PT Money » Financial Goals

4 Rules to Budget By

PT — Wed, 17 Feb 2010 17:37:11 +0000

I recently stumbled across these four rules by YNAB that you can use to help drive your budgeting process. They create a nice framework of standards to shoot for when you’re first getting started with your finances.

Strive to Live Beyond Paycheck to Paycheck

At some point in our lives, we all live paycheck to paycheck, whether it’s just out of college, or after a financial hardship. In other words, we need the next month’s paycheck to cover next month’s expenses. There is no reserve. You’re not “a step ahead”.

As long as you consistently spend as much, or more, as you earn you will remain in this state. How do you break free? How do you stop living paycheck to paycheck? There are two approaches to take: either reduce your spending or increase your income. Actually there’s a third approach: do both.

Regardless of your approach, if you do it consistently from month-to-month, everything else being equal, you will stop living paycheck to paycheck. As for your budget, you get beyond paycheck-to-paycheck by budgeting less money in expenses than you receive in income.

Give Every Dollar a Job

Giving every dollar a job is assigning every dollar that comes into your budget (i.e. income, found money, lotto winnings) a specific place to be used. “Give every dollar a home” is the phrase Dave Ramsey uses, I think.

For instance, let’s say you have $5,000 in income. To give every dollar a job, you would assign money to your known (fixed and variable) expenses, giving, saving, and even assign money to some unknown or unexpected money.

At the end of your budget process, you will have $0 left over. This does not mean you haven’t saved or given though, because you have specifically assigned dollars to those categories. And because there is zero left over, this is often called a “zero-based budget”.

Save for a Rainy Day

The save for a rainy day concept is a familiar one. We should each set aside some money from month to month that is reserved for the unexpected. This can be for a job loss, car repair, medical expenses, lump sum expenses, whatever.

Everyone at some point is going to experience an unexpected loss or need to pay for a big expense all at once. By saving for a “rainy day”, you’re more prepared for when that time comes. I typically refer to this as an emergency fund.

Roll with the Punches

Got to love a good boxing analogy. Rolling with the punches is all about taking life’s financial ups and downs in stride. Budgets are not about perfection. They’re about improvement. Creating a budget sets up a standard in your life. Sometimes we don’t live up to that standard. That can be because we failed or it can be through no fault of our own. The key is to have the standard in the first place. Then, make it up next month and not give up.

Believe me, even people who live and breath personal finance every day make mistakes with money. It’s how you respond next month, and over your entire financial life, that makes the difference.

Hat tip to the folks at You Need a Budget for sharing these 4 rules. If you are in the need of a proven budgeting software system, be sure to take advantage of You Need a Budget’s 7-Day Free Trial.

Photo by bigburpsx3

Goals for 2010

PT — Mon, 04 Jan 2010 16:52:59 +0000

Happy New Year! Don’t you love this time of year? I’m a pretty hopeful guy usually, and the promise of a whole new year gets me really fired up. I’ve had my hits and misses with the resolutions over the years, but I remain hopeful still.

If you want to see how I did against last year’s financial goals, see my post about 2009 goals. In short, we crushed it. In 2009 Mrs. PT and I paid off our auto loan and our student loans, we maxed out our retirement funds (401k and Roth IRA), we maintained a nice emergency fund, we got life insurance, we started a 529 college savings plan, and we were able to start saving up some money for another house down payment.

I’m not going to get down into the nitty gritty with my financial goals for 2010. But I’ll give you a flavor of what I’d like to achieve. I recommend you make your own goals SMART.

Maintain our emergency savings
Maximize 2009 and 2010 contributions to our Roth IRAs
Maximize 2010 contributions to our 401(k)
Increase giving and do it more consistently
Build up savings for a new house or investment (maybe)
Spend more consciously

Nothing really new this year. As you can tell though, we’d like to do a better job of giving and spending in 2010. Even with the 2009 success, we felt like our discipline slipped on the spending front, and our giving wasn’t what it could have been. I’ve got a couple of ideas to make these a reality.

As for blogging goals, I’m going to try and make the following happen in 2010:

Provide some type of interesting series
Finish the “saving to give” e-book
Roll out another e-book
Write more guest posts
Double my current traffic and income stats
Grow subscribers to 5000 (currently at 2300)

What about you? What are your goals? Have you given up on new year’s resolutions?

