Take Control of Your Money — The Little Dollar

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The Little Dollar

21 min readNov 27, 2019

Money is a funny thing, before I began budgeting, I was just spending on a whim. Id buy anything I could. Food mostly.

I found myself buying stuff just because I had money. It felt great tbh. I would buy $200-$300 in eating out a month. I never saved money. It was kinda a bad thing. (oh, old Johnny huh)

Then I found out exactly how to budget, I mean I knew budgeting was a thing. I just never did it. Like I knew budgeting, saving, investing, becoming rich and awesome. Those were some goals of mine, but little did I know I could even work towards it without actually doing it.

I read a few blogs, found J money of budgets are sexy to be great along with some favorites over at NerdWallet and Pennyhorder.

I did soon find out I would have to start breaking it down myself. So, I started budgeting on a pen and paper method. I would always be sure to pay off my major bills first and then go spend money on dumb stuff.

I was a fool proof plan I thought

Then I learned more and more. I watched YouTube videos, I even learned about how to side hustle and why I needed more income than just 12/hr. at my silly job.

I learned blogging, affiliate marketing, shopify, etc. etc. and I knew it was time to build my plan. All while still spending copious amounts of my money and random crap.

I soon came across a dilemma. My knee was injured in a skateboarding accident a while back. ( knarly bro) and I had to get surgery on it. ACL replacement. And I would be out of work for 3 months.

That was when I realized I had no money to fall back on. I saved aggressively and got $1000 so I could afford to live while being unable to walk. While I gained a lot of weight from this. I did manage to financially protect myself from the effects of no income for 3 months.

Then I read about personal finance for those 3 months. I still went to some events where I spent money of course but I learned. And that’s when I became obsessed with having an emergency fund.

This wild ride has been rather silly to take but I took it. And I want to outline how you can take an even better and easier path than mine by following this route to financial success.

First, Evaluate your finances.

Evaluating your finances is a top priority for you if you are just getting started. This will include assessing where you are currently in your financial life and what you are looking to do financially over the course of your financial life.

To start you will be printing out your bank statements. If you have never set a budget or any money goals before this will be very helpful in doing so. You can get your bank statements printed out online at your banks website or visit a branch to get one.

You will then be accessing what you have done last month. This task will be like treating last month’s bank statement as if it were a budget. You can see what you spent on and categorize it.

If you spent money on rent/mortgage you will put it in the housing category. As with money on food at the local fast food restaurant. Write down every expense you had in a category.

Common categories include-

You can also put in savings and investing.

Once you do this get totals. And see what you overspent on. If you spent $300 on convenience you may be mad at yourself but now you know what to fix instead of fixing my money situation.

You can even build yourself one of those fancy pie graphs and see what chunk looks really big. Ones you should be okay with are housing and car being the bigger chunks.

To further dig into your money situation, you can even categorize down to needs, wants and savings/investing. There are many Instagram posts that show how ‘poor’ people budget with 30% needs, 65% wants and 5% investing. (which I believe to be utter bullshit tbh) poor people spend 70% on needs and 30% on wants.

But they also show that ‘rich’ people spend 15% needs 5% wants, 80% investing. Which is nice to do when you make more than $1000 a month and see rent at $1100 a month. (obviously that avocado toast is ruining your financial future huh?)

Do the categories, even if they look like utter crap. Its good to know the real numbers before getting upset.

Now its time to fix things,

Set your goals with this money.

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You need to be focused now on fixing your situation to benefit you. You will need to set SMART goals.

SMART goals are built to be goals you can achieve using a strong plan. SMART of course being and mnemonic device for Specific, Measurable, Attainable, Relevant, Time-based.

Let’s say your goal is to spend less money on that $300 convenience food example.

A SMART goal would be specific in that you are looking to spend $50 less this month. Not only does this meet the measurable and Time-based aspects as well. It is quite Relevant to the situation and it should be attainable.

If you said spend less on convenience food, you would be not very specific.

Measurable would be digging into the number. $50 in this case. If you said spend $250 less on convenience food this month. It is still specific and measurable. That goal would work for the first 2 criteria.

