Become a Financial Artist. Create Your Masterpiece.
Yesterday. we started our visual budget. We listed the months across the top, then the income down below. Today, right underneath that, put your number one goal. Is it to save cash for when your car needs repair? Is it to have cash when a crisis happens? Is it to pay off debt? Is it to save for a house? Is it to save for college? Save for retirement? Are you financially sound and you want to give more? Whatever your first goal is, put it here and focus all your effort on it.
Here are some helpful tips on goals if you don’t know what to do first.
Pay Off Debt First or Save?
Save at least $500 to $2,000 before paying off debt. Otherwise, you will just reuse paid off credit cards or keep going back into debt when a crisis happens.
Invest or Save First?
If you don’t have at least 3 – 6 months of savings to cover your expenses, you’re not ready to invest. You don’t need to be investing. You need to save for your own good. This is especially hard to accept if you don’t have savings and want to invest. If you have no cash, you will blow up your investments every time a crisis hits.
When Do I Buy a House?
Have an emergency fund of 3 – 6 months of expenses before you buy a house. And, buying a house isn’t an emergency. This is another hard thing to accept. Save at least 20% of a down payment and use a fixed rate mortgage, preferably 15 years. Roughly, an affordable mortgage wouldn’t be more than twice your salary and your home value would be around three times your salary. Otherwise, honestly, you can’t afford the house. This is another difficult thing to accept because you know what, “I want it now and I don’t care what I can afford or what I should be doing. I want it right now and don’t want to work too hard to get it.”
Do I Give Before I Save and Invest?
Pay your bills first. Don’t give and then can’t pay your rent. You may want to give 10% for religious reasons, but can’t pay your bills, save or invest. Work to lower your bills and increase your income so you can give. Give something and give of your time until you can do more. Remember, a tithe is to a church, not to a person. Don’t confuse codependent, enabling with real giving.
I Want a New Car
Honestly, your car and your car payment may be killing you financially. Do all you can to stay out of car loan debt. Save for a car.
My Kids Come First and I Want Them To Have More Than I Did
Save for your retirement first which you do after you have an emergency fund and a house. Then and only then save for your children’s education. This is extremely difficult to accept, especially for Mama Bears like me who want “the best” for my son. If you are like me and pay a lot for daycare, feel good knowing you can probably cash flow instate tuition if you can pay for infant daycare.
Life Comes in Seasons and Harvest Comes After Planting
The reason why so many of us are messed up with our finances is because we’re doing things out of order. We want a harvest without planting. We think a season is a lifetime. Order your goals and focus on one at a time. Striving for conflicting goals is almost worse than working on no goal because you aren’t getting anywhere. You’re just getting frustrated and frazzled. Focus. Focus on one at a time with all your might. Remember, life comes in seasons and harvest comes after planting, watering and tending.
Live below your means for a richer life.