Avoid Making These 4 Mistakes During Open Enrollment

Fall is a time of leaves changing colors, children going back to school, families enjoying Thanksgiving dinners, and… open enrollment. Yes, it’s the opportunity for most employees to select which benefits they will choose for the following year. Here are some of the most common mistakes we see people make:

1. Not fully understanding the value of an HSA-eligible health insurance plan

According to a recent study, HSA-eligible high deductible health plans have gotten 400% more popular over the last decade. These plans tend to come with lower premiums (what you pay per month or paycheck for your coverage) but higher deductibles (what you pay out-of-pocket before most of the insurance benefits kick in) than more standard health insurance plans. In addition, they make you eligible to contribute pre-tax dollars to an HSA (health savings account) that can be used tax-free for qualified medical expenses at any time.

Possible free money

While it’s easy to compare the difference in premiums and deductibles, don’t forget to factor in the value of the HSA. First, many employers will actually make contributions to your HSA for you. That’s free money! If you contribute on top of that, you also get a break on your taxes.

For example, I recently spoke with an employee who would save almost $1,900 a year in premiums by choosing the high deductible health plan. In addition, he would receive $1,000 in his HSA from his employer and would save almost another $2,000 in taxes by contributing another $6,000 to the HSA. The $4,900 in total savings dwarfed the difference in deductibles.

2. Under or over funding an FSA

FSAs (flexible spending accounts) let you put money away pre-tax that can be used tax-free for health or dependent care expenses. If you’re in the 24% tax bracket, that’s like getting a 24% discount on those eligible expenses! Not taking full advantage of these accounts could cost you hundreds or even thousands of dollars in lost tax breaks.

However, there is a catch. Unlike HSAs, FSAs are “use it or lose it” so you don’t want to contribute more than what you’re pretty sure you can spend. (Having a general health care FSA also precludes you from contributing to the more valuable HSA in the same year.) If you do end up with extra money in the account at the end of the year, try to use it by stocking up on qualified supplies like contact lenses and prescription drugs. You can find FSA-eligible items here.

3. Not taking advantage of a prepaid legal plan for estate planning

Do you have updated estate planning documents like a will, durable power of attorney, advance health care directive, and living trust? If not, you can save a lot of money by using your employer’s prepaid legal service to have these documents drafted or updated. You pay a fee per paycheck, but the legal services are free or heavily discounted. You can then choose not to renew it the following year after you’ve gotten your documents in place.

4. Ignoring insurance benefits you may actually need

Disability insurance

Disability insurance is often overlooked even though about 25% of 20-yr olds are likely to be out of work for at least a year due to a disability. If your employer doesn’t provide it, you may want to purchase it. The good news is that employee-paid disability benefits are tax-free.

Life insurance

Your employer may offer you life insurance coverage equal to one or more times your salary, but you may want to purchase supplemental life insurance if you have dependents. You can use this calculator to estimate how much you need. Then compare the cost of purchasing it through your employer with the cost of a policy in the individual market. (See if your coverage at work can be converted to an individual policy once you leave the job.)

Your benefits can be a significant part of your total compensation and open enrollment can be your only chance to take full advantage of many of them. When in doubt about your selection of benefits, see if your employer offers a financial wellness program with free guidance and coaching from unbiased financial planners who are trained on your particular benefits. Then go and enjoy the holidays knowing that your family is protected.

A version of this post was originally published on Forbes

Define Your Dream and have a Burning Desire to Achieve It – Post 420

“Do you want to fail or do you want to succeed?”

Until You Know Why, the How Doesn’t Matter. Define Your Dream and have a Burning Desire to Achieve It!

That’s the first step. That’s always been the first step. It is still the first step.

Until you know why you’re on the Financial Peace journey, or building a business, or really anything else you want to accomplish in life, until you know why, the how doesn’t matter. You have to take the time to ask, “OK, what do I want to accomplish from this journey?” You have to decide.