However, the $250 goal might not be very attainable. If you spend $300 a month on something. To cut back $250 will make you have that object feel like it was stolen from you. You will come to resent yourself for making that goal and not even try to achieve it. It’s too big

You also want a relevant goal. Don’t set a goal to workout more to burn off the calories that you get from spending $300 a month on candy

Having your goal time based as well will create urgency and make it work for you. Setting the goal to lower your spending this month is time based.

Be sure to keep these goals realistic. You cannot expect yourself to cut your spending to a sharp good plan next month if you are going buck wild with your money. You will rebel against yourself.

Slowly trim away at your spending and set that money into a savings account.

Be sure to plan out your goals and write them down on paper to remember them. If you just think about it, it can surely be forgotten. But If you go and write your goal down you have manifested your aspirations into the world. Awkwardly this somehow helps.

Be sure to check out NerdWallets post on setting Savings Goals

Now that you have seen your financial situation and drawn out goals that will fix it. It is time to

Develop you Budget!

Budgeting is a scary word for most people going through their money, but it’s so necessary. To take control of your money you must know where your money goes after you get it. You must know what every dollar does.

Use last months finances and goals to gather to your budget and hold everything together.

I highly suggest you budget out your last months bank statement to get a feel for it. Take your last monthly statement and put all your expenses you made in categories.

[Needs, Wants, Savings, Investing]

[Rent/Mortgage, Utilities, Car, Transportation, Subscriptions, Groceries, Insurance, Household, Debt, Giving, Savings, Entertainment]

When budgeting, be sure to compare your options before moving forward, are you looking for a paycheck budget? A Monthly budget? A biweekly budget? Or an annual budget?

How do you get paid? In cash, or direct deposit? Weekly? Biweekly? Monthly even?

There are a few options to choose from. The paycheck to paycheck budget is set to help you escape the living paycheck to paycheck lifestyle. You already do this, but you are digging deeper into the micro field of your finances.

You get paid $500 this check. If you spend $450 on bills, $250 set aside for rent, $50 for utilities and $100 for food. Then $50 for various household expenses. You can save $50 a paycheck. These numbers may be ideal, but you get the idea. The goal here is to put half of your bills aside and save what you can.

I know there is some anger around should you save or invest. We will get to this in later sections.

Alternatively, you can do the Monthly budget where you ideally have a months’ worth of expenses in your checking account and can automatically pay bills out without worry and you float on 1 months of expenses. Then you can of course grow it from there.

Be sure to make your budget your own. This is for you to control your money. There are many ways to budget and all it is tracking your expenses and being sure they are inline with your income. Its not scary or hard. Its helpful.

There are templates out there, but I have a Free template that tracks everything. You can gain access here.

Track you spending-

You will need to track you spending to get this budget thing down. To have your spending tracked you should be posting all your purchases on your excel sheet. Or!

The is what I do. I post them in an excel cell. I just type it out like this.

=4.94+5.88+2.36 etc.

That will be my spending on convenience products. And it sits on one cell that will add together with others.

Another good way to track your spending is by opening your banking application. And gathering all your transaction data into either a pen and paper method or just on a spreadsheet. This will show you what is and isn’t over spent and what bills you may have forgotten. Been there ha-ha

You must be sure to work with your time commitments to tracking your money as well. Tracking everything can take a lot of time and energy. Not only is Wealth building important, but Health building is key as well.

Living is the spreadsheet is a dangerous thing to fall into and can cause you to struggle with building your life the way you want it. The goal is happiness and freedom, not more stress and turmoil.

To best track your spending, you use a spreadsheet. This helps with the next step of evaluating your spending. You will look to see what you spent and if you need to fix anything.

(the part everybody hates. Fixing their finances. Cue the temper tantrum of society right)

If you spend too much on Donuts and coffee, Yes John I am talking to you 😊 then fix it.

Yes, guys I spent about $200 a month on coffee and donuts for a while. I too was bad with money.

