Sometimes We Cheat...(Article)

Just Sharing...

http://lifeinc.today.msnbc.msn.com/_news/2012/04/24/11291884-sometimes-we-cheat-on-our-partners-about-money-survey-shows

MsMoneyGuru

Having problems developing a plan to get out of debt? Want to know who we are doing our debt snowball? You may need a coach...MsMoneyGuru is here to help, contact me at msmoneyguru@gmail.com for a consultation.

Investment vs. Expense...Changing Your Mindset.

I watch a good amount of television. Not too much crazy reality shows (although I do have my guilty pleasures), but mostly lifestyle TV...like HGTV, and the Travel Channel, with a lot of Investigation Discovery (ID), CNBC,  and History Channel thrown in. Okay so unfortunately watching lifestyle channels, CNBC, and listening to Dave Ramsey is my only real glimpse into how wealthy people view things.

One thing I have picked up is that when wealthy people are interviewed for a particular show, whether it be buying a property or going on a vacation, then tend to describe it as either an  "investment" or an "expense".  As you would expect, they tend to "invest" more then just "expend", my assumption is because they want to stay wealthy...Maybe broke people "expend" more than "invest"... Is it that simple?

Dictionary.com defines the word invest (verb) as:"to put (money) to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income, or appreciation in value". So in other words, people who do more of this tend to put their money into things that  will reap some sort of return (monetary or otherwise).  

Dictionary.com also defines the word expend (verb) as: "to use up".  So in order words, people who do more of this tend to put their money into things that use it up. Basically "expending" your money is like driving down the highway with $1 bills in your hand throwing them out of the window, its gone, its not going to generate anymore, its been expended!

I suspect that when wealthy people decide to "expend" they first determine if they can really afford to take the "hit", given the amount of their other money is going toward investments.  

For example, you take a $3,000 vacation which (for the sake of argument) is an "expense"; can someone with your net worth and income level really afford that vacation? Even if you don't go into debt and save up for it; can you really afford to take a $3,000 "hit" to your total financial world (net worth, etc.)? In other words, can you afford to drive down the street and throw 3,000 $1 bills out the window without batting a eye?


I think if we are going to be financially successful, we need to pay attention to how much of our money are we "investing" vs. how much we are "expending".

I know that in order to survive expenses are a very necessary part of our world, however I think we should consider them under these terms.  I don't know the "magic" formula of how much of your income should be going to expenses vs. investments...but I am (personally) trying to get my living expenses down to 50% of my income, with 30% to invest, and the remaining 20% to spend and enjoy. So that would leave me 70/30 in terms of expending vs. investing. Now if (when) I become wealthy those ratios will change, just because you make $10M, doesn't mean I must now live on $5M and spend $2M on crap.  Likewise a person making $30k per year, may not be able to live on $15k, invest $9k and spend $6k a year!


I would challenge you today to make a list of things you often spend money on and categorize them as either an investment or an expense...


Let me help you...



*Some of these items can be considered both an expense and an investment depending on the circumstances.

MsMoneyGuru

Having problems developing a plan to get out of debt? Want to know who we are doing our debt snowball? You may need a coach...MsMoneyGuru is here to help, contact me at msmoneyguru@gmail.com for a consultation.

"How We Saved $10,000 in Just One Year" (Article)

Check out this article!

Interesting story about "Wealth Watchers" a Money Diet (sorta like Weight Watchers).

"How We Saved $10,000 in Just One Year" - Your Money - MSN Living

The author of the story is married with two boys. She and her husband do not combine their inco me (they split bills), they tried this Money Diet separately and found relative success.

The Wealth Watchers program in short requires that you make a typical monthly budget, with income at the top subtract all fixed expenses, then take the remainder and divide by 30 to give yourself a daily discretionary  budget. The author had about $90 a day to spend. Of course if you spend more one day you can spend less the next day...you tally up your net spending every week and save the excess.  Psychologically, having only $90 a day to spend made her reevaluate her needs vs. wants therefore making her a better saver (like Weight Watchers does with its daily points system). After a year, she was able to save or pay down $10,000 worth of debt.

