Budgeting Your Way to Financial Freedom

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Check out the latest guest post from Andy Hill over at Marriage, Kids and Money.  Make sure to read his bio at the end of the post!

When my wife Nicole and I started our marriage, we were $60,000 in debt and spending money like it was our full-time job.  I, for one, had no issue with going on vacations, driving cars and updating our home all on credit.

When we started thinking about having kids, Nicole and I knew it was time to break our addiction to debt.  We knew we needed a plan to master our money.

We heard that developing a monthly budget could help us in eliminating debt, saving more money and reaching our goals.  So, we gave it a go.  In was rocky at first, but soon it became a habit.

Fast forward six years later, we’re debt-free and our net worth has increased by $500,000.  In 12 months, we will own our home outright and we’ve never been happier.

The catalyst for this major change in our lives was creating and sticking to a monthly budget.

Here are the steps we took to our own future through budgeting.

Budgeting Your Way to Financial Freedom

Find Your WAY Through Your WHY

Before you start your budgeting process, you need to set out clear objectives by answering some questions.  Why are we budgeting?  What is our purpose?

When Nicole and I decided to have kids, my purpose (or my Why) was clear.  I wanted to make sure our kids had the best lives possible – no student loans to worry about, memorable annual vacations together and parents that didn’t stress about money.  Without this ‘why’, I don’t think I would have ever changed my path.

Pause for a moment here… Think about your “Why” for getting on a budget.

Outside of saving more money and eliminating debt, what end results are exciting to you?  Could you…

  • Go on that dream vacation?
  • Upgrade your car?
  • Change into a different career that you love?
  • Give to a charity you feel passionate about?
  • Help out a friend in need?
  • Vacation more?

Write down your “Why” and keep it as a strong reminder as you develop your budget each month.

 

Level Set with Your Partner

If you’re married or thinking of getting married soon, share your life and financial goals with your partner and ask them to do the same with you.  In order for you to succeed with the budgeting process and stick to it, your partner needs to be on the same page.

Once you learn about what your partner’s goals are, write them down and put them together with yours.  Sit down on the comfy couch, review the goals and dream about how amazing your lives will be when you achieve them.

After that, you will be motivated to develop your first budget… as a team!

 

Choose Your Weapon

If you’re headed into battle without the right weapon, you’re going to get slaughtered.  Same goes for budgeting!

Your budgeting weapon can be a piece of paper, an excel form or online programs like Mint, Every Dollar or YNAB (You Need a Budget).  I highly recommend testing out different methodologies to see which weapon feels right in your hands.

Our family started with an excel document since we didn’t have a lot of expense categories in the beginning but then moved over to Mint a few years ago.

I’d highly recommend checking out Mint.  It is FREE, it has a very intuitive app and it syncs up with your accounts to track your spending.  We use it and love it!

If you’re not into the online tools, don’t let that stop you from getting started.  Grab a piece of paper, write down how much money you make each month and subtract that from the amount of money you spend each month.  If you don’t know how much you made or spend each month, take advantage of this moment and find out right now.  It’ll make a monumental difference in your life.

My new friend Tia from Financially Fit & Fab has a whole library of helpful articles on the budgeting process.

 

Create a “Budget Party”

The key to success in budgeting is maintaining consistency.  You can do this by setting a specific date each month and ensuring both you and your partner will be attentive and engaged.  We’re talking about your future here, people!

Side note…

When I originally proposed these monthly get-togethers to my wife, it took a little convincing.  “Staring at the numbers” didn’t sound like the most exciting thing to her.

I knew a name like Budget Meeting or Finance Review wasn’t going to entice her… So, I thought “Hey, I’ll call it a Budget Party”.  Everybody likes a party, right?

Well, my wife is pretty smart so she saw right through my naming tricks.  She pointed out that looking at spreadsheets and talking about finances didn’t equal a “party” even though I thought it was super fun.

We agreed that a little pizza and some wine would definitely make it more party-like.  Now it is a running joke that I still call it a “Budget Party” and she sort of rolls her eyes at me, but it worked because she loves our get-togethers now.

I digress…

Nicole and I get together on the 1st of the month and review 3 main things:

  1. Last Month’s Spending
    1. Were we over budget?
    2. Were we under budget?
    3. What areas to adjust for next month?
  2. Current Month’s Plan
    1. What events do we have (birthdays, weddings, etc)?
    2. What areas do we need to adjust this month (heating bill increases – curse you Michigan winters!)?
  3. Future Dreams
    1. What do we want to do when this mortgage is gone?
    2. What trips do we want to go on?
    3. When are we taking the kids to Disney for the first time?
    4. When can we join that swim club down the street?

Whether you have pizza, wine or go on a date out of the house, find a fun way to integrate budgeting into your relationship.  Who knows? You might just like it!

Budgeting your way to Financial Freedom

Celebrate the Wins

If saving money and creating an emergency fund is your goal, then make sure to celebrate that milestone moment when you hit your goal number.

If you’ve made your last student loan payment, then go crazy and have a flippin’ party!

It can be very motivating to put a reward out there for yourself when you achieve your personal finance dreams.  Nicole and I bought a nice bottle of champagne and put it in the refrigerator to drink on the day we both owned our cars outright with no loans or leases.  When we had enough money to make that situation a reality, those bubbles tasted that much sweeter.

And financial victory can also be very addicting.  Once you hit one goal, you feel empowered to do a lot more than you ever thought possible.

Our next goal is to have our mortgage paid off by December 2017.  It is something we never even thought was possible when we started budgeting six years ago.

The goals and dreams we reach next will change our family tree for generations to come.

 

Andy Hill, a mid-30’s father of two living in the metro Detroit area, pens the MarriageKidsandMoney.com (MKM) blog and hosts the MKM Podcast taking you through the trials and tribulations of being a young parent and husband who is planning for his family’s future and winning with money.  Contact Andy on Facebook or Twitter to learn more about strengthening your family tree.

 

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How One Family Paid Off 60k and Increased Their New Worth by 500k | Saving Money | Money for Families

9 comments

  1. I’m a huge fan of having a budget party, has never crossed my mind. And congrats for you and your wife. You both put in five long years of focus and sacrificing and now you get to reap the rewards.

    1. Thank you very much Andre! We still have a long way to go, but we’re having a great time working together and winning together.

      If you do the budget party, figure out a way to make it fun for both of you. That way you’ll both look forward to it.

    2. Totally agree! This was my favorite part about the article. Making personal finances and budgeting fun sounds like a great idea!

  2. Very cool success story, Andy. I also started using an Excel file and have continued to use it for about four years now. I plan on digging into some of the online options, if not for our own use then to write about it.

    1. I’ve heard that a lot of people just like the control and the flexibility of using their own Excel file. The online tools are have a lot of nice features and can save you time, but some of them lack the flexibility that people want.

      I just signed up for Personal Capital yesterday to give that a try. I will report back!

      1. Nice, looking forward to hearing your thoughts on Personal Capital. My take is that it’s great for tracking net worth, but not a good budgeting tool.

        1. You are spot on David. I’m finding that I can’t even figure out how to do the budgeting function … I suppose I need to spend more time on it, but it definitely is not as intuitive as Mint so far.

  3. Having paid off my house in December of 2012 I can tell you that it’s the best feeling in the world. It took me a couple of months for it to actually sink in. But now that I don’t have a mortgage payment it’s an awesome feeling that is propelling me towards FIRE.

    Keep up the awesome work and I look forward to reading the rest of your financial journey!!!

    1. Nice job crushing that mortgage! I can’t imagine what those last 5 years have been like for you. One more year for us – I’m hoping to feel the FIRE too!

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