You aren’t going to make it. If you don’t know why the how doesn’t matter.

At the end of 2011, 3 weeks before Christmas I lost my pharmacy position. Long story short, they were replacing those of us that had been there quite a while with new grads that they were paying 20 grand less than I made before. After a year of ny finding temporary or part time work I decided to get involved in my first side gig business outside of pharmacy. I had three goals that compelled me. Number one, I wanted to save my home, the dream home that I built with my own blood sweat and tears, I wanted to save it from being sold or foreclosed on while I was underemployed. Number two, my Malibu was on its last leg and I needed a new car. Number three, I needed to finish paying for my youngest son’s private school tuition. That’s why I got started in this business. Now my goals of course have changed since then because I was able to accomplished all three of those with the help of this business. But those were the first goals.

In my consulting and personal development business I teach people that when they first get in business to focus on the real reasons they want their business to succeed. Likewise, my good friend and business mentor, Dale Calvert asked me to go and sit down with my spouse and come up with 20 really good reasons I wanted success in my business and then out of those 20 he asked that we decide on our top 3 reasons then focus on those. He said you have to decide, “OK, what do we really want to accomplish from this business?”

Until you have that and it is inside of you, you will not make it. You will fail. Those principles apply to anything you want to accomplish in life. In this episode I apply these principles to the financial peace journey and show you how to define those dreams and then ignite that burning desire to accomplish them.

 

 

To learn more about creating extra income for yourself by creating your own business like I did visit http://AIMHighForSuccess.com

Do you want to fail or do you want to succeed? – Post 419

Do you want to fail or do you want to succeed? In this podcast we are going to talk about defining your dreams. Until you know why the how doesn’t matter.

 

Until you know why you’re doing ANYTHING, the how doesn’t matter. You have to take the time to ask, Why do I want to become debt free? What can I do or become if I’m debt free? What do I want to accomplish in life? You have to decide.

You’ve got this!

Now is the best time to start taking control of your money! I’ll be covering many topics to teach and encourage saving and debt freedom. Be sure to subscribe to this blog at ProsperityRx.com to learn how to save money, make a budget, pay off your debt, reduce your taxes and invest for your future.

And if you found value in the information that I’m providing please like and share this with others.

Also if you want to learn more about how to create extra income by starting a home business that requires no startup capital, no pyramid that requires a monthly auto shipment that cost you money every month instead of creating money, and no selling of lotions, or potions or pills, or quick magic diet aids that melt away inches in minutes or other such scam promotions visit http://AIMHighForSuccess.com.

The Mindset Pendulum – Post 418

On today’s podcast I want to talk about the “Mindset Pendulum.” What goes on inside your brain as you embark on the financial peace and prosperity journey. Once you have an understanding of what’s going on in the 6 inches between your ears then you have a better chance of recognizing how your thoughts affect your success and you will be better equipped with ways to change what Zig Zigglar refers to as “Stinkin’ Thinkin’.” You will be able to stop the stinking thinking and get yourself back on track.

In your brain there is this pendulum swinging back and forth. When you start this journey you have attitudes, opinions and beliefs. All of us. We have opinions about everything. We have opinions about things we don’t need to have opinions on. We have attitudes which are stronger. Strong feeling about things. And we have beliefs.

We are made up of opinions, attitudes, and beliefs.

When you start this journey you usually have a neutral or negative opinion. What happens, in our mind, we get a little bit of information. Maybe we go to a financial peace university class or we see a video podcast or webinar by Dave Ramsey or one of his associates and our opinion changes to somewhat positive. And when that opinion changes from neutral or negative to positive then we say, “What’s the worst thing that can happen? What’s my risk, what’s my reward? I’m doing this.”

That’s what happens. Then we go into the world and somebody says, “You can’t live without credit, you’ll never buy a home or a car” . . . Then what happens to that opinion?

It goes back to negative. Then we hear callers give the “Debt Free Scream” and are all fired up and our pendulum swings back to excitement.

