Thank you for signing up for our email course. In the next 7 days, I’m going to introduce to you the budget, or what I call a money system, that changed my life and my finances.
If you have tried other budgets in the past I hope that this one can offer you a new view on your money and help you the way this system helped me. Even if you only take one or two parts of this system and use it for yourself you are making progress and that’s wonderful!
The First Key Ingredient That Was Missing From My Finances Was A Simple One.
Think about it. When you have a purpose you have focus.
Purpose gives you direction.
Purpose is the difference between going through life aimlessly and going for what you want.
Tell me if this sounds familiar
You decide you want to get good with money so you start saving and cutting back only to blow up a few months later because something shiny caught your eye.
I was a bit of a yo-yo saver before this system. Too many times, I would save, but I wouldn’t know exactly why I was saving.
Then there were times when I would save up a bunch of money only to blow it on something I wanted in the moment (A.K.A. Shiny Object Syndrome). This would make me feel good for a day or two. Then I would feel terrible and then start the saving cycle over again. One step forward, two steps back.
But once I had a purpose, everything changed.
The Other Ingredient That Was Missing From Every Other Budget I Tried Was:
Every budget I tried before felt like I was restricting myself too much. Once I found some balance and combined it with purpose everything changed.
Your life is broken out into different parts, and your finances should be too.
Think about your life, it’s made up of the following:
Things you have to do now.
Things you want to do now.
Things you need to do later.
Things you want to do later.
Plus being able to enjoy those things when you get to do them.
Think about your money it’s the same way:
You have your living expenses (Things you have to do now)
You have your fun and entertainment. (Things you want to do now)
You have the things you are going to do in the future. (Things you need to do later)
You have the fun things you are going to do in the future. (Things you want to do later)
Plus you have the things that you need to do on an ongoing basis to ensure you can enjoy your future. (Stay healthy and sharp)
The Money System That Changed My Life: An Overview
Today is just going to be an overview of the system. Every day you will get an email with a little homework you can do at the end. (Sorry, change usually requires action)
Don’t worry, most of the jobs are quick I promise.
The Founding Principle Of The System
Here is the founding principle: Split your money up into groups. Keep it separate and give each of those accounts a purpose.
I’ll repeat that because it’s the so important:
Split your money up into different accounts. Keep it separate and give each of those accounts a purpose.
There are 6 main accounts in the system:
Big Ticket Items
Education, Health, and Wellness
How the Accounts Breakdown
Living – Things you need to do now – 50%
Now this doesn’t mean save half, it means living on half.
This money is meant for food, gas, clothes, shelter, utilities. All of your daily living comes out of this one account.
(Psst… Don’t let this scare you, the first time I looked at it I felt the same way.)
F.I.R.E (A.K.A. Savings) – 10%- 20%
If you are new to the term F.I.R.E (Financial Independence and, Retire Early) the concept is to have enough money coming in from your investments to cover your costs of living. This was you can be financially free.
The F.I.R.E account is for building your nest egg, retirement fund, streams of passive income. Whatever will help you fund your life so you can enjoy retirement.
The typical personal finance book will tell you to save 10%, my thoughts is you should aim for 20% if you can. Like all of the percentages here it’s adjustable.
The only rule is to never decrease it from where you start. So if you are starting at 10% and you increase it to 11% then you never decrease it.
Big Ticket Items 5%-20%
This account is for big items. Think of it like a short term savings account for things you will want or need later on.
Down Payment on a House
Christmas and Birthday Gifts
Anything that is going to take a few months of saving goes in here.
A quick guideline: A Big Ticket Item is if you need to save up for more than 3 months. This can also be where you save for an emergency fund too.
Play/Fun – Things you want to do now – 10%
This was missing out in all of the other budgets we tried.
Saving a lot of money made sense but I often did it at the expense of play. Which would work for a while then and then I would go on a spending spree (on whatever I had my eyes on at the time, honestly looking back 10 years I’m hard pressed to remember… a Nintendo Wii, wait was that 10 years ago?!? Geez…)
Education, Health, and Wellness 5%-10%
What is the point of saving your money and living a good life within your means, if you aren’t around to enjoy it?
If you ask me the purpose of life is to grow… and to keep on living.
This amount is reserved for gym memberships, coaching, books, learning new skills and other things that will keep your body and mind active and in good standing.
Giving – Entirely Up To You
There are a lot of rules about giving. Some say 10% others say more, some say none. What you chose to give is up to you. I have done free classes and donate to charity. I like to give some money and some time. Honestly giving my time is more valuable to me than money in a lot of ways.
There you have it, 6 main accounts and a few smaller ones. Tomorrow we will get into putting everything into place.
About the Percentages
The first time I saw these percentages I was “Nope not going to happen, I don’t look at my money this way”
Then I realized that it didn’t matter, my money was already being handled using percentages. It was me that wasn’t paying attention to them
The most common question is “Can I change the percentages?” The answer is: ABSOLUTELY!
You need to figure out how to make this system work. These percentages are used as guidelines. If you need to change around the percentage then go ahead. The only one that stays fixed is saving at least 10%.
I only need you to do one thing tonight. Find out if your bank is charging you for the privilege of banking with them. If not call them and ask for no fee banking.
I haven’t paid a monthly banking fee in 15 years. I have multiple accounts with our system and from that 1 change of banks I estimate that I save between $25 and $50 a month in banking fees.
If you are in Canada I use PC Financial, if you are in the U.S. here are a few banks that could help. I haven’t checked these out so you will need to do your own research.
I have made a spreadsheet for you to set up your monthly spending amounts you can get it here.
A Few Notes Before Tomorrow
Give yourself time
A lot of times people jump into a new
budgeting money system and it doesn’t work in the first month, or the second, or the third… It’s NORMAL! Nothing is easy if you have never done it before.
You will be making small improvements all the time, then in a few months you will look back and be amazed at the small changes that added up.
Don’t Do it in Your Head
Whenever the idea of using multiple accounts come up it can sound scary and overwhelming.
It’s not. What’s scary and overwhelming is not having control of your money.
A lot of people say: “I’m just going to keep track in my head.” Which is great if you have the time. But I have tried both ways and doing the physical tracking versus the mental system and the physical one (a.k.a. multiple bank accounts) works way better.
While we are on the topic of bank accounts
There are a lot of banks that do not charge you for the privilege of holding your money. Think about this for a second. If you went to a person and said “Can you hold on to this $1000 for me”, would you expect that person to reply “Sure for $10 a month I can hold on to that money for you”
Paying bank fees makes no sense. For the love of the almighty please make a commitment to switching banks today. Or at the very least demand from your bank to not pay fees. It’s absurd.
Tomorrow we will talk about your F.I.R.E Account!
See you then!