything going in, must have a job going out. You can’t just let money sit in your checking account doing nothing for you. It should leave your account to do work for you, earn some interest, pay off debt, or maybe invest.
Here are 3 simple ways to improve your cash flow and make sure you are making moves to a better financial future.
1. Have a positive cash flow.
The very first thing you have to do is to make sure you have more coming into your account then you have to send out to bills. If you have a negative cash flow, that needs to be immediately fixed. Track those expenses, get yourself on a budget, cut your expenses, increase your income, do whatever needs to be done to make sure you aren’t spending more than you make.
The very first thing to do is to determine if you have an income problem or a spending problem. If it’s a spending problem, that’s an easy fix. Find quick ways to cut some spending to immediately help your cash flow move to positive. If it’s an income problem, that’s also a fairly easy fix. Find yourself a side hustle, or evaluate if you are fairly being compensated.
Either way, you need to evaluate and make sure you have a positive cash flow, otherwise you can’t move to improving your cash flow.
2. Evaluate your cash flow.
Once you have a positive cash flow, it’s important to evaluate the money coming into your account and the money that leaves it. The money that you have coming in, do you feel fairly compensated for your work? Do you think you need to increase your income to reach your goals?
The big question is evaluating the money you have leaving your account. What happens to money when it enters your account? Does it sit in your checking account? Does it immediately go to bills? Is it working towards a specific goal you have?
Once you evaluate your cash flow, all the money coming in and out of your accounts, you will be ready to make big changes to improve your financial future. Start thinking about the things you want to change with the money coming in and out of your account.
3. Zero out your cash flow.
Once you know where you currently stand with your cash flow, it’s time to zero it out. Like I have said before, this doesn’t mean spend every single dollar you make. This means that you need to give every dollar a job, the easiest way is to zero based budget. That’s why you should have a zero cash flow by the end of your budgeting period.
If you still have a positive cash flow at the end of the month, what is that money doing for you? You need to put your money to work. In order to reach your financial goals, you need to make sure you are using your money to get there.
It’s not a bad thing to let money sit there, but the reality is, you’re not improving your financial future by letting it sit. If you are letting money sit in your account, what’s the purpose for the money? If you have a purpose for that money, then absolutely let it sit. Is it a buffer? Is it so you can get to the point of being a month(s) ahead because your income fluctuates? Are you cash flowing an expense you know is coming?
The point is, you need to make sure your money has purpose and isn’t just sitting around not working for you. By zeroing out your budget and cash flow, you can make sure you are reaching your goals.
Remember, your money needs to work for you.
If you don’t put your money to work, you’re not going to reach any kind of goals that you have for yourself. You need to make sure that you clearly know your goals and know how to make your money help you in reaching those goals. By making sure that you have given a job to every dollar that enters your account, you can ensure that you reach your goals. How have you made sure that you reach your money goals?
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Life is busy and it is so easy to let time slip by without getting things accomplished. It’s crazy how much time can be lost just from getting lost in some Netflix series. I know for myself, I can easily waste away hours on Netflix, if I’m not careful.
I was totally that girl that would see people getting so much accomplished and thinking, “how the hell do they have the time to do all of that?!” I know I’m not alone in thinking that.
The problem I had was that I got too comfortable with my life and my schedule. I wasn’t doing anything to make changes, but I wanted changes to happen. That’s not realistic.
Eventually, I sat down and really thought about my time and how I was spending it. This happened right around the time the iPhone screen time feature came out. That was eye opening for me.
What I realized was that I was spending SO much time on wasted activities. Of course I wasn’t getting anywhere or getting anything done, I was wasting away my days.
I slowly started implementing a couple of strategies and have since accomplished so much more in such a short amount of time.
1. Write out a to do list of what you want to get accomplished.
Now, this is probably something that you have heard a million times. But, lets be real, it’s because they work. Personally, I used to always write them down and lose them shortly afterwards. Or, I’d start crossing things out and also adding more to my list and never felt accomplished.
I suggest you create a time limit on your to do list. I personally have a general one for each week. I keep it in my notes in my phone so it’s basically always with me. This allows me to easily add to it and easily cross things out as they are accomplished.
I really like that by Sunday, I check in with myself to make sure everything is completed by the end of the day. It really feels so great to have everything checked off and Monday morning I start fresh with a new list for the new week.
2. Spend a few minutes each morning planning out your days.
This has been a game changer for me and one of the best strategies I have started doing to get more done. I spend a bit of time each morning planning out what I want to get accomplished that day. This breaks down my weekly to do list in to more manageable parts.