Then you get on facebook and you see all the posts from your so called friends about their exotic vacations and the luxury car or boat that they bought while you are on a “beans and rice” diet getting out of debt and your pendulum swings back to the negitive.

This thing swings daily in the beginning. Your pendulum is going to swing. It’s normal.

Sometime we think we’re going crazy because we’re up and down about it. Because we are all made up of opinions, attitudes and beliefs. If you just hang in there eventually your opinion will become an attitude. And it’s stronger. Then over time the attitude becomes a belief.

That is in anything we do in life. Not just on the financial peace journey but in business as well. We get involved in whatever we make a commitment to and think we don’t like this swinging back and forth in our mind so we think something is wrong. Sometimes they’re excited and sometimes we want to puke. Its just the way people are and most people can’t get through this because they don’t understand what is really going on in their mind..

Listen to my podcasts or watch my video blogs. Catch Dave Ramsey or one of his team members on the radio or over the internet. Stay plugged into folks that are on the same journey as you and folks that have gone there before. It will calm your pendulum down.

We all go through it.

So you have to understand your pendulum will swing. But if you continue and stay on the right track, it will get to a point where it just doesn’t swing as bad, and eventually just doesn’t swing any more. Stay plugged in and when you get to a point, it just doesn’t matter any more.

You’ve got this!

Now is the best time to start taking control of your money! I’ll be covering many topics to teach and encourage saving and debt freedom. Be sure to subscribe to this blog at ProsperityRx.com to learn how to save money, make a budget, pay off your debt, reduce your taxes and invest for your future.

And if you found value in the information that I’m providing please like and share this with others

Also if you want to learn more about how to create extra income by starting a home business that requires no startup capital, no pyramid that requires a monthly auto shipment that cost you money every month instead of creating money, and no selling of lotions, or potions or pills, or quick magic diet aids that melt away inches in minutes or other such scam promotions visit http://AIMHighForSuccess.com.

You’ve made the decision to get out of debt, now what? – Post 417

anchorYou’ve Made the Decision to get Out of Debt, Now What?

Congratulations!

You’ve made the decision to get out of debt.

So now what?

Some people never get beyond this point because they don’t know where to start. The big picture is overwhelming, so people often quit before they ever write the first check to pay off a debt. But you don’t have to worry, because you’re about to discover the first step toward saying goodbye to debt!

Before you learn this secret, you need to be forewarned: This step may surprise you. It will seem like the wrong thing to do. You won’t guess it offhand because most people don’t think it has anything to do with getting out of debt. Are you ready?

The first step is this: Save $1,000 as fast as you can.

You weren’t expecting that, were you? Why would anyone put money in a savings account instead of using it to pay off debt?

Because life happens.

Think of your emergency fund as a safety net. Saving first allows you to get in the mind-set of being in control of your money. It forces you to make a change. Saving money can actually become addicting once you see you can do it!

We don’t know when a storm will come our way, but we know rainy days do come eventually. Your air conditioner breaks in the middle of July. Your car has a busted transmission. Your kid breaks their arm at baseball practice. Surprises like these are a part of life. But if you have $1,000 in an emergency fund, you won’t have to go deeper into debt when the inevitable comes your way.

Jump-Start Your Savings Fund

If you’re serious about getting out of debt, work as hard as you can to put away $1,000 quickly. Here are a few ideas!

Make a budget.

Zero-based budgeting is essential to your financial success. Your budget is the key to saving your $1,000 emergency fund. It will show you where you’re overspending and where you can cut back to save instantly. But if you don’t make a monthly budget, you’ll never know how many different areas you could be saving in.

Scale the grocery budget way back.

We know it might sound impossible, but it is doable! Make a shopping list and stick to it. Stop purchasing “wants” and only purchase necessary items. If you cave in to impulse purchases when walking down the aisles, consider doing curbside grocery pickup. Switch to store-brand products. Challenge yourself to get creative and only cook with the items left in your pantry. Make slow cooker meals and see how far they’ll help you stretch your groceries throughout the week.