The only thing I didn't like about the story (example) is that she and her husband don't combine to any extent their finances... In my opinion, we were not put on this earth to go alone, so if you have a good healthy relationship and you utilize teamwork in everything else (raising kids, etc.) why not include your finances?  I think she would have been much more successful if she and her husband combined some things...

In an extreme case this is how you end up with one spouse that is a saver and has $30k in the bank with $300k in retirement savings and the other spouse with $30k in debt and no retirement savings...that's counterproductive in my opinion and makes for a hard choice when the skeletons are reveled.  When they retire will the responsible spouse (at the end of the day) be willing to share their hard earned money with the irresponsible spouse? Maybe your irresponsible spouse has a hard time with money and is not a natural saver, isn't the responsible one obligated to help them improve instead of leaving them to fend for themselves?  I just think its a recipe for disaster. 

I am personally a spreadsheet, category driven type of girl and would go crazy if I didn't know how my husband was managing the other side of the household, I need to balance my checkbook every day, and I don't buy anything without first consulting my budget.  However, this daily allowance thing is a little too much...I budget two weeks at a time (aligned with my paycheck schedule).

What do you think about the Wealth Watcher program as described in the story? Is it something you can see working for your family?

MsMoneyGuru

Having problems developing a plan to get out of debt? Want to know who we are doing our debt snowball? You may need a coach...MsMoneyGuru is here to help, contact me at msmoneyguru@gmail.com for a consultation.

My Finance Journey...Update 3/31/2012

Thought I would do a quarterly update to our Financial Freedom progress...

In the last few months we were able to put to bed two more accounts. We are completely out of credit card debt and only owe on our car loan!

See our progress below:

 
 *I want to note that I don't count a debt as paid off until it is completely paid off. Therefore, while the starting number is accurate, the debt still owed is actually less due to ongoing monthly payments.

See our current debt category's below:

As you can see we have a beast of student loans to tackle!  My husband and I both have undergraduate and masters degrees, so this category is a substantial portion of our debt load.

We also sold our rental property last year, which help to eradicate $185k of the $430k we originally owed.

For those that think its not worth the sacrifice to pay off debts, take a look at the monthly savings alone.  We have more than $2,800 in extra income that is not going to bills!  That's money that is now going to pay for retirement, emergency fund, taxes, fun, giving, and of course to pay off more debt!  LOL

More to come...we can finally see the light at the end of the tunnel!

MsMoneyGuru

3 Money Tips for Every Income

Check this out!
3 money tips for every income

I like this article, it gives general guidelines for every income level.

Incomes from Low Income (Below $20k) to Upper Income (Above $100k).

Word to the wise, if you find yourself in the lower end of this spectrum...make a promise to yourself not to stay there for long...

MsMoneyGuru

Gen Y's Retirement: $2 million...Not Impossible

Check this out!   Gen Y's retirement: $2 million

So, apparently according to this article, Generation Y-ers need around $2M in Retirement!  Seem impossible? It shouldn't, most of Generation Y (mostly those born in the 80's) are fully capable of saving at least $2M in retirement.

Perhaps my experience is limited, but almost everyone I know has financed a car, at one time or another.  If you can finance a car, you can save $2M by the time you are 65; plain and simple.

Check out the math:

Lets say the average car payment in America is $350/month, although I have read that it is higher then that!
And you invest that $350 a month in an IRA or 401k making at least 10% annual return a year (reasonable estimate), in 40 or 35 years from age 25-65 or 30-65, respectively. On your 65th year you should have $2,213,427.85 or $1,328,823.32.

The idea is to save enough, so when you are in retirement you can pull out the growth (interest) on an annual basis and live off of that. For example, if you have $2M in the bank, and you earn 10% a year (on average) you can pull $200k a year out for living expenses. 

Mind you these numbers are simple in that they don't include an employer match or inflation. My point is that it doesn't take much to re-set the trajectory of your financial plan.

