Vee’s Inspiration June 27, 2023
I had a conversation yesterday with one of my young ones…
It’s ok to have a good time and do the things you want to do. Just understand everything has a cost.
It’s important to weigh that cost with your mental/physical tolerance.
It’s ok to “ball out of control” Just understand if you use money meant for bills or savings, you will ALWAYS pay that cost down the line.
I re-explain my sacrifice principle/budget when it comes to money.
This is an after Tax Budget.
Budget:
Pay your future self first- put a set percentage away for retirement - (401k/Stock/LT investments, etc).- (10%-15% more if possible)
Pay your current self next- have a set allowance you pay yourself every time you get paid (this should include tithes/ donations, etc) -Use a dollar amount not a percent.
Pay your monthly obligations (your bills). Try to pay your obligations in full each month. (Mortgage, Car loans and home equity loans might be the exception.) Paying your obligations should be done according to a budget that has already been put together. The best times to do or redo your budget: 1. After a COLA increase. 2. In July, most people see a slight increase in their net take home in June. ( it’s a tax thing) 3. The beginning of the calendar year. 4. After a raise.
Pay into your short-term fun/ travel/ emergency fund. I recommend a dollar amount - it can be as little as $20-50$ each time you get paid.
Pay into your long-term emergency fund. I recommend a percentage for this - 10%-20% - is a good range.
Set up a minimal amount of cash fund- set a floor amount of cash you want to be able to put your hands on quickly - $500 might be a good starting point.
If after you’ve done all of that, you still have money left over you need to adjust your budget.
Sacrifice:
The sacrifice part only includes Step 2 and/or Step 4. It's ok to blow these two accounts, I would not recommend it, but if you do, you are still insulated. The sacrifice comes while you replenish accounts for steps 2 and 4
It’s not wise to sacrifice your future self. Step 1
You can’t sacrifice the obligation portion, that’s not your money.
Step 3
It’s not wise to sacrifice your emergency funds - Step 5 unless It’s a true emergency. (Define a true emergency in your budget and stick to that definition when in doubt)
In my opinion, it’s not wise to go below the minimum cash amount. You can recalibrate when you redo your budget. This is more of a phycological financial safety net.
To tie it all together. If you “ball out of control” and spend your allowance money and the money in your fun account then you can’t pull from the other accounts because you want to continue having a good time. As I always tell my young ones, that math doesn’t work.
I hope they listen. My sacrifice principal/budget has helped me over the years, I pray my young ones listen and it helps them, perhaps it will help you.
Have a great Tuesday!
Stay safe!