Purge the house.

Sell the mysterious items in the attic and the clothing you didn’t even know was lurking in your closet. Get rid of the high-priced jewelry you bought to keep up with the Joneses. Sell the boat. Sell the car. Look for social groups or websites like facebook marketplace and Craigslist to sell everything you’re not using. After all, one person’s trash is another person’s treasure.

Find ways to bring in extra cash.

Are you a great photographer? Can you knit masterpiece blankets in no time? Now is the time to use your hobbies or skills to generate extra income. Look for opportunities to work overtime.

If your job doesn’t give you that option, consider finding an extra gig to take on during weeknights or the weekend. Sure, it might not be glamorous delivering pizzas or stocking canned goods at the grocery store—but then again, swimming in debt isn’t too glamorous either.

I’ve had side gig incomes for years. I can show you how you can build a side gig business which will generate additional income for you and at the same time help you save considerably on your income taxes. I can show the side gig that I’m doing that doesn’t require a financial investment investment to get started. None of these pyramids where you have to spend money on monthly autoshipments that cost you money each month instead of creating money. No selling lotions, potions or pills, no magic juice or magic diet aids that claim to cause you to loose inches in days or other such nonsense that you see all over social media. Stay tuned to the end and I will share with you how to get more information.

Decide what you can live without.

Are you ready for some 21st century sacrifice? Go through your bills and cancel any needless memberships and subscription services. Wave goodbye to that unused gym membership and monthly magazines you never read! Maybe it’s time to ditch the cable (and even Netflix) and get to know your DVD collection once again.

Look at it this way: If you’re working an extra job, do you even have time for binge-watching numerous TV shows? A little bit of sacrifice for a period of time can add up to extra cash in your pocket pretty quickly!

Once you’ve reached the magic number, take your money to the bank. Don’t keep it at home—you’ll use it because it’s there! You’d be amazed at how easy it is to justify an “emergency” when you forget to get cash for a field trip, the pizza driver needs a tip, or your co-workers are pooling money for a farewell gift. Instead of tempting yourself with cash on hand, open a savings account separate from your regular checking account. Put your $1,000 in it and leave it alone. Don’t touch it. It’s for emergencies.(Oh, and a clearance sale at your favorite store is not an emergency.)

You Can Do It

A safety net for the unexpected isn’t the only plus in starting your emergency fund. This first step also gives you confidence, a feeling of accomplishment, and a sense of control. This step proves you can save money. You can control your behavior. You’ve discovered the power of intense focus and determination. Now keep using those skills to tackle the next step—getting rid of your debt.

You’ve got this!

Now is the best time to start taking control of your money! I’ll be covering many topics to teach and encourage saving and debt freedom. Be sure to subscribe to this podcast and my blog at ProsperityRx.com to learn how to save money, make a budget, pay off your debt, reduce your taxes and invest for your future.

And if you found value in the information that I’m providing please like and share this with others

Also if you want to learn more about how to create extra income by starting a home business that requires no startup capital, no pyramid that requires a monthly auto shipment that cost you money every month instead of creating money, and no selling of lotions, or potions or pills, or quick magic diet aids that melt away inches in minutes or other such scam promotions visit http://AIMHighForSuccess.com.

Jim Rohn Once Said:

In the process of living, the winds of circumstances blow on us all in an unending flow that touches each of our lives.…

What guides us to different destinations in life is determined by the way we have chosen to set our sail. The way that each of us thinks makes the major difference in where each of us arrive. The major difference is the set of the sail.

The same circumstances happen to us all. We have disappointments and challenges. We all have reversals and those moments when, in spite of our best plans and efforts, things just seem to fall apart.…In the final analysis, it is not what happens that determines the quality of our lives, it is what we choose to do when we have struggled to set the sail and then discover, after all of our efforts, that the wind has changed directions.

