How To AVOID OVER COMPLICATING PERSONAL FINANCE. THE BASIC RULES.

When you are in the daily grind of life it can be hard to see if you are making progress or going backwards. Most days I am on the phone with someone I love or know helping them with this very topic and it got me thinking about sharing this. If you get these simple principals down you will be fine. Over time you will look back (in a short time) and realize you are better off than you were just a bit back. It generally takes a few months to start to really see progress, much like dieting. The first few weeks are hard, then a month goes by and you see some improvement, six months go by and you see more and a year goes by and you realize how much you have changed. Personal finance is the same. It's the daily choices that add up. Sometimes it's the big things like not buying that brand new car or house that is more than you can afford, but mostly it is the little things. 
Here are some simple guidelines that will make it easy.

1. Keep your housing expenses to 1/4 of your income or less. If you are with a partner consider keeping all your expenses to the cost of one income. *Example: If you each make $40,000.00 then your expenses don't go over that and you save the rest. 
2. Keep transportation cost low.  I'll use my 26 year old son as an example. He has a 26 year old Honda Accord that looks like it came out of the junk yard but is still going strong, his insurance is $29.00 a month. He wants and needs a new car soon. He will save $25 a week towards a new car (it's November), when he gets  a new roommate he will save $100 a week towards a new car, by tax return season he should have around $1400.00 saved. If he gets a tax return of $1400 he can then buy a $2800 car to replace his $800 car. Rinse and Repeat a few years down the road.  
So maybe you are 40 and you think this doesn't apply to you because you have a fancier job, kids and you "need" a nicer car. Lets say you have a 2015 Toyota with a payment of $500 a month and your car insurance is $100 a month to total $600. You have no equity in your car. My recommendation would be to sell the car and buy a cash car. How? You have no extra money. SAVE. You save, you sell stuff, you work an extra job until you have about $4000 and then you buy a nice used Honda or Toyota and you repeat and upgrade. Take that $600 save it for one year you have $7200. 
3. Food cost are the easiest way to save. I eat what one might consider an expensive diet. For years of my life I could not afford many groceries and now that I can I've spent the past few years not really watching my grocery bill until one day I did! Holy Smokes. $1400 a month. Well part of that was I was feeding three people, buying dog and cat food for five animals, and toiletries. This was also over the holidays when we had our kids home for visits. So I have now set my budget to $65 a week per person for food (according the USDA chart) and I buy the bulk size dog food when I can (I need help carrying it), and with toiletries I am mindful of what I spend. The cost of all of this is about $800 a month now. This past two weeks were expensive so I have instituted a no grocery spend for the next 10 days. Meaning we have to eat what we have and not go to the store until 11/10 (started on the 1st). 
4. Discretionary Spending.  This can be a big black hole for many people as they spend what is left over.  What I suggest if you hate budgeting is to save then spend. So write down all your bills and make one saving, then decide how much you need for food and gas and then spend what is left over. Or give yourself a discretionary amount. My husband and I have $200 a month each. We are about to raise that. When I was younger and had less money it was about $50 a month (when I was in debt). This is for anything that is over my normal budget. For clothes we have allowance but if I spend it I have to use my personal money. I can also stock pile my personal money for one big spend if I like. Regardless of if you have a little or a lot, save first and give yourself an amount. If you know you like to travel set aside an amount for it then stick to it.  Limits give us freedom and help us avoid decision fatigue. If you know you have $2000 for a vacation then you are going to plan accordingly. 
5. Have an emergency Fund. Most people can save something or sell something to gather up an emergency Fund. If you are not familiar with the baby steps by Dave Ramsey google it now and follow them. Sell stuff. Get an emergency fund. I do not agree with $1000 but it's a good start. $100 is a good start, however most people need one month of expenses saved for an emergency. Think of how different your life would be if your car broke down and you could fix it or your landlord tells you that you have to move and you have the money to move. How to save when you feel broke. Sell everything you don't need. Cut your food bill. Cut your discretionary spending. Take on an extra job or find something you can do to earn your 1 month expense fund. Things I have done: Clean houses, check on peoples houses while they traveled., such as checked their mail, water plants, and care for their animals for money. This is also called house sitting. When my kids were small I took in other people's kids. My ex husband did computer work on the side. My current husband would take on extra construction jobs. When we are in need of a little extra money my husband will do more roof repairs instead of turning them over to other people. My son picks up extra hours as a delivery driver.  
6.  Get out of debt and invest:  If your debts have interest rate lower than 6% you might want to consider getting out of debt and investing at the same time. Your age will impact this and your income. If you can get out of debt in a couple of years you may want to just buckle down and do this especially if you are young. We are not so we have a different strategy . This depends on each person individually. I'm going to give some examples. 
EXAMPLE 1. My daughter is 23 with student loans, a job with a 401 K and a match, and she has no other debt. She makes about $12 an hour as a journalist (with two degrees!) and shares an apartment with two people. I had her (advised her) to put 15% to her 401 K and get the match, then she pays her bills, has a $2500 emergency fund (she is a saver) and she is aggressively paying her student loans off. I am not sure of the dollar amount but she got two degrees with less than $5000 in student loans (she is super smart and got scholarships and listened to me when I said "Minimize those loans!").
EXAMPLE 2. My friend and her husband are 49. About $200,000 in student loans. Income of $120,000 approx. Consumer debt is less than $5000. They rent and have one car with a payment and insurance around $550. My strategy off the top of my head would be to sell the car with the payment and pay cash for something cheaper, pay off the debt asap, live on half your income with a budget for housing, auto, food & discretionary. Go ahead and pay the payments on the student loans, do the 401K match but don't pay more on the student loans until you have at least one to three months expenses in savings. Do this quick within three months. 
My friend has a high paying job so I would have her max out her 401K with the match and her husband is disabled so I would have him see if he can get an IRA and max it out at $6000 a year. I would tell her to open an IRA with Vanguard (Traditional not Roth because they need the tax relief) and max it out at $6000 this year and $7500 the year she turns 50. So at $120000 they will invest $31,000, they will live on $60,000 and then they will throw the rest to the student loans. Taxes will be about $12,000 (or less) and this will leave at least $18000 to throw at student loans. If they could live on $48000 then they could put $30,000 towards student loans and have them paid off in less than 7 years. So at age 56 they would be out of debt. *At that time I would open up another 401K in her husbands name if possible and add max out both 401ks and both IRA's, and start a larger savings in a money market fund until I was 59.5. This is similar to our strategy except we are paying off the farm instead of student loans. At 59.5 you have choices now, you will have a great savings, no debt and be in a much better place to decide what you want to do until you reach 68.8 full Social Security Retirement. You could retire lean and take 4% off your investments, you could go part time, your world opens up a lot because you have paid for your freedom. 
LETS MATH THIS BABY UP: Current Situation 
INCOME FOR TWO +$120000
TAX DEFERRED IRA/401K -$31,000
STUDENT LOAN PAYMENTS -$30,000 (after debt payoff and ER Fund within three months).
TAXES (I figured with standard 24K deduction)-$11000
LIVING EXPENSES -$48000 (after taxes and insurance paid by company)
Total is $120,000


There it is folks. Follow these principals you will find yourself in a much better place in a year from now! 

Much Love,
​Courtney

---

My kids Miller, Me, Cole, Felisha, and Will.