Budgeting Will Set You Free

Sadie and Emma,

Do you want to win with money?¬† Yes, would be your answer ūüôā¬† The way you win with money is getting on a budget!¬† By being on a budget, you are telling your money where to go!

If you don’t track your spending and plan out your month and every dollar of income for that month then that money will just disappear.¬† When you first start a budget, you will be amazed at how much you spend on different categories.¬† It can be mind-blowing in fact.¬† If you eat out five nights a week, you might not realize how much you are actually spending every month.

To start your budget, you need to figure out your monthly expenses.  Track every dollar you spend.  Update your spending once a week.  Every week when you add in your weekly spending, you might need to update certain areas of your budget.  Maybe you went over on your eating out expense, so that extra money to cover that category is going to have to come from somewhere else. Your budget is a fluid object, it changes constantly.

After a few months of budgeting, you will start to really get a feel for it.  This is when you can really start optimizing your spending.  Look at places where you can trim the fat, and cut back on excess spending.  Do you really need to go spend that $20 a month at the coffee store?  No, make your coffee at home and save that money.  This is where you can make your changes.

The goal here is to limit your spending so you can save as much as you can.¬† The more you save, the more you can invest.¬† The more you invest, the sooner you can “retire”, or more so really do what you want to do.¬† Find a passion, and go after it!¬† This all starts with budgeting and getting your expenses under control.¬† Start a budget.¬† Update the budget every week.¬† This is how you WIN!


The Path to FI, and Why

My sweet girls,

Why I am writing these letters to you?  What is the point in all this?  Why should you care about personal finance?  I am going to tell you why it is important to me, and hopefully, that will help you understand why it should be important to you.

Let’s start with “What is FI?”¬† FI, or financial independence, to me, is having enough money that you don’t have to be a slave to a job you don’t like.¬† It is being able to not have to do what everyone else¬†thinks is normal, work a job you don’t like, Monday through Friday, 8-5, until you are 65!¬† It is having “F U money!”¬† It is being able to live on your terms.¬† This is the path your Mom and I are working our way towards.¬† My goal is to empower you with the knowledge so that you can start early so it won’t take you as long as it will us.

I struggle with my job right now.¬† It isn’t terrible by any means, but it is not what I want to be doing.¬† It is not what I am passionate about.¬† It was a great opportunity when it fell into my lap.¬† It got me out of the restaurant industry, and the crazy hours that go with it.¬† It gave me the opportunity to be home with our family on the weekends finally!¬† That is important to me.¬† But now, I don‚Äôt just want the weekends.¬† I want to make my own schedule.¬† I want to be my own boss.¬† I want to be able to spend more time with you girls.¬† This is what FI can provide for us.¬† It can let me work on my passion.¬† Let me let you in on a little secret girls, if you like what you do you will never work a day in your life!

So, start early!¬† Stay away from debt, get on budget, have an emergency fund, maintain a high savings rate, and invest, invest, invest!¬† Your best friend is time and compound interest.¬† If you start young, you can be one of these people who “retire” in their 30’s.¬† Some people look at it as FI/RE, or financially independent, retire early.¬† I look at it as financially independent so I can work doing what I love.¬† Get on the path!

Debt, the Wealth killer

Sadie and Emma,


Dad here.  I want to teach you girls about personal finance.  I want you know at a young age, what it took me years to learn.  I had to figure some out on my own but also learned quite a bit through seeking knowledge.  So, my first nugget of wisdom is that debt is bad.  Debt is the biggest obstacle to building wealth.


What is debt you ask?¬† Well, according to www.dictionary.com debt is, something that is owed or that one is bound to pay to or perform for another; a liability or obligation to pay or render something; the condition of being under such an obligation.¬† Or in other words, you spend money you don’t have now, and pay it back later, with interest…usually very high interest.¬† The average credit card interest rate today is 15.07%.¬† One of the biggest epidemics in our country today is student loans.¬† The average person graduates with $28,950 in student loan debt.¬† Think about that for a minute…you just finished college, getting ready to start your career, and you already have a negative net worth.¬† It is terrible!!


When you have debt, you are giving away your hard earned money every month to someone else.  Imagine if all that money you are giving away every month to pay off debt was staying in your bank account!  If you are debt free, then you are on your way to FI (financial independence), which is the goal.  I will talk more about FI later.


If you are debt free then you can save all that money.  Put that money into an emergency fund.  After your emergency fund is done, then you start investing that money.  If you can start investing as soon as you get out of college, then you are on the path.  The two biggest keys to investing are time and compound interest!


So, don‚Äôt do like Dad & Mom did and get into debt because then you have to spend all this time and effort to get out of debt.¬† You have to sacrifice just to get back to a zero net worth.¬† Instead, stay out of debt, and start building your wealth.¬† Let’s give you an example to show you how powerful it is to start early.


At age 21, you have $0 in retirement.¬† You start contributing $1,000 per month to invest.¬† If you get an annual return of 8% (S&P has an average return over 30 years has been 11%), then by the time you are 65, you will have….drum roll please….$4,626,067.


Now, let’s say you didn’t take Dad’s advice, and you go into debt.¬† Let’s say you also put off investing any money because you are trying to pay off your debt and become debt free. Now you don’t start investing until you are 30.¬† Let’s take the same scenario.¬† At age 30, you start contributing $1,000 per month to invest, and you are still getting 8% annual return.¬† At age 65, you now have…$2,233,225.


See the power of starting to invest as early as you can?!?!?  Stay out of debt, and invest!


This is going to be a series of letters that I write to my two daughters, Sadie and Emma. Through these letters I am going to share what I know about personal finance, to try and share with them the knowledge that I was never given. I think personal finance should be a mandatory high school class. There is so much that you are not taught in high school or college and go throughout life learning as you go and making mistakes. Well, I would like to share my mistakes so they don’t make the same ones. Hopefully, as my girls get older, they can look back and read these letters, and learn some basic knowledge.