When the winds change, we must change. We must struggle to our feet once more and reset the sail in the manner that will steer us toward the destination of our own deliberate choosing. The set of the sail, how we think and how we respond, has a far greater capacity to destroy our lives than any challenges we face. How quickly and responsibly we react to adversity is far more important than the adversity itself. Once we discipline ourselves to understand this, we will finally and willingly conclude that the great challenge of life is to control the process of our thinking.

Learning to reset the sail with the changing winds rather than permitting ourselves to be blown in a direction we did not purposely choose requires the development of a whole new discipline. It involves going to work on establishing a powerful, personal philosophy that will help to influence in a positive way all that we do and that we think and decide. If we can succeed in this worthy endeavor, the result will be a change in the course of our income, lifestyle and relationships, and in how we feel about the things of value as well as the times of challenge. If we can alter the way we perceive, judge and decide upon the main issues of life, then we can dramatically change our lives.

Set your sail for prosperity, get out of debt, create additional streams of income, and life life to its fullest. That is your prescriotion for prosperity.

Start Today!

 

7 Baby Steps to Prosperity – Post 416

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Episode 9 – 7 Baby Steps to Prosperity

I am a huge fan of Dave Ramsey’s baby steps from his book, The Total Money Makeover. It was the baby steps that helped us get rid of $140,000 in consumer and student loan debt, and we are not the only ones. Millions of people have taken his course and followed his baby steps as well, so you can be confident that if you follow these steps, you will build a strong financial foundation for you and your family. A foundation that will lead to peace and prosperity.

Today we’re going to go over each step briefly and explain how they are so important to accelerating your path to peace and prosperity, financial independence.

Let me just list what the baby steps are and then I will give a short explanation of each.
Baby Step 1 – $1,000 in an Emergency Fund
Baby Step 2 – Pay off all non-mortgage debt using the Debt Snowball
Baby Step 3 – 3 to 6 months of expenses in savings
Baby Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement
Baby Step 5 – Funding College for children
Baby Step 6 – Pay off your home early
Baby Step 7 – Build wealth and give a bunch away

To help you figure out where you are in the process here is a breakdown of what each baby step entails.

Step 1. Save $1,000
This is a starter emergency fund. It might seem silly to sock a grand in the bank when you could be putting that money toward reducing debt, but here’s the logic behind this first baby step:

Unexpected expenses happen to everyone, and for some reason they often tend to happen more when you’ve just committed to getting out of debt. In order to avoid being tempted to use your credit cards to handle these unexpected costs and rack up more debt, save a quick $1,000 and put it aside as a buffer for those emergencies that will happen.

If in the course of paying off your debt, you have to use some of the money in your starter emergency fund, you simply stop paying extra on your debt and put any extra money into your starter emergency fund until it reaches $1,000 again. This step will help ensure that your credit card balances continue to go down and not up.

The starter emergency fund also serves as training ground for both paying for emergencies in cash and for developing a habit of saving money.

Step 2. The Debt Snowball
As a math geek I understand that paying off debts according to the highest interest rate first will save money in the long run, but the debt snowball is often a better choice when it comes to keeping you motivated for the long journey of becoming debt free.

With the debt snowball method, you start by listing your debts from smallest to largest. You make the minimum payment on all debts, putting any extra funds toward the smallest debt until it’s paid in full.

Then, you take the minimum payment you were paying on the smallest debt, the minimum payment on the next biggest debt, plus any extra funds, and put that money toward the next biggest debt until it too is paid off.

This method of keeping your total monthly minimum payments the same and then adding any extra funds toward your current smallest debt means that you will pay off your debt at a faster rate than you have been up to this point.

Being able to mark those smaller debts as “Paid in Full” more quickly will give you more motivation and faith that you really can win the battle against debt.