Just something to think about...if you can afford a Tahoe or Camry payment you can afford retirement.


MsMoneyGuru

My Financial Journey...

Back in 2010, my husband and I started on our journey to Financial Freedom...

We had done all that we were suppose to do...gone to school, secured professional jobs, but we had barely any savings and was barely living paycheck to paycheck. It was one of those moments when we looked at our situation and realized "something had to change".  We were sick of it!  So we started on our journey inspired by Dave Ramsey's Total Money Makeover. Now, I have shared in the past our journey through real estate hardships. But I never gave you exact figures...well, here is the closest to details you can get.

When we started our journey, my husband and I owed a total of $430,379 in debt!

Here was the breakdown:

See, prior to our revelation we never really considered auto loans, student loans, and rental property to be "bad debt", but after realizing how much per month it was costing us, we decided to conquer our mountain.

As of today, our journey continues, but we have made significant strides in the last 18 months.

Check it out!

The journey continues...

MsMoneyGuru

The real cost of living: $150 000 a year...Really?

I thought you would be interested in this: http://money.msn.com/family-money/article.aspx?post=c20e622f-9f80-4b2d-90fd-164ead94b9b1#scptid


According to this article, in a survey, people who claimed to make $150k a year are among those of us who where quoted in "saying they could buy what they need, afford some extras, and still be able to save a bit". I live in Southern California (higher cost of living) and tend to agree with that (believe me, I've worked the numbers).  However, since the article claims to be an average or a national representation...I wonder what people these days define as "what they need vs. what they want"?  

$150k a year use to be considered upper middle class, have we re-defined "needs vs, wants" or is has the American Dream really grown out of our reach?

Something to think about...

MsMoneyGuru

How to have a low stress, budget friendly Christmas!

So in the past I always get ultra stressed around Christmas.  I don’t know why, but it was like Christmas time would catch me off guard.  Plus, after getting married there was adjustments to different Christmas/Holiday traditions to get use to and all that comes with it.

Well, on the 5^th year, I finally figured out what makes me work, and for the first time in a while I am having a pretty stress free Christmas:

1)      Plan Early! Duh! For some reason, I would forget Christmas was coming, then when I realized it was so caught up in the wants and needs of everyone else that I could barely hear myself think…plus I was BROKE!  So, this year, I started thinking about Christmas in October, making my list, deciding how much money I needed, and saving from paychecks to make it happen. This worked so well, I’m going to start even earlier next year, oh and I started a Christmas Fund (saving for 12 months).

2)      Pay Cash! Duh…please don’t charge Christmas. Did you know that the average American doesn’t pay off Christmas for 6 months following Christmas! Click Here Don’t be a statistic. MsMoneyGuru doesn’t believe in using Credit Cards, so this wasn’t an option for me anyway.  But NO ONE (on my Christmas list), not even my child is worth my financial stability and responsibility I have to myself and my family.  Sorry, if I don’t have the money I don’t get it.

3)      Make a list, check it twice. The B-WORD again!  I’m sorry, there is no getting around it…you need to budget everything you do!  Including Christmas.  So using my trusty EXCEL Spreadsheet, I made a list of all the people I wanted to give gifts to, including any gift exchanges, and Christmas decorations, etc.  I put 3 columns next to each person: 1) gift (description), 2) Budget Cost, and 3) actual cost.  In some cases I didn’t spend that much, maybe what I wanted was on sale or maybe I used “Kohl’s Cash” or coupon codes from another purchase…it evened out the budget on items I went over budget on.  As long as I made it within my overall budget I was happy, and therefore I am!  

4)      Tell everyone to get over it!  You don’t have to actually say this…just do it!  In the past, I would succumb to the pressure of buying gifts when I couldn’t afford it. I would just “charge it”. Well, last year was the year I stopped charging.  I had overwhelming debt and obligations, so Christmas budgeting was the last thing on my mind.  Well in the end, I managed to scrape a few dollars together to get some gifts for family, but I had to stand my ground and tell my family that the gifts would be small this year. Not everyone understood this…but honestly who is going to be in my house the following month paying all these bills, not them! 

