Financial Freedom Kickstart For 2019 – Day 7

Savings will grow

The next thing to consider is what you plan on spending in the future and start saving for your future. Since we want to eliminate debt, we want to make sure that there is cash ready in savings for the things that you will want to do, see, and have.

If you have completed the Focus On Income from Day 5 and Calculate Your Monthly Expenses from Day 6, you should have dollar amounts at the top of the worksheet for Monthly Income and Spending Plan Total. The amount currently in your Spending Plan Total should be only your monthly bills or expenses.  Take the monthly Spending Plan Total and multiply it by 6, this is the amount you want to ultimately save in an account for your emergency fund of six months worth of expenses.

We recommend setting up individual savings accounts for each category of savings such as an emergency fund, health care fund, house fund, car replacement fund, school fund, travel fund, tax fund, investment fund, and retirement fund for any of the categories that are not being funded sufficiently elsewhere.

The very first savings account it is important to fund is an emergency account that contains at least six months of your expenses. As for the other accounts start to consider the future and what you will need your savings to be to support it.

Save the Spending Plan Worksheet and have it ready for tomorrow!

Financial Freedom Kickstart For 2019 – Day 6

Calculate your monthly expenses

Pull out all the bills that you owe. The next step is to fill out the expense sections of the Monthly Spending Plan Worksheet. It is set up to calculate your monthly spending plan, so for quarterly payments, divide the quarterly payment by 3 to get a monthly payment and for annual payments, divide the payment by 12 to get the monthly payment.

Then starting with your housing costs enter your monthly payments for all of the items in that category.

Put the amounts of all monthly payments in each of the items in the following categories: utilities, food, auto, insurance and health, personal, recreation, and debt payments.

Then save the worksheet in a handy place where you can add your planned spending for the future to it tomorrow!

Financial Freedom Kickstart For 2019 – Day 5

The next step in the process will be to count up all of the income that you receive on a monthly basis. This information will be entered into a Monthly Spending Plan Worksheet. Go to: http://www.financialfreedomclassroom.com/resources/money-management/ and download the worksheet.
 
This will include any pay you receive from an employer, rental income, business income, dividend, interest, social security, retirement, or other income that you receive. If there is only one source of income right now, don’t worry. We encourage you to start thinking about how you might start to add at least one other income stream to increase your income.
 
Save the Monthly Spending Plan Worksheet with your Net Worth Worksheet for us to use tomorrow. Stick with these small daily steps for an amazing future!

How much should you pay yourself?

Image courtesy of David Castillo Dominici at freedigitalphotos.net

Image courtesy of David Castillo Dominici at freedigitalphotos.net

Well, it depends. If you have ever been a business owner you know what we mean. Technically speaking you should get paid what you are worth but as a business owner there are many variables that need to be considered.

One very important consideration is to pay from the profits, ONLY. It can be difficult to watch the money come in and think WOW I got it made! But if your expenses are large you really don’t. So be careful to only pay from the revenue minus the expenses or the profit.  Remember to include TAXES in your expenses.

In some legal business structures the business owner’s pay might be restricted. For instance, if the business is incorporated and there are stockholders, usually the business owner is on the payroll, like an employee. Conversely in a sole proprietor situation you can pay yourself whatever you want!

As a business owner, do you feel you are paid enough? Please comment.