This is also something that makes me feel so much more accomplished by the days end. By breaking it down into a daily to do list, I am able to get those tasks accomplished that day. By spending some time in the morning doing this, it frees up my mind to actually get things done, instead of thinking about the list. It’s kind of like a brain dump of the things you need to get done.
3. Time block.
Another life changer, let me tell you. I bought a Day Designer planner and it has completely changed my productivity. This is where I write my daily to do list, I block out my day into when I am going to get things accomplished. It can be an adjustment to get yourself to follow a schedule, but once you do, you will notice how much more time you have.
If you want to give time blocking a try, they have a bunch of free downloads available.
4. No distractions until it’s done.
This was really hard for me. I mean, I told you my eye opening screen time alert. I don’t even want to tell you how long it said I was on my phone on average. It’s that bad. But, I set myself a strict rule, no distractions until the work is done.
This means that I put my phone on do not disturb and away from me and I definitely don’t have anything going in the background. I basically always had the TV going in the background or Netflix playing. The reality was that I was losing precious time whenever I’d get distracted by the show or my phone.
We live in a world full of distractions. It’s important to disconnect and just get shit done when you need to. This also means that once my to do list is done, I’m most definitely catching up on my fave shows and Instagram. I’m still the same person, just a bit more disciplined!
When you have a never ending to do list, it can definitely get overwhelming. It’s why I have a daily to do list and a weekly to do list. Within my massive to do list, I prioritize my items based on when they need to get done.
Fo example, an email I received the prior day may be pressing and need to be dealt with ASAP. This means it would be the first thing I accomplish on my list. It also is something that I may not have expected when planning out my week. Something that is less of a priority for that day, may get bumped to the next day.
By prioritizing what you need to get accomplished, it allows you to control your list, instead of your list controlling you.
Remember not to be so hard on yourself.
It can be really easy to get discouraged when things don’t get done, but that’s not going to get you anywhere. I have fallen into this trap many times. You see a mountain of things to get done and it causes you to feel overwhelmed. This was what always happened to me, it was a vicious cycle. That’s why I put these systems in place, to limit the amount of overwhelm I feel day to day.
I’m still getting everything done, but it’s so much more manageable day to day this way. And of course, there are days where I just need to throw the list to the wind and say forget about it. It’s important to listen to your body and what it immediately needs, the list will be there tomorrow. What are some strategies that you have incorporated to get more accomplished?
This post may contain affiliate links. Check out my Disclosure Policy for more information.
Budgeting can seem overwhelming and managing your finances can seem like a major task that seems impossible to figure out. There are SO many different ways to budget and SO many different people pushing different ways to budget.
What’s the right way to budget? Should I try cash envelopes to budget? Should I use an app? What about using a spreadsheet? Ugh. There’s too much out there to figure it out. And then you’re back to square one and definitely not budgeting and definitely not knowing where your money is going every month.
I’m fairly certain that most people that have never budgeted before have similar questions go through their head. If you’re anything like me, you definitely did.
I remember absolutely panicking about my post grad student loan bill every month of $2,000 and thinking, “How the hell am I going to make this work on a teacher’s salary?!” I was 23 and absolutely freaking out about how I was going to afford my life in a few short months.
This is the moment that determines if you’re going to be successful with budgeting. There isn’t any crazy math knowledge required, no special courses, no specific way, really it’s very simply why people succeed at budgeting and others don’t.
People don’t succeed at budgeting because they don’t want to do the work.
Budgeting is simple, but it’s in those moments where it’s make or break. People simply don’t want to do the work that is required to budget.
They want the freedom that a budget would bring, but they don’t want to do the work. Budgeting is easy, but it does take some time and desire to have the freedom to spend money.
I do get it, there are SO many different ways to budget out there. The reality is that you need to just commit to something that tracks your money and start. What works for me, might not work for you. That’s why you need to do some trial and error and find out what works for you.
It’s going to take time and some work, but the results you will see are so worth it. I have a template for Google sheets available, if that’s something you think would work for you.
People don’t succeed at budgeting because they don’t want to face their reality.
I remember when I hit my reality moment before I graduated from my masters program and realized how tight my budget was going to be with my minimum monthly payment. All the blogs out there said a budget would be freeing, WTF did I just sign up for?!
The reality is that in the beginning, your budget is going to feel restricting because it’s a new way you are managing your finances. But, something that helped me a lot was really focusing in on my why.
I want to live a life that wasn’t governed by bills, wasn’t dictated by when I was being paid next or how much I was getting paid. I want to live a life that doesn’t require me to stay at a terrible job just because I need the money. I want to do work that I absolutely love, regardless of my paycheck.