Take the tiny categories you built and see what percent of your spending is used in those categories. If you spend 33% of your money on useless items. Its time to cut back.

If you spend 50% on livi

ng expenses, you can either look for cheaper living, or cut back on other expenses to battle the spending issue.

If you spend 0% on savings, you should at least move to 5% but 10–20% is ideal. Sometimes we just don’t make enough money. And I will get to that in future sections as well. For now, we are being mean to our spending habits. And that is necessary.

To get a better system to your Budget, Try mine!

And if you are looking to use the best budget tools, These may be your tool you need best!

Tackle your debts-

Debt is a huge thing that many Personal Finance bloggers and gurus talk about. And with good reason, most people who dig so deep into Personal Finance are ones who landed themselves in $30,000 in Student Loan debt.

It’s awkward cause people hate debt with a huge passion. It causes an improper skew to frugality that is dangerous. I think this is caused by people wanting to live such a minimalist life they are only obsessed with the numbers and not a quality life.

My philosophy is that of materialistic abundance. I truly do not want to live in small cramped housing that is cheap for the sake of being cheap. I don’t enjoy buying bland boring things because they are cheap. I like to buy fairly pricy items, not outrageous items from Supreme, but maybe a Calvin Klein button up. I don’t share the same philosophy as the minimalist Personal finance junkies.

And this is my philosophy on debt as well. Money is not real, it’s an idea, a tool used to build happiness. So Is debt. When you die this stuff doesn’t come with you yes, but it also affects your life right now.

When you have debt, you only need a plan to pay it down, not aggressively not eat and move to a homeless shelter to allocate more money to your mortgage.

So, build a debt payoff plan. If it is your idea to pay things down faster that is fine, just don’t cut yourself too minimalist. Lifestyle is worth a fair cost, not a zero cost.

When building your debt payoff plan, I suggest building a backwards plan. Say you owe something in the range of $10,000 and you make $2500 a month. Your bills and Savings are zero based and you budget well. But you have this debt.

If you allocate your savings. Say its 10% so $250 monthly to your debt. That debt is paid off in 40 months. (3 years 4 months.) interest permitting. Or you can say you want it paid off in 2 years.

If you pay $5000 a year now, that is $420 a month. Leaving you to live on $2080 for 2 years.

Compare these ideas and more to your debt payoff plan and work to add these payments into your budget.

Allocate money monthly to the debt as to give you more freedom of your money.

Build an Emergency Fund-

Did you know 40% of all Americans cannot pay a $400 emergency bill? The need for an Emergency Savings fund is so great that microeconomics suggests people should charge for the information about Emergency funds. 😀

This is crazy to me. And I must say Emergency funds are just separate savings that are used for the sole purpose to have for when the time comes you lose your job or need to pay a huge medical bill.

I will always preach about this, but other Personal Finance guys talk about a 3–6-month Emergency fund. For some people that’s $5000+ for a starter emergency fund and they only save $200 a month so far. That’s so huge nobody even thinks its possible and thus forgets this advice all together.

So, when I talk about Emergency funds, I suggest you start at a savings goal for $1000 and you don’t have to have $1000 to start with it. Save $20 a month if it works. But don’t touch this money until you have $1000 then it reaches Emergency fund status.

This is a manageable goal for most people looking to control your money.

Then you can move to the 3–6-month goal.

The 3–6-month goal is best due to it being a perfect amount to fall back on if needed. Let’s take my particular income levels to illustrate this.

I make about $1400 a month. That would be $4,200-$8,400 of an E fund. I have achieved $1010. If I had a bill for an ambulance, I could afford it easily. As my bill sits at $1500 from my past ambulance ride.

Having a bigger emergency fund is ideal to handle the freedom of time.

Aiming for a 12-month Emergency fund will provide you with a fully free lifestyle to have an entire year to find what you want to do with your income ideals. For me this would be $14,000 and I would be considered Financially Free in this situation.

Your ultimate goal with the Emergency fund will be to build a 12-month fund.

