Thursday, February 14, 2019

Financial and Budgeting Tips and Tricks


Hi everybody! Coming at you with my CPA hat on, and offering up all of my tips and tricks on how to manage your budget and to financially plan for your future. Lifestyle inflation is a very real thing (“make more, spend more”), and upgrading needs (most frequently your house and car), spending more on wants, and spending to save time and for added convenience all add up extremely fast. This is how you can make sure you have a strong financial foundation built.
1. You need to have a very solid understanding on money in /money out. Tracking ALL monthly income and expenses in a good old Excel spreadsheet can give you just the visibility you need. This is easiest if you pare it down to one or two credit cards and one bank account and set aside an hour a week to track spend on each. I categorize our expenses into Mortgage, Car Payment, Groceries, Student Loans, Phone, Parking, Daycare, Groceries, House Decorating/Renovating, Kids, Utilities, Clothing/Maintenance, Alcohol, Eating Out, Gas, Gifts, Medical, and Miscellaneous. This gives you a great view into where you may be overspending and the areas you can work on. 

2. Tackle high interest debt, including credit cards. This should be your #1 priority. Do not pass go until this is checked off the list.

3. Build up an emergency savings fund, which should be a minimum of three months of living expenses, though six months would be ideal.

4. Get life insurance policies for both partners. This is so very important. For us, it was important to get a policy large enough to pay off the remaining mortgage on our home and to replace that partner’s income for a certain period of time. 

5. Consider an umbrella policy for your auto insurance. If you or your significant other get into an accident, you’re exposing yourselves to a lawsuit that puts all of your financial assets at risk. We added a $1M umbrella to ours for a few hundred dollars a year.


Now, what to do with additional savings over and above? If you’re able, consider hiring a reputable financial planner to maximize your return. At least 20% of your income should go towards savings. This means 401K or other retirement plans, IRAs, employee offered stock purchase plans, stocks, bonds, mutual index funds, or other investments. Money sitting in a bank account is going to do the least for you over the long term. While we could have possibly taken the time to figure an investment strategy out on our own, we feel that a seasoned professional was best for us to tackle a lot of the added complexity we’re facing with medical school loans. If you’re note quite ready to work with somebody 1:1, a 401K or an IRA are both easy and proven places to invest and come with little complexity or decision making.

Having a financial plan and savings strategy in place is really important, and makes things easy in that whatever money is left over after contributing your set amounts to your investments is yours to spend. That’s why automatic withdrawals from your paycheck or from your bank account at the beginning of each month are both handy. It’s easier if that money is set aside before you really realize its there. 

Hopefully this was helpful in getting you started in achieving your financial goals as you look forward in 2019. Progress, not perfection, is the key here. If you have any questions, shoot them my way!

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