None of that was my reality then and it still isn’t my reality today, but I’m getting closer to living that life. All it took was my one decision to change my future and create a budget that helps me to get there. I’ve now created a budget that allows me to spend my money on things that I value and I do whatever I can to save money on things I need to spend on.
As a twenty something that’s quickly moving towards my upper twenties, people think I’m absolutely insane to still be living with my parents. But, I don’t mind living at home for now and it allows me to reach my long term goals so much faster. My parents live in NJ, cost of living is ridiculous, which also means my salary as a teacher is basically the highest it would be in most other parts of the country. This means $0 towards rent while getting a higher salary.
This was planned and a major change I made in my post grad plans once I made a fake budget for post grad. You need to face your realities, so that you can make changes for your future to get you to your goals.
Budgeting is not going to be easy, especially at first, but I promise you it will definitely be worth it. I can’t even imagine where my life would be now if I didn’t start budgeting back in 2015. I know for sure I wouldn’t have paid off 6 figures of debt so far and I definitely wouldn’t be in a place to start thinking about moving out. So, what’s stopping you from being successful at budgeting? I’d love to help, check out my email coaching, if you’re struggling with starting. Comment below what’s challenging you!
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A windfall of money can be a wonderful thing for your personal finances. It can enable you to get out of debt, finish that emergency fund, or get some needed stuff done around the house. However, it can be overwhelming to get unexpected money and figure out what to do with it.
I consider a windfall of money to be any money that you weren’t expecting. So, your paycheck, side hustle money, or overtime pay, wouldn’t count in these. These are things that you worked for, so it would be expected that you got money.
A windfall of money is any money that you get that wasn’t expected. For example, and a big one right now, is your tax refund, if you get one. I plan to redo mine at my next job so that I don’t get a refund, and instead get that money throughout the year, but for now, I get a nice refund each year.
The easiest way to handle this type of money is to earmark it for something as soon as you find out about it. For example, I found out my tax refund amount and immediately knew what I would use it for. This makes it easier to manage when the money is in your account.
Here are some tips to consider when deciding how to manage a windfall of money. Of course, personal finance is personal, and these are my suggestions on how to manage this unexpected money.
1. Add to your emergency fund with a windfall of money.
I strongly encourage everyone to look at their emergency funds first when they get any windfall of money. The reason being that without an emergency fund, you will never get ahead in the event of the unexpected.
My suggestion is to have at least 1 month of expenses saved, if you are paying off non-mortgage debt. Once you are debt free, other than your mortgage, you should have at least 3-6 months of expenses saved.
Now, this is heavily impacted depending on your income and how reliable it is. If you’re in a job that the income is unreliable and changes every month, I would encourage you to have a 3-6 months emergency fund, regardless of your debt. This is also the case if you are in a job that is only short term or is a short contract. Of course, if you are in this line of work you need to budget for the variable income.
By using your windfall of money to have a full emergency fund in place, it will allow your normal income to work for you in your other goals. This will shorten the time it will take to reach those goals.
2. Apply it to your current financial goal.
If your emergency fund is good to go, I would suggest applying this windfall of money to whatever goal you are currently working on. Are you cash flowing renovations on your house, cash flowing a car, paying off debt, saving for a house, paying off your mortgage, investing, or anything else that there is to do out there with your money?
Any of these goals can be worked on with a windfall of money and I encourage you to do so. Any unexpected cash will shorten the time it takes to reach your ultimate goal that you are currently working on.
3. Cash flow your normal sinking funds.
Sinking funds are great to slowly save up for things you know are coming. I personally have one for my car, medical expenses, summer, moving out, and self care. By having these accounts, it allows me to easily go to the doctor when I’m sick or fill prescriptions and it not impact my budget.
With a windfall of money, it may be good to fill up those sinking funds, or simply cash flow an expense that you know is needed. For me, I haven’t had a hair cut in 7 months, so instead of pulling from my self care sinking fund, I simply cash flowed the hair cut with my tax refund.
The important thing is to be mindful of the money.
This is with all of our money, normal income or a windfall of money, we need to be mindful of our money. When we aren’t mindful of it, it disappears without us knowing where it went. Be mindful of where the money is going, what purpose will you give this money.
A windfall of money can be a wonderful way to get your goals accomplished faster, or it can simply be thrown away. Make sure that doesn’t happen! By budgeting every month and then being able to budget this money to help you work on some long term goals, you will set yourself up for a much brighter financial future.
I personally used my tax refund to fill my moving out fund for the month of March ($500), paid for a hair cut ($40), and the rest is going to my student loans ($2,593.20). You need to figure out how this money will best serve you and your current needs, as well as your long term goals.
I’d love to hear how you’re allocating your windfall of money to best serve you in the comments!