So, if you suffer from the same issue with pleasing others that I once did, LET IT GO!  Get what you can afford and move on…Christmas is about spending time not money on people; if they can’t understand that, then that’s not my problem…I have my own problems to deal with. Now a days I don’t wait to see what people want me to do, I just do what I want to do, and give what I want to give…I’m the giver, I get to decide what and how much! Plain and simple!

5)      Remind yourself “Who” is the Reason for the Season!  It helps calm your nerves because you realize why you have the ability to give. Continue to thank God for His grace and mercy and for sending Jesus to the world to rid it of its sin. Once you center yourself on that, everything else is cake. 

MsMoneyGuru

GETTING ORGANIZED: Fixing a Negative Cash Flow Budget

This week I thought I would continue our discussion on creating a household budget. Last time we covered HOW to create a basic plan or budget. If you recall, I had you create two budgets, one from memory and one from reality (based on banking statements and receipts).  Hopefully doing this exercise has given you some insight on your spending habits. Now, most people (hate to generalize) that don’t follow a plan of some kind tend to run out of money before the end of the month, am I right?  So today I just want to touch on what to do when you have discovered that you have a NEGATIVE net income (expenses exceed your income). 

Where to start? In the most simplified terms, if you have a negative net income, you either have a spending problem or an income problem. So I’m asking you, which is it????

I can hear it now…”If only I made $10,000 more, I could save, or I could pay off this or that”. Well we all want to make more money, but what are you going to do in the mean time? I tell you, you will not be successful if you have a negative cash flow every month. This means you are most likely going into debt to cover your expenses.  First things first, you need to develop a plan (budget) that balances. Wow, a balanced budget!  Something even Congress can’t seem to do! 

Okay let’s get started. You have your piece of paper, right; the one with all the categories of expenses? Well get that out and at the bottom of your paper you will have the amount of your NEGATIVE NET INCOME amount; this is the amount you need to cut back by. 

There are two ways to fix this: Priority OR Balanced

1)      Priority Approach

Take out another paper and put your income at the top of the page.  Now re-list those categories, but in order of importance.  Let me help you…1) Food, 2) Utilities, 3) Shelter, 4) Transportation, and so on…Once you have that list completed, you will use it as a guide on how you will spend your money…all the way down the page. You will stop when you reach zero (net income). Everything else gets cut.

 

2)      Balanced Approach

This involves cutting a little of everything. You have the same list of categories, but you take a little out of everything that is discretionary, until you reach your needed number. Lots of ways to cut back…eat out less, reduce cable/satellite package, cheaper cell phone plan, clip coupons for grocery/household items, or DRIVE LESS! 

Okay, you get the point. Basically you have to make it BALANCE.  I recommend a healthy budget consist of 50% of income going to things you NEED (food, lights, shelter), 20% of income going to things you WANT, and 30% of income going to savings.

If you are wondering why I didn’t tell you to do that in the first place, it’s because the tendency is to load up your budget with a lot of ideals that don’t exist.  For example, before I started really paying attention, I thought we (hubby and I) only spent $250 for food/dining/household items, turns out it was more like $750 (yeah we were eating out a lot).  Well, I have tried and tried and the lowest I can get it is $450 (including diapers and household items).  I have to keep it real; I just need $450 a month, period. I can work with that reality much more then my imaginary $250 budget! Make Sense?

So, this week’s homework is to get your budget plan to BALANCE!

I know you are shy out there, but I would really like some feedback, have any of these exercises helped you?

Enjoy your week,

MsMoneyGuru

GETTING ORGANIZED: Creating a Household Budget for Success, Part 1--You Get More Time!

I’ve decided to give you all more time to participate this one. I will resume this subject in the coming week.

That means it’s not too late to do the Budget Experiment from last week… I want to hear some feedback people!

