Thoughts on Finances

Important Categories of Budgeting

Tithing (10%)

• This is the first thing that should come out of your income.

• Fast Offerings come out of your monthly budgeting in The Rest.

Long-Term Savings (20%)

• Retirement

  • 4% rule = retire with at least 25x what you want to live on annually

  • Always match your employer’s retirement offers - literally free money

Subsets of Retirement Saving

• Roth IRA (pay fewer taxes now while you’re in a lower tax bracket)

• to be continued...

Short-Term Savings (20%)

• Paying in cash for Vehicles (something you should never go into debt for)

  • “Car payment advice. If you have to take out a car loan, by definition you can’t afford the car. Instead of having a $492/month car loan, if you invest that money instead during a normal working life of age 25-65, you will have over 6 million dollars in retirement.”

• Down Payments for Future Houses

  • If you can’t afford the down payment (at least 10% of the full cost of the house), you can’t afford that house.

The Rest (50%)

to be budgeted further with the following costs and subcategories in mind:

• Fast Offerings

• Car Insurance

• Phone Service

• Health Insurance

• Mortgage Payments

• Internet

• Subscriptions

• Building Emergency Fund

• Vacations, Trips, Visiting Family (Travel)

• Birthday and Christmas Gifts

• Clothing

• Groceries

• Medical Expenses

• Gas and Oil Changes

• Eating Out

• Dates

• Other Wants

Emergency Fund (-)

• Build up over time to equal 6 months of your income (only for use if you lose your job or have other big emergency expenses)

• Building your emergency fund should be a priority so that you can face any setbacks without immediately losing your financial progress or going into debt. You don't ever want to worry about your spouse or kids going without food or a roof over their heads.

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Reasons to Live Frugally

Living Frugally means more Money in the bank. You need money for:

• Incredible Retirement

• Medical Expenses

• Down Payments for Houses

• Buying Cars

• Emergency Fund

• Paying for Kid’s College Tuition

• More Vacations

• More Christmas

And you do not want to go into debt. Debt means everything costs extra. A little patience can mean a lot of money saved to use on other things.

Most millionaires are frugal.

“I’d rather go to Europe.”

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Going into Debt

Only appropriate for home mortgage payments and possibly education (that one is debated).

A home mortgage should be a 15-year monthly payment plan, and should fit in your monthly budget.

Live under your means. Don't live for your future paychecks. If you can't afford a certain lifestyle yet, be content with what you can afford, and work to better your offense and defense to slowly elevate your lifestyle.

Offense = Income: How the money comes in.

Defense = Budgeting: How the money goes out.

Better Offense means earning more.

Better Defense means spending less.