Our Financial Journey
A lot of people may think that they have their finances together. I am confident that we do. I’ve been fortunate to experience a lifestyle where I didn’t make a lot of money and I had to learn how to make that work. Trying to support a family of three is tough when you’re making just a little bit over the standard living wage. The average income is like 50 to 60k in the household, and I was making just about 40K for 3 people. It was justttt enough to sustain a comfortable lifestyle but we cut out a large majority of luxuries. Spending money guilt-free was not even a thought at this point.
Our Budgeting Strategy
The first thing that we did and we do moving forward is we create a mint.com account. It gives us a running snapshot of where the money is coming in, where it’s going out, and what we need to do moving forward. From that point, pull a six-month average of where your money has gone and what kind of budgets you need to set up. This will set the foundation for how you will spend money guilt-free.
Setting Up Bank Accounts
We then create a bank account for each grouped expense. Personally, we use Charles Schwab because they have a really flexible style of banking. We also have a Marcus Goldman Sachs high yield savings account for longer-term expenses. They’re both free to set up and come with no fees of any kind which is incredible!
Set up Short-Term and Long-Term Expense accounts
Your short-term expenses are things like groceries, housing, utilities, and any standard things like lawn care or any other services that you get on a consistent monthly basis. Your long-term expenses are things like vet visits, adventures, baby expenses, fun money, and business expenses. Create a bank account for each bucket of expenses. (There’s no minimum account fee with either bank so sign up for as many as needed within reason.)
We have at least 8 accounts. While this might sound crazy, it’s crazy effective as you’ll see and it removes so much mental stress once ever dollar has a place to go.
Make sure you have one main checking account where ALL personal income goes to. (You can have another for business and do the same there but everything needs to come from one central place.)
All accounts are built off of the central account so it really helps to have all your money coming from one place.
The Digital Envelope System
We set up transfers on the 10th and the 25th of every month coming from the central account going to each bucketed account. This gives us enough time for paychecks to come in and everything settles. It’s important for us to set it up on this recurring transfer twice a month at least so that the money is out of our account of our joint checking account.
For example, we might have groceries, personal accounts, and home expenses/utilities withdrawn for short-term expenses since they are consistently every month. These short-term expenses will then go to a schwab bucketed account but our longer-term expenses will go to our goldman sachs account. Those might include travel, investments, gifts, or expenses for our current child and future child. Each dollar we earn has a place. This way you can have a system in place to spend money guilt-free.
Since we’ve taken the average expense for each category, we should now have a surplus on top of our expenses. That all goes to our investment fund. If you don’t have a 6 month emergency fund, I would recommend making sure that gets built first. That would include all expenses you see on a monthly basis that are ESSENTIAL to your daily life. Food, shelter, utilities, car payments, those types of expenses, not movie night.
If you already have a 6 month emergency fund, personally, we like to put EVERYTHING into the investment fund. For us this consists of real estate or vending machine acquisitions. We’re not concerned with stocks since we don’t control the outcome and there aren’t as many tax advantages.
The Fun Part to spend money guilt-free
Now that you’ve got your base expenses and you’ve set everything up that’s comfortable for you, the key word is comfort. You do have to be realistic because you need to cut expenses that aren’t bringing you joy. The farther you get away from your base expenses, the more comfortable you’ll feel. This is truly how you spend money guilt-free
The farther away from your base expenses, the better off you’ll be. So it would be ideal to get a second job, and heavily reduce any loans/bad debt you may have.
The goal is to put away as much extra income as possible into your investment fund as you can so you can deploy it into something that will grow for you over the long term.
Growing Your Income to spend money guilt-free
Once you have your budget automation setup, then you can really expand and grow in your accounts. You start to pay for your lifestyle with your investments and then you take your income and put it off to the side for more investments. The goal is to support your lifestyle entirely off of your investments and if you have any personal income, you just use that to buy more investments. It just continues to grow in this big continuous cycle.
The goal of financial freedom is to make work optional. For many, they hate what they do but if you can find an opportunity that you genuinely enjoy and can already make work optional, that’s the winning formula.
I hope this makes sense and helps you in your financial journey. Please feel free to send over any questions that you might have. Thank you so much for watching.
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