Let’s Start The Race To Retirement
If the journey of 1,000 steps starts with the first step, the first step of early retirement is knowing your financial position. This only becomes clear when a full assessment of your current financial situation is assessed. The first part of that assessment begins with the formation of a budget. The importance of a budget is to know how much money you’re bringing in and how much money is going out. I know most people, like myself, think of making a budget as a long arduous process, but you will never reap the benefits until you take the time to create one. For me, I used to feel comfortable with keeping up with my expenses in my head. Nowadays, having to keep up with cash, credit card, PayPal, and check payments in your head is nearly impossible. Over the years I’ve used a number of methods that I have found to be useful. I ranked them by convenience.
- Use a ledger: Using a ledger is maybe one of the most primitive methods, but it works. Advantages to using a ledger include: 1. you don’t need internet access, 2. you don’t need a charger, and 3. you don’t have to worry about remembering a password. Since it is a physical handwritten booklet you can check it whenever it’s in your possession. Ledgers allow for you to organize your expenses and income as you make transactions. The downfall of the ledger is that it is a physical object that you have to keep up. Also, as you make purchases you can’t automatically put it underneath that heading. Ledgers are mostly used by corporations as an accounting system.
- Use the envelope method: The envelope method starts with taking a piece of paper and writing down all of your fixed expenses and all of your fixed income. Next, you must calculate how much money you need to contribute from each paycheck so, by the end of the month each expense can be paid in full. Then, you take an amount of envelopes equal to the number of expenses you have and write one expense and how much that needs to be contributed from each paycheck on the envelope. Each paycheck you’ll take cash and contribute the appropriate amount to each envelope, then at the end of the month pay each expense. I used to use his method quite often, it was actually my first budgeting technique.
- Make an Excel budget: This method starts to get into Microsoft skills that any novice can acquire. Similar to the other methods you simply just list and keep track of your expenses and income. Those that are savvier with Excel build in equations so that when they enter their income, or additional expenses it automatically updates the entire Excel spreadsheet. This method will be advantageous to those that regularly use their computer. Most people have Gmail accounts which allows you to use an open source version of Microsoft Excel. You can create a budget that is password-protected and can be accessed from any computer.
- Register for Mint.com: Registering for mint.com was one of the scariest things I ever did. The thought of logging into all of my accounts to review all from one place was a scary thought for me. With the rise of identity theft I really didn’t want to take the chance, but I was willing to try it out. Mint.com has been the most eye-opening experience for me. When you log into all your accounts mint.com automatically shows your current debts and assets. Next, they have a budget tab that tracks all of your purchases over the last 30 days and puts them into different categories. The site automatically creates a budget, but you can also create a budget for yourself and have the website keep track of your accounts. Then, mint.com will send notices every week of how you are keeping with your budget.
All of the suggestions are for education purposes only, and not an endorsement. Please conduct research prior to implementing any method.
Remember to “ACHIEVE, BUILD, AND INSPIRE”
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