MsMoneyGuru

GETTING ORGANIZED: Creating a Household Budget for Success, Part 1

Hello out there!  So, for this week’s post, I thought I would give some insight on how to get organized and on a budget.  One of the themes of my posts to date have been the importance of establishing a budget, it is essential to any financial plan.

There are TWO steps in creating a Household Budget for Success…1) The Budget itself, and 2) The Cash Flow Plan. Today we are going to focus on Step 1: The Budget.

What is a Budget? 

Well, according to Investopedia.com, a BUDGET is an ESTIMATE of the given REVENUE (INCOME) and EXPENSES over a specified future period of time. THAT’S IT! If you look at the definition clearly, you will see there is really nothing to be scared of.  First: it’s an “estimate”, which means the amounts don’t have to be PERFECT, or EXACT.  Second: it’s for the “future” which means it’s done ahead of time. Third: it’s for a “specific period of time” which means it can change.  You are not locked it for the rest of your life! I change my budget all the time depending on the circumstance.  The important part is that it’s a PROACTIVE way to manage your money.  A budget is not a dream crushing, fun killing monster, it’s just a PLAN!  You will find that you actually enjoy yourself MORE when you live on a budget.

So now that we know what a budget is, let me tell you the best (in my opinion) and easiest way to build one and live on one. This post requires some participation!

DISCLAIMER: the following is an example of the way I create a simple budget, the budgets used in personal counseling are a lot more complex, the example in this post is to help you get started and to give you some general ideas on how a budget is created.

Let’s start simple, depending on how organized you are, this may take little or a lot of effort.

1.      Get out a piece of paper.

2.      Write your monthly income at the top of the page.

3.      Under your Income write the following Expense Categories:

·         Giving (charity, tithes, offerings)

·         Savings

·         Rent/Mortgage

·         Homeowners Assoc  Dues

·         Insurance

·         Child Care

·         Loans

·         Credit Cards

·         Internet

·         Cable/Satellite

·         Electricity*

·         Gas*

·         Telephone*

·         Water*

·         Trash*

·         Groceries*

·         Eating Out*

4.      Fill in your “estimate” of what you typically spend in a month next to each category.  Some items are going to be easy, your loan or credit card payment, and rent are items which are typically fixed. However you might have a hard time estimating your “discretionary” categories (* see asterisk).

5.      Subtract the Income Amount from your total Expenses Amount; the result is called NET INCOME.

Whalah! You have a budget!

Do the amounts left over make sense?  Does your NET INCOME match the amount you have in your pocket at the end of the month? 

This is where most people get in trouble.  They try to manage their life on this initial budget (based in memory), but after a week or two of failing, they give up out of frustration…Why? Is it because you can never budget for everything? Something always comes up that wasn’t in the budget. TRUE, but that’s not why the budget didn’t work...most likely it didn’t work because it’s not based in reality. Even the most detailed budgets fail to predict every dollar down to the cent…that’s why a budget is a living document…it will change…just embrace the change.

So at the beginning of this post I told you that I was going to show you how I create a budget.  Guess what?  We are not done.  This way is going to take a little more effort on your part. 

1.      Get out a piece of paper.

2.      Pull out your last month’s worth of paystubs. Or bank statement.

3.      Write down the amount either the paystubs or the bank statements say you take home in a month; whatever is most accurate.

4.      Under your Income write the following Expense Categories:

·         Giving (charity, tithes, offering)

·         Savings

·         Rent/Mortgage

·         Homeowners Assoc Dues

·         Insurance

·         Child Care

·         Loans

·         Credit Cards

·         Internet

·         Cable/Satellite

·         Electricity*

·         Gas*

·         Telephone*

·         Water*

·         Trash*

·         Groceries*

·         Eating Out*

5.      Pull out your last month’s bank statement (checking/savings).

6.      Look through the record of transactions.

7.      Fill in the amounts spend on each category based on the bank statement.

You may have to make a category for CASH withdrawals if you can’t remember what you spent the money on.