Step 3. Finish the Emergency Fund
Once you have paid off all your debt except for your house the next step is to increase your emergency fund until it contains 3 to 6 months’ worth of expenses for your household. To get this emergency fund built as quickly as possible is to take all of the monies that you were putting toward your debt snowball, which should now be paid off, and put it toward finishing your emergency fund.

A 3 to 6 month emergency fund will keep you and your family well buffered against major financial emergencies such as job layoffs and large unexpected expenses such as major home repairs.

Developing a habit of saving BIG money will make it easier for you to develop a habit of putting money into a separate fund for expected major expenses like I did to pay cash for my daughters wedding.

Step 4. Maximize Retirement Investing
After the consumer debt is gone and the emergency fund is fully funded, Ramsey suggests maxing out your retirement investing.

For 2018 this means contributing up to the legal maximum allowed by the IRS of $18,500 a year for 401(k)’s and $5,500 a year for IRAs (Ramsey suggests 15% of your income). Those 50 and over can contribute an additional $6,000 to their 401(k) and an additional $1,000 to their IRA holdings.

By maxing out your retirement investing based on your retirement funding goals, you are ensuring that your golden years will be secure and comfortable.

Step 5. Prepare the Kids’ College Funds
One of the things I like about the college section of the Total Money Makeover book is that Ramsey is clear that college is not a guaranteed career success for your kids. He goes into great detail about how important it is to calculate the cost vs. the benefit of college before you go sending your kid out to spend $25,000 a year on schooling.

It’s important during this step to talk with your spouse about how much money you can comfortably set aside for your child (ren)’s education.

The dollar amount is totally up to you. Just be sure you research the different college saving options and make sure that what you’re planning on contributing to your kids’ college educations is affordable for your family – and make your plan clear to your kids so they know exactly what to expect from you where college education help is concerned.

Step 6. Pay off the Home Mortgage
After you’ve paid off all consumer debt, have a fully funded emergency fund, are contributing at least 15 percent of your income toward retirement, and have a plan for contributing to your kids’ college educations, it’s time to dump the mortgage.

Put all extra funds (based on having created a solid budget) toward that mortgage and get it paid off in full as soon as possible. The less interest you pay to the bank, the more money you have available to give to worthy causes and to fulfill your dreams, whatever those dreams may be.

Stpe 7. Build Wealth and Give a Bunch Away
Here’s arguably the best step! Now that you owe no money to anyone and have a nice stockpile of savings, it’s time to start building some serious wealth.

That wealth-building can come in a variety of forms. You can invest in mutual funds, invest in real estate or simply sock the money away in a high-interest earning bank.

The goal is to put as much money as possible toward whatever your financial goals are, whether that means traveling the world, building your dream home or living life as a philanthropist.

Once you are completely debt free and have amassed a serious amount of wealth, the world is your oyster and your dreams are unlimited. So start working the baby steps in your life today, and work toward achieving all of your dreams

Now is the best time to start taking control of your money! I’ll be covering many topics to teach and encourage saving and debt freedom. Be sure to subscribe to this podcast and my blog at ProsperityRx.com to learn how to save money, make a budget, pay off your debt, reduce your taxes and invest for your future.

And if you found value in the information that I’m providing please like and share this with others

Also if you want to learn more about how to create extra income by starting a home business that requires no startup capital, no pyramid that requires a monthly auto shipment that cost you money every month instead of creating money, and no selling of lotions, or potions or pills, or quick magic diet aids that melt away inches in minutes or other such scam promotions visit http://AIMHighForSuccess.com.

Jim Rohn Once Said:

In the process of living, the winds of circumstances blow on us all in an unending flow that touches each of our lives.…

What guides us to different destinations in life is determined by the way we have chosen to set our sail. The way that each of us thinks makes the major difference in where each of us arrive. The major difference is the set of the sail.