Having a 12-month emergency fund will provide you with a strong enough cushion to provide you freedom. If you 1-month expenses are $1500 your 12 months would be $18000

Set up your Savings funds-

Have you ever wanted to go on a vacation? Or buy a new car? Move to a new home?

Having extra money saved to pay for the down payments or goals you have is key to financial freedom. When you have the money available you can afford yourself the goals you have.

So why save your funds? We see many personal finance gurus say to save everything and some that say saving is for people who have no idea how to manage money.

Saving money is for your goals. While saving everything is futile and not helpful to your financial future, not saving at all will be detrimental. The right number for you is to be determined by looking at your goals.

If you are saving up for an apartment and can afford the monthly payments but cannot afford the startup costs. Saving for the startup costs to get into the living situation is good practice. Saving for the monthly payments will be hard as you cannot afford them on your simple income.

Save for one off expenses, Build income for repeating expenses.

You may be wondering how much you should have saved. This is also based on your goals and income.

If you are looking for the exact number this formula might be helpful.

Price of the item you are saving for, times 1.5.

This offers you a buffer amount incase of the price increasing and not leaving your savings fund to fall to 0 after paying for the goal.

For example, if you are looking to save for a down payment for a car, and the down payment is $2000. You are best saving $3000 in order to cover any extra or hidden costs when it comes to getting the car as well as if it only costs you $2000 you will have $1000 in the savings fund to fall back on.

Challenge Yourself: Monthly Personal Finance Savings Challenge

To set up your own savings goals, look to where you wish to put the money once you have it saved. Are you saving for a car? Or a house?

When setting your savings goals, you want to look to your future life you wish to have. If you want to have a car, saving is going to be a down payment for the car. You can also look to cheaper cars.

When I set my savings goals, I draw them out by month, so I know how much each month I have to save.

For example, if I need to save $2000 this year for a purchase, I am saving $170 a month.

Evaluate your Credit-

Having strong credit is set to provide you lower cost borrowing and lower interest rates when you take out credit. Its more than just a credit card.

So many people talk about how credit has ruined their lives and they let credit card debt get out of hand. When you keep a strict lock on your credit you are going to successes. Do you know your credit score?

You can get your credit score easily and see weekly updates to your score by using Credit Karma. They offer recommendations on your score and allow you access to a modified version of your report.

Credit Karma is also a free service that does this all for you. Completely Free. No credit card needed, you get access to this for free. Credit Karma makes their money by direct advertising to you with their partners.

Banks will pay Credit Karma to directly advertise to your based on your credit. So, you get Free updates on your credit report (Transunion), Credit Karma gets revenue from ads, and Banks get access to you with direct converting marketing.

If you are a Girl in College, would you want an advertising plan to sell you men’s hair loss protection crème? Or would you enjoy an ad for a new bag for your girl’s night? Direct ads are set to offer you ads based on what you actually are searching for.

While myself as a guy, would be seen as okay getting an ad for a new toolbox, I however do not need a new toolbox, but if I got an ad for a new laptop I may be interested.

Note- Credit Karma will offer you 2 scores and basic reports. One from Transunion and One from Equifax. They do not offer Experian on their services.

You can also access all 3 of your credit reports using annualcreditreport.com and get each one for free.

I highly suggest rotating every 4 months. You can access your Transunion once a year, Equifax once a year and Experian once a year. Doing this every 4 month you will get a good a picture of your credit health.

Once you have your reports and using Credit Karma, you will need to setup a plan to build your credit. If you are starting from a low score. You can find your starter Credit Card and see what you need to pay down.

You can find more Credit Resources here.

Best Credit Cards for students Credit cards and how they work

Working towards retirement-

Once you have setup everything in the savings, budgeting and credit department it is time to get serious about this money thing. Its time to see what you can retire on and how to do it properly.

You see all these people talking about getting a 401k or 403b, and IRA or a Roth, but where do you start?

Well I like to lay out the retirement accounts that you should know to get started.

There are many variations and I bet you haven’t heard of some of them.

With accounts such as the 401k, 403b, and 457b these are pretax dollars taken from your paycheck and placed into funds that grow depending upon your investing needs. T he 401k is offered by most employers while the 403b plan is for educators and nonprofit workers, the 457b account is for government workers.