How to Setup Multiple Savings Accounts at ING DIRECT

PT — Fri, 17 Jul 2009 19:50:43 +0000

Over the past few days Mrs. PT and I have been talking about starting to save for the down payment on our next house. I’m of the opinion that housing prices will remain at bargain levels for at least another year. Being of that opinion, I need to get my savings in gear sooner, rather than later. Also, we’re starting to think about Christmas and a vacation this winter. Both will be expensive, and we don’t want to have to finance these purchases using debt. So, let the saving begin.

With those goals in mind, today I decided to open up more individual savings accounts at ING DIRECT. I already had a savings account there, but it’s our generic emergency savings account. I don’t want to just start dumping all our different savings funds into the same account. It’d be nice to have them all in their own unique accounts. Plus, I prefer an automated system vs relying on me and my discipline. Luckily, ING DIRECT allows for multiple account setups, and they allow you to name them individually. Here’s how it works:

Step 1. Log in to (or sign up for) your ING DIRECT savings account. Note: I just recieved some more ING DIRECT $25 bonuses. Feel free to use one to open your account.

Step 2. Look for the “open another account” button.

Step 3. On the next page, select “Orange Savings Account”.

Step 4. Next, you’ll click the big “Open Now” button.

Step 5. Select how you’d like the account to be opened: single, joint, living trust, living trust – joint. Note: to set up a new joint account you’ll need the joint owner there to provide his/her login credentials.

Step 6. Finally, you’ll need to give the account a nickname (that’s the fun part), and decide where you’ll initially fund the account from and for how much.

That’s it!. You’re all set up. Here’s how your new account home page might look:

There are obvious advantages to setting multiple accounts up like this. We all have different savings goals and this account structure will allow you to log in to your account at ING DIRECT and instantly see how you’re progressing towards each of your goals. You might even like to nickname your accounts something like “Christmas Fund 500″ to remind you that your goal is $500.

So what do you think? Are you using this method already? Do you find that it helps you reach your goals easier? Or do you prefer to have all your savings in one account?

My 2009 Financial, Blogging, and Personal Goals

PT — Fri, 02 Jan 2009 21:08:51 +0000

It’s the beginning of a new year: a great time to set some goals for yourself. I took some time today to think about the year ahead and what all I would like to accomplish. To help keep me accountable I’ve laid out my financial, blogging, and personal goals for the year.

Savings and Retirement Goals

Reach our savings goal in the FNBO Direct Pay Yourself First Challenge by March 1, 2009 – only $1,000 remaining to get to our goal of $7,500 DONE
Max out 2008 Roth IRA contributions for Mrs. PT and I by April 15th, 2009 – $10,000 DONE
Max out 2009 401k contributions & get the full company match by December 31, 2009 – $16,500 + match DONE
Max out my company’s Employee Stock Purchase Plan twice (May DONE and November 2009 DONE) – 10% of paycheck (These shares are sold as soon as purchased. See ESPP flipping. Funds are used to pay property taxes)
Maintain our emergency fund at the current level DONE
Stretch Goal: Begin saving for a down payment on our next home or real estate investment DONE

This may look daunting, but most of it is done by automation and separation: two keys to increased savings. I’ll share more about my methods for saving in the coming year.

Debt Reduction Goals

Payoff the auto loan or get a newer vehicle and loan with a more reasonable interest rate DONE
Stretch Goal: Begin making double payments on our student loans DONE

This could be the first year that I don’t have a debt with and interest rate above 4%, excluding the mortgage. Would be nice.

Blogging Goals

Write at least 3 valuable posts a week DONE
Continue providing deals and money-saving ideas here and via Twitter. DONE
Continue growing traffic by 15-20% per month FAIL
Grow subscribers to 2,500 by December 31, 2009 – Subscribe FAIL
Double the monthly blog income by December 31, 2009 through diverse sources FAIL

Personal Goals

Sleep more (odd thing to say for a guy who’s about to become a Dad) FAIL
Spend more time with family and friends EVEN
Develop better time management skills (write faster) FAIL
Learn to converse in Spanish FAIL
Run another half marathon FAIL

The personal goals are a bit generic, but they’ll have to do. Also, could someone please loan me a couple of extra hours each day? That would really help.

What are your goals for 2009? Share them in the comments below…