6.      Subtract the Income Amount from your total Expenses Amount; the result is called NET INCOME.

8.      THIS TAKES A LITTLE MORE BRAINSTORMING…On a separate piece of paper, list of all the expenses that occur more sporadically, like DMV Registration and Costco Memberships. Include the amounts for each category and put the list to the side. This will be use for the Cash Flow Planning step.

Whalah! This is your TRUE budget! At least it was last month!

Does your New NET INCOME match the amount you had in your pocket at the end of the month?  Probably a lot closer than before.  Hopefully this amount is not negative…more on that later…today we are just building a budget as we stand today.

Now, go over the 2^ND BUDGET and ask yourself the following:

1.      If I could go back to first of the month, would I change the way I spent my money? For example, perhaps you didn’t mean to spend $150 on Starbucks??? JUST GUESSING.

If the answer is “yes”, then change the amount in the category to the desired amount.  If the answer is “no”, then keep everything the same.

2.      Is there any category that isn’t on the current list that should be based on your spending from last month? (Like haircuts or gym membership)

If the answer is “yes”, then add the category and put the amount you spent next to it, or put the amount you want to spend next to it.

THIS IS TOO EASY, RIGHT?

I counsel people all the time, and it never fails how wrong they are about what they actually spend…my philosophy is to start small, this is a good exercise to do if you are NOT facing an emergency, but know that you need to get organized!  I also believe that if you are going to be successful, you should start with little changes and build your way out. 

By doing this exercise you have uncovered TWO THINGS:

 1) Where you thought your money was going, and

2) Where it actually went!

Like I mentioned last week, a budget is a process, it takes time to perfect.  You can’t start on a journey if you don’t know where it begins... 

So, this week I want you to DO something!  For the next week try to build a budget, you will have two versions, one based on memory and one based in Actuals. NOTHING FANCY, JUST DO IT ON PAPER!

Next week I will take you to the next step in budgeting…Cash Flow Planning…it’s the HOW after the WHAT!

Check back…MsMoneyGuru

YOUR’S, MINE, & OURS: Tips on Combining Income with Your Spouse/Partner: Part 2: Home from the Honeymoon…

Congratulations!  You’re married!  Hopefully you had a chance to get away with your new husband/wife.  I know after all the stress of planning your wedding; you were due for some rest and relaxation.  Now you find yourself dropped off into the reality of actually being married. 

The purpose of this post is to share my thoughts and advice on building a strong financial foundation for a new marriage or commitment.  I am not trying to dictate whether you should start a family or buy a house as soon as you land home, you are free to disagree with me. Everyone’s situation is different.  All I know is what I went through when I first “came home from the honeymoon” and what I learned from it. 

So here it goes:

1)      DO NOT BUY A HOUSE

You just got off the roller coaster of Engagement and the last thing you need is a house! Believe me…never be in a hurry to make so many commitments at the same time.  Unless you have a unique situation (like you lived together before you were married) or one of you already owns a house, I would hold off buying a house for at least a year.   A house brings so much financial stress (unexpected expenses, repairs, etc.), and this is a time to get to know each other and to get a financial system (yes it’s a system) established.  If this is the first time you and your partner have ever combined incomes, you have a lot of adjustments to make and its way more enjoyable without a mortgage hanging over your head.   EVEN if it is cheaper to buy then rent, EVEN if you are paying through the roof in taxes, EVEN if everyone is doing it and they think you are crazy to rent “in this market”, I don’t care if you are 25 or 45, DON’T DO IT!  

The Ms Money Guru has a checklist to determine whether you are ready to buy a house (more on this later) and it is IMPOSSIBLE to have that completed by year 1 anyway…so forget about it!

2)      INSURANCE

Seems very obvious, but still worth mentioning.  You are now a REAL household and you need to make sure you are adequately protected. Now that you are married, you need to reexamine all of the needed insurances because your situation has changed…in some cases, your premiums may go down!

