In a typical family, every member has a distinct role. If mom is the nucleus of a family, dad is the musculo-skeletal system. Dads are all about practicality and getting things done. They are the breadwinner, disciplinarian, coach, and the head of the family.
But I want you to realize that the head of every man is Christ, and the head of the woman is man, and the head of Christ is God. – 1 Corinthians 11:3
Simply put, dads are the foundation and support system for the entire family. Interestingly enough, the basic level of your personal finances works the same way. Your income, expenses and emergency fund serve as the foundation and support system for all of your goals.
Whether it’s starting that business that you’ve always dreamed about, helping your kids with college costs, or simply enjoying retirement without the worry of having more month than money; the right foundation is imperative if you plan to see any of your financial goals come into fruition.
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Families with fathers in place are strong. Personal finances that manage income, expenses and emergency funds are strong. Since you can’t build anything great on weak foundation, today we’re going to take a closer look at some familiar personal finance topics and share a few quick tips to help you build your financial tower on solid ground.
Maximize Your Income
If there’s one piece of financial advice that you NEED to follow, it is…you ready?…to spend less than you earn.
I know, mind blowing, right?
In all seriousness, I know we’re all familiar with the ‘Spend Less Than You Earn’ mantra that is a fundamental part of financial freedom, but more often than not the emphasis is placed on spending less, rather than earning more. However, it is really hard to spend less if your entire paycheck goes to rent and a student loan.
Now, don’t get me wrong, there is a place for frugality and cutting back on unnecessary expenses will never go out of style. However, earning more offers a significant value that proves even more powerful in supporting the idea of spending less than you earn. Check out Joshua Sheats info at Radical Personal Finance to give you some facts and figures on the positive impact of earning more over time.
The path of least resistance here would be to increase your earnings from work, either through a promotion or by taking on additional duties that could provide extra (overtime) income. Additionally, you could also make money by building a side business, like blogging or if you’re crafty, refinishing and flipping garage sale finds.
No matter what route you take, the end result will widen the gap between how much you spend and how much you earn. Over time, the wider that gap grows, the greater the personal finance success you’ll experience and the faster you’ll begin to realize the long-term goals you’re seeking.
Minimize Your Expenses
As mentioned in the previous section, there is immense value in looking at ways to lower your monthly expenses. In theory, this makes total sense, but the follow through often proves more difficult.
Why? Well, because people don’t like change.
Personal finance guru, Dave Ramsey goes into detail about this in his book “The Total Money Makeover.” According to Dave, “Change is painful. Few people have the courage to seek out change. Most people won’t change until the pain of where they are exceeds the pain of change.”
Don’t wait until you feel the weight of financially overextending yourself before you decide to change your spending habits. By then, the damage is done. Start reviewing your expenses early, and don’t be afraid to revisit them often.
To get you started, here are a few expenses where small cuts can go a long way in improving your bottom line.
Cable: A few years ago, a report from the FCC estimated that the average cost of expanded basic cable TV per month at $64.41, but keep in mind that this is just the basic package.
If you watch certain shows that aren’t included on the basic channels, your costs could easily go into the hundreds. Services like Netflix, Hulu, and even YouTube have made it easier to cut the cord and enjoy much of the same on-screen entertainment for a fraction of the price of cable.
Cellphone: Do you really need the brand-new-top-of-the-line smartphone, especially it comes with a restrictive, two-year payment plan. Search online using eBay, Amazon, and even Craigslist or OfferUp to find deals on smartphones that you can buy outright.
That alone will save you hundreds of dollars, not to mention the additional fees and interest that you’ll save by not financing the phone through your cell phone provider.
Energy: Did you know that for every one degree that you raise your thermostat in late spring and summer, you could save 3% on your energy costs? The same works for lowering the temperature during cold months. Depending on how well you can navigate those extreme temperatures, you could stand to save a significant amount.
The #1 Budget Buster
Groceries: According to a study by the USDA, food represents (on average) one-third of monthly household expenses. Put a different way, the average monthly tab for a family of four runs anywhere between $500 for frugal families to over $1,200 for more liberal spenders.
True enough, avoiding convenience meals and cooking at home can put a significant dent in your monthly food costs, but a prudent approach to how you shop for meals could help you save even more.
Food expenses are without a doubt the number one budget challenge for families I talk with. To help you with this, Pampered Check specialist Stacy Combs and I are teaming up to help you! Through our special Facebook Event, we are offering a week of tools, tips and tricks to help you tame your budget through meal planning, menus, recipes, and tips for cooking at home. If you choose to make a purchase, a percentage of all the proceeds will go to help Jackson Park Ministries in Charlotte, NC. Please join our event from April 10 – 14 to help your budget and give back to those who need more.
Emergency Fund
Any financial professional worth their salt, should stress the importance of having an emergency fund. And as Your Financial Mom, that’s a job I take very seriously.
Given that nearly 78% of individuals will have a major negative financial event at some point in a ten-year period, it safe to say that having an emergency fund is an important part of your financial foundation.
You should think of your emergency fund as your ‘oh my goodness, I lost my job’ fund. This is money kept separate from your general ‘operations and maintenance’ funds – the money you need for new tires, replacing your air conditioner, healthcare deductibles, and other big-ticket but items with unknown timing.
Ideally, if you lose your job, you can balance your Expenses and Emergency fund for a while. Doing this allows your tower to remain standing and not crumble. When your income returns, you can begin allocating resources back toward rebuilding that fund. But remember, this is only possible if you make the creation of an emergency fund a priority from the outset and remain diligent in contributing on a regular basis.
Bringing it full circle, in the same way that Dad’s are an essential part of the family dynamic, heading the household and helping strengthen the familial structure around them; your income, expenses, and emergency fund, are all key components of the structure responsible for maintaining your financial tower. By implementing the steps above, you should be well on your way to building your financial structure on solid ground.
Don’t forget to join the Pampered Chef Event happening from April 10 – April 14.
Pamela J. Horack, CFP® of Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.