I have very few things in life that I am passionate about. One of those things is personal finance and personal financial planning. I think we all have the ability to control this aspect of our lives but many of us fail to do so. Now let me first note that I have made plenty of financial mistakes in my lifetime. Some of those mistakes include, but are not limited to:
- Purchasing three BMW’s in the span of 5 Years
- Purchasing a overpriced condo-conversion at the peak of the real-estate market
- Racking up $7,000 in credit card debt by the time I turned 22.
- Losing a couple thousand dollars in Vegas several times a year
So what happened?
I had a moment where I was just fed up with my credit card bills. In 2003 I owed $7000 in credit card debt (between 3 high interest yielding cards) and when I looked back at it I had nothing to show for the debt I managed to rack up. So I set a goal for myself, I told myself I would payoff this debt in a years time. Anyone that knows me knows that I have a very driven personality. If I set my mind to a goal whether it be short or long term; 9 times out of 10 I will achieve those goals. Needless to say, I paid off $7000 in a matter of 10 months! How I did that will be another part of this series.
Fast forward 5 years and you will see a drastic change:
- Zero Credit Card Debt
- 18% participation in deferred compensation through my employer
- Five-figure Savings Account Balance (ING Direct - PLUG!!! If any of you need a referral I can send you one)
- BMW sold and gone
- 5% net income savings
- I still have my tax refunds for the last 5 years yielding interest in my ING Account (let alone my milk money from the 3rd grad
)
Most people think that you need to have tons of money in order to save and curb spending. The key is to develop a monthly budget and stick to it. It’s very hard to sit down and put together all of your incoming and outgoing cash flows starting with a blank sheet of paper. I found this budget planning spreadsheet that I use and update monthly to know exactly where my money is allocated from one month to another. A budget planner should be a living and breathing document. You shouldn’t sit down, develop a budget, and never look at it again. If that is the case you are simply wasting your time. The budget planner is most useful when you use it, modify it, and gain valuable metrics to your personal spending habits. I believe that if you don’t know where your money is going you can’t plan or forecast for the future.
The spreadsheet can be downloaded below in a Excel format. It is very user-friendly and I encourage you to use this religiously.
Personal Budget Spreadsheet