 I recommend everyone get 5 types of insurances:

Life Insurance:  20-30 year term life insurance, 8-10x your income…if you or your spouse dies the insurance payout can be invested in a mutual fund earning an average of 10%, should replace the spouse’s annual income.  Why only 30 years? The goal is to be able to self insure after 30 years.

Auto:  In my opinion, you should at a minimum carry full insurance with 100/300 ($100,000 per person, $300,000 per occurrence).  Some people will argue that is a lot of insurance, when I was first married we were so broke we only had 15k in liability…that is way too low. What if we hit a brand new BMW or even a Chevy Tahoe? Everything above 15k would be our responsibility. So until you can “self insure” (with a healthy emergency fund) against all these “what ifs”, it’s wise to just get the best coverage you can.  I’ll leave the size of the deductable up to you. 

Renters:  Since you are NOT buying a house, you need to insure the items inside your unit; your landlord will only cover the structure of your building. He won’t cover your belongings if you get robbed or if the rental burns down. You can add your wedding rings on this policy too.

Health:  Despite whether you have a job with full benefits or not, you need to look into health insurance. Health care bills are one of the top reasons people in this country go bankrupt.  Please get health insurance, it’s worth it.

Long Term Disability: Short term (less than 13 weeks) is not the problem, that’s what an emergency fund is for…it’s the long term disability that hurts most.  God forbid something happens to either one of you, and it takes you out of the working field for an extended period of time, you don’t want to depend on the state or your family for everything…be smart get some long term disability insurance.

3)      EMERGENCY FUND

Seems obvious…the general rule is 3-6 months expenses.  You should have this BEFORE you buy a house and before you go on your next vacation.

4)      GET ORGANIZED…THERES THAT “B” WORD AGAIN!

Funny thing that happens when you get married…Income goes up, Expenses go down.  Gone are the single days of pinching every penny, and making sure you can make your car payment and rent.  Now you should have TWICE as much money, RIGHT? 

WRONG!  There is a difference between PERCEIVED wealth and ACTUAL wealth.  When you get “married money”, for some reason you will feel like you got a little raise, a little bump.  Even if one of you is not working, you know that if push comes to shove you have an able bodied adult who is willing to pick up the slack.  Two is always better than one.  BUT that doesn’t mean you don’t need a budget! EVERYONE needs a budget, even Warren Buffet needs a budget, if he didn’t have one, he wouldn’t be Warren Buffet.  This is what RICH people do.  They live within their means, they save, and they buy things with cash.  It’s so plain and simple, yet for some reason so hard for ordinary people to do.  What couples tend to do is “grow” their lifestyle first, and then budget second.  If you create your budget FIRST, you will be in touch with your NEW households’ spending habits, and this will help avoid “growing” your lifestyle into your newfound income.  Remember PERCEIVED vs. ACTUAL…this is where that comes in.  You don’t want to buy a new car (with payments) and a few months down the road realize that it was a curse instead of a blessing because you can’t afford to enjoy your new life together.   Married people need to go on dates too!

So, BEFORE you get excited and run off to the mall and buy everything you see and sign up for a new car loan or God forbid a TIMESHARE.    You need to come together with your spouse, (remember the come clean ceremony from Part 1) and put all your obligations, including your new insurance premiums, new rent payment, etc. together, and see what you really have left over at the end of the month.  You want to live in that place for at least 3 months, and really get a feel for how your money flows.  For instance, I work for a company that pays me salary every two weeks, while my husband is a teacher and most of the time they get paid once a month and only for 10 months. So given the different variables, we had to plan for the summer (non paying months) and plan our bills around the timing in our pay (cash flow) as well.  It is a new process and it takes a lot of practice. MsMoneyGuru has WAY more on this subject and a step by step process to build a budget…more to come.

Are you in Debt?  Hopefully your come clean ceremony (see Part 1 of this series) opened your eyes to what you have before you.  Paying off your debt should be JOB #1.  Are you overwhelmed and not sure how to do it? MsMoneyGuru has the answer…more to come.