My Brother-in-Law is going off to College…

So this week my brother-in-law is going off to college.  I want to empower him with all my financial knowledge to help him from making the mistakes I did.

First thing first, debt is bad!!!!¬† Debt is the number one thing that will keep you from being wealthy.¬† Stay away from the credit card offers that give you a free shirt for signing up!¬† Lol, ignore the shiny objects!¬† You don’t need¬†to get a credit card to start¬†building your credit.¬† Stay away from debt and be debt free when you graduate.¬† This is easier for him than most because he has a full ride.¬† For most kids, student loan debt is the norm.¬† The average person graduates college with $37k in student loan debt.¬† This is the biggest financial epidemic in our country today, but I will dive deeper into that in a later post.¬† Long story short, graduate with as little debt as possible.

My second suggestion would be to live like a college student as long as you can.¬† Live on little while your income keeps growing.¬† Maximize your savings rate.¬† Don’t fall into lifestyle increase with every raise you get.¬† The typical thing to do, “I just got a raise, I should go get a new car.”¬† Don’t try to keep up with the Joneses, and to impress people you don’t like.¬† If you can maintain a high savings rate, 40% or higher, then you can really put away a lot¬†of money to invest!

My next piece of advice, and in my opinion the most important, is to invest early and often.¬† Your best friend in investing is compound interest and TIME. Invest, invest, invest!¬† Max out your 401k and Roth IRA every year.¬† My suggestion for him would be to stay away from single stocks and invest in low-cost index funds.¬† By doing so you keep your fees at a minimum.¬† Don’t try and time the market because you will lose!¬† The key is dollar cost averaging, investing the same amount on a regular schedule regardless of share price.

John, if you can follow this advice, you will be well on your way to #FIRE!

The B Word…

To really win with money you have to have that one thing, the thing that people cringe when they hear the word, a BUDGET.  Most people, in my experience at least hear budget and think of this as a confine.  They think that by using a budget they are restricting what they can spend and that they won’t be able to do anything fun anymore.  Well actually, the opposite is true.  A budget tells you what you can spend on things you want to spend money on.

To start on your path to financial independence, you need to first become debt free.  One of the best methods to do this is using the debt snowball.  This is where you list your debts smallest to largest, pay the minimum payments on all but the smallest, then put as much extra money as you can towards this smallest debt each month.  Once you pay the first one off, you move the next debt to the top of the list, and any money you were putting to the paid off debt now goes to the top, and so on and so on.  So how do we know how much money we have to throw at this debt every month…by using a budget!

When we first started doing a budget, I pulled up Excel and listed all of our expenses for the month.  Then as the month went on I would input what we were spending.  The problem is, we weren’t budgeting, we were tracking our spending.  The point of a budget is you tell your money where to go before the beginning of the month.  Every dollar has a purpose.

By definition, a budget is an estimate of income and expenditure for a set period of time.  My favorite type of budget, and what has worked for us is a zero-based budget.  The point of the zero-based budget is for your income minus your expenses to equal zero.  If you account for all your expenses and you have $250 left over, you need to spend that $250 somewhere on the budget (ideally towards your debt snowball).  Once we started using a zero-based budget we really started to make some progress.  We paid off our car loan, and have started to make make a dent in our credit card debt.  I suggest using a budgeting app to help you.  We use the everydollar app, which I love, but there are some other good ones out there such as YNAB and Mint.  I just don’t have any experience with those.

Getting on a budget is the first step in the right direction.  Just by paying attention to what you are spending where will help you so much.  We set our budget before the beginning of the month.  We sit down together to look it over and make sure we are on the same page.  Then once a week, usually Friday night, we will have a quick budget meeting to look at where we are currently and if we need to make any adjustments to the budget.  Maybe we overspent in one category, so we need to take from another category to even it out.  Think of the budget as fluid.  Things come up, and since you have spent all your money for the month, an unbudgeted item needs to be paid for from another budget line.  This way you aren’t putting this unbudgeted item on a credit card, and adding more debt while you are trying to get out of debt.

Your first budget is going to be terrible.  It takes practice, just like anything else.  When you first tried to ride a bike were you a pro?  No, you probably fell quite a bit at first.  Well, learning to budget is just like that.  You will forget to add in an expense, or severely under account for a line item.  But it will get easier.  You just have to keep doing it.  Generally, after your third or fourth budget, you will have it down.  Get on a budget, pay off your debt, so you can start putting that money towards your future, and your path to FI!

The Legacy


Why is this so important? I want to leave behind a legacy to my wife and two girls.  I want to change our family tree.

We had over $70k debt between student loans, credit card debt, and car loan.  We were “normal.”  After listening to Dave Ramsey for so long, we decided to finally start.  We saved up a thousand dollars for our emergency fund.  We put together a budget on Excel.  The problem was it was all reactionary.  We weren’t telling our money where to go, we were just tracking it.  After a few months of this, we tried the Everydollar app. This is a zero-based budget, meaning all of your income for the month is is budgeted for and spent before the month starts.

We finally began making progress.  We paid off our car loan.  We are now down to about $50k left and slowly making progress.  I want to pay off all of our debt so I can focus on investing. This is where I get to my legacy.  This is how, by contributing every month to our retirement accounts, we start making progress!  My goal is to be able to have enough money to retire and not worry about money.  I want to reach FI.  I want to have both our girls’ 529’s funded so their education is paid for and they are not crippled by student loans. Student loans are the new epidemic of this country!!!  I also want to leave behind money for them to be set financially, but to also teach them how to handle money so they won’t need us to leave them money!  This is what I strive for now!  This is my passion and my drive!