The same circumstances happen to us all. We have disappointments and challenges. We all have reversals and those moments when, in spite of our best plans and efforts, things just seem to fall apart.…In the final analysis, it is not what happens that determines the quality of our lives, it is what we choose to do when we have struggled to set the sail and then discover, after all of our efforts, that the wind has changed directions.

When the winds change, we must change. We must struggle to our feet once more and reset the sail in the manner that will steer us toward the destination of our own deliberate choosing. The set of the sail, how we think and how we respond, has a far greater capacity to destroy our lives than any challenges we face. How quickly and responsibly we react to adversity is far more important than the adversity itself. Once we discipline ourselves to understand this, we will finally and willingly conclude that the great challenge of life is to control the process of our thinking.

Learning to reset the sail with the changing winds rather than permitting ourselves to be blown in a direction we did not purposely choose requires the development of a whole new discipline. It involves going to work on establishing a powerful, personal philosophy that will help to influence in a positive way all that we do and that we think and decide. If we can succeed in this worthy endeavor, the result will be a change in the course of our income, lifestyle and relationships, and in how we feel about the things of value as well as the times of challenge. If we can alter the way we perceive, judge and decide upon the main issues of life, then we can dramatically change our lives.

Set your sail for prosperity, get out of debt, create additional streams of income, and live life to its fullest. That is your prescription for prosperity.

Start Today!

5 Steps of a Zero Based Budget – Post 415

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Episode 8 – 5 Steps of a Zero Based Budget

Saving money isn’t a matter of math—it’s a matter of priorities. We often tell ourselves we’ll start saving once we reach a certain milestone, like when we get a raise, we pay off the car, or the kids move out.

But without healthy money habits, you won’t save money when you get that salary bump, when you own your car, or even when the kids are grown.

You’ll only start saving money when you develop healthy money habits and your future needs become more important than your current wants.

It’s not as overwhelming as it sounds. Yes, it requires dedication. But with a few tweaks to your spending priorities, you’ll be on the fast track to saving money in no time.

Why Americans Aren’t Saving Money

We all know we need to save, but most people don’t save like they know they should. In fact, a 2017 report by the Federal Reserve found that 44% of Americans couldn’t cover a $400 emergency, or they would cover it by borrowing money or selling something.(1)

Why?

Because they have competing goals.

A lot of times the goal to save money isn’t a big enough priority to delay the purchase of that new smartphone, kitchen table, or TV. So we spend our dollars away or, worse yet, go into debt to buy the latest want. That debt then becomes monthly payments that control our paychecks and our lives.

Let’s take a look at some facts about Americans and saving money.

  • The average cost of living in 2017 was $57,311 yet 78% of Americans live paycheck to paycheck.
  • The average American household debt is $137,063.
  • Only 41% of Americans have a budget.
  • 44% of adults can’t cover a $400 emergency.
  • 42% of Americans aren’t saving for retirement.

So What Is the Secret to Saving Money?

You can stop the cycle of living paycheck to paycheck with a simple secret: Make a zero-based budget before the month begins. A budget is all about being intentional. It helps you create a plan to see where your money is going and how much you can save each month. It’s never too late to take control of your money!

Saving money has to be at the top of your priorities and the top of your budget before you’ll gain any real traction with your goals. When you make a zero-based budget, you’re effectively saying, “I choose to put my future needs before my present wants.” It really doesn’t matter how much money you make—it matters how you spend the money you make.

What Is a Zero-Based Budget?

Zero-based budgeting is simple! It’s just a way of budgeting where your income minus your expenses equals zero. That’s all! With a zero-based budget, you have to make sure your expenses match what’s coming in during the month and you’re giving every dollar a name. Now that doesn’t mean you have zero dollars in your bank account. It just means your income minus all your expenses (outgo) equals zero.

Basically that means if you earn $3,000 a month, you want everything you spend, save, give or invest to all add up to $3,000. That way you know exactly where every one of your dollars is going. You could be setting yourself up for disaster if you don’t know where your money is going each month. It’s no fun to look up one day and find out you have no money—and no clue where it all went!