The IRA side of retirement is different as it’s a tax favored account that offers you to invest in stocks, bonds, mutual funds, etfs and the like. With the 401k, 403b, 457b and Traditional IRA, you are making contributions with pretax dollars. Meaning that you will pay taxes on the money you contribute as well as gain within the accounts, the exception being the traditional IRA is tax favored in that your gains are not taxed.

There is however a different approach, the Roth option. The Roth IRA and Roth 401k plans are invested from after tax dollars and allow you to be tax sheltered as well. You will not pay taxes on contributions, as you already have paid tax on that income. And you will not pay tax on the gains as it offers the Roth feature.

These accounts typically have contribution limits and may not allow you to open the account if you reach over a certain income level.

The Simple IRA option is meant for small businesses to offer a plan to their employees. This option is similar to the 401k option and the money grows tax deferred.

The SEP IRA is a self-employed retirement plan that allows you to have higher contribution limits while owning your own small business.

How to figure out how much to live on retirement?

You might be wondering how much you need to live off of. Most people say to contribute 15% of your income but this could be faulty if you have a low income while contributing.

Let’s say you make $30,000 a year. 15% of that is $4,500 a year. For 40 working years of your life. Giving you $180,000 to live on in retirement. If you live on the same $30,000 from there, you have 6 years of retirement before you are out of money.

I suggest working backwards on this problem. Say you will live 20 years in retirement on that same $30,000. This provides you with a need for $600,000 for retirement.

If you divide $600,000 by 40 working years. You need to save $15,000 a year.
With an employee match you could get away with $7,500 of your own money.

However, saving $7,500 of your $30,000 is quite difficult and even having to save all $15,000 yourself is nearly impossible. living costs money

So, you will need to find a way to bring in more income. This process will enlighten your retirement plans and the earlier you look the better off you are.

Now what if you match all your retirement limits and still want to invest more money?

Investing is what makes so many people gain large quantities of wealth.

To put this into perspective. If you invested, your money in the stock market from the 1970s. and just kept it there until the end of 2019. Your money would grow a significant amount.

Investing in the stock market is a key of building wealth for those who are looking for an easy way to put money into a growing account. But we know this. This is why we read posts about the markets and watch the news.

But what investments should you know and why?

Starting a Side Hustle to boost income-

Side hustles in 2019 are easy to get started.

I have made a few posts on Side Hustles you can check out here

Top 7 ways to make money online How to start a blog the right way

The landscape of side hustling in 2019 is paramount to getting enough income when we live in a world of low wages and high cost of living.

Mowing lawns or tutoring was a huge deal back when side hustles became the norm. Getting into making a few hundred extra dollars to close the gap on groceries or a car payment was astronomical when you needed it.

So many families got to hard work, working 8 hours plus 5 more a day to make ends meet, but now we can budget, save, invest and hustle our way to victory.

Now in the world of side hustling we have Traditional side hustles, much like mowing a lawn or having a lemonade stand.

Now you have the Digital age, where you can freelance using a laptop or even start a blog.

Some digital side hustles I have seen include,

Starting a blog
Subscription Website or Online course
Create eBooks
Create YouTube tutorials
Freelance Writing
Digital Marketing
Virtual Assisting
Online tutoring

Starting the side hustle idea is based around running your hustle like you are running a business. You own this income, this is not for you to get paid for the hours you put in. this is for you to get paid for the value you put out.

Treat your hustle like your business. You will be rewarded greatly.

Your goal is to replace your job with your side hustle you are most excited with. This will help you to scale your side hustle to a business and make even more money. Financial Freedom and control is just around the corner.

Final thoughts-

You will be following a flowchart to get your money in order, from looking at your wacky bank statements to starting your business. You will be working towards your goals, if you start on step one, step 11 isn’t so scary.

Put your mind to it and you can control your money, and control your future, welcome to The Little Dollar. You will be successful here.

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Originally published at https://thelittledollar.com on November 27, 2019.