How to Make a Zero-Based Budget:

  1. Write down your monthly income. – You can do this the old-fashioned way with a sheet of paper, or you can use our super easy and free budgeting app EveryDollar. Your income should include paychecks, small-business income, side hustles, residual income, child support, and any other cash you bring in. If it’s money and comes into your household’s bank account, it’s income! Be sure to write it down and add it all up in your budget.
  2. Write down your monthly expenses. – Before the new month even begins, write down every expense. Things like rent, food, cable, phones, and everything in between should be added to the list. But be sure to start your budget with the Four Walls—that’s food, shelter and utilities, basic clothing, and transportation.After you’ve got all the essentials covered, continue listing out the rest of your monthly expenses. Your needs will change from month to month, which is why you need to make a new spending plan every single month. Don’t get overwhelmed! Just focus on one month at a time.

    And don’t forget to plug your saving and giving categories into your budget! Saving money isn’t a matter of math—it’s a matter of priorities, and the same is true for giving. If you don’t make saving and giving a priority at the start of your budget, chances are you won’t make them a priority in the future. PLUS, giving is the most fun you’ll ever have with money!

  3. Write down your seasonal expenses. – Now think through the whole calendar year—what expenses will you have coming up that you can start planning for? You know Christmas is in December every year, so there’s no reason to act like it suddenly snuck up on you. Regardless of the occasion, make sure you prepare for those expenses in the budget. Things like birthdays, anniversaries and holidays are set dates that shouldn’t surprise you—or your budget.
    Next, think about all the irregular expenses that can pop up. Plan for those too! Things like car tag renewal fees, property taxes, and even your insurance premiums can be budgeted for. If you set aside a little bit each month, you won’t feel the strain of an expense “blindsiding” you all at once.
  4. Subtract your income from your expenses to equal zero. – We want this number to be zero, but it might take some practice to get there. Don’t be shocked or worried if they don’t balance each other out right away. That just means you need to do something to bring one of the numbers up, the others down, or both! It’ll take some work, but getting this written down is what will give you permission to spend without regret!If you’re spending more than you make, trim up the budget so your income and outgo equal zero. To cut back expenses, try buying generic at the grocery store, cutting the cable, using coupons or the store’s app, making coffee instead of buying it, or catching a carpool to work. If you need to bring in more money, start a side hustle or look for stuff around the house that you can sell to make quick cash.

    Here’s the deal with a zero-based budget: Every dollar must have a name! That doesn’t mean you have zero dollars in your bank account at the end of the month—it just means you have zero dollars left over in your budget.

    If you fill out every line item in your budget and come out $100 ahead (meaning you have nothing for that $100 to do), you haven’t finished your budget! You must assign that remaining $100 to something. Whatever you decide is totally up to you. But if you don’t give it a name, it will be spent, and you’ll end up wondering where that extra $100 went. And who wants to lose $100?

  5. Track and go! – All that’s left now is for you to track your expenses throughout the month. It’s the only way you will know if you’re spending lines up with your plan! This is how you’ll start winning with money throughout the month AND throughout the year. When you track your expenses and engage with your money, you actually make progress and learn to love your life—and your bank account.

Having a zero-based budget is the quickest way to make your money goals a reality!

Trying to get out of debt?

You need a budget.

Saving up for a safety net?

You need a budget.

Wanting to put money away for retirement?

You need a budget.

Already a millionaire?

Guess what—you still need a budget.

Remember, you’re the boss of your own budget. You get to tell every single dollar exactly where it will go each month. And don’t think of it as limiting your freedom. Having a budget actually gives you the freedom to spend money AND makes your money go further!

Now is the best time to start taking control of your money! I’ll be covering many topics to teach and encourage saving and debt freedom. Be sure to subscribe to this podcast and my blog at ProsperityRx.com to learn how to save money, make a budget, pay off your debt, reduce your taxes and invest for your future.

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