Author: Hayleigh Snotherly

Have you ever traveled across an extremely high bridge and wondered how did the engineers and builders ever build this bridge?  Where did they even start? They started with a plan. And as the build took place, they referenced that plan a lot.  The plan gave them direction on what areas needed more support and what areas needed a little bit of flex. 

Building a budget is remarkably similar—No two months are the same; which reminds us that a budget needs to be reviewed every month. Some months may need a little flex. If you’re going on vacation, money may need to be reallocated plan for that road trip. Budgets need a little bit of flex.  

If you’re married, when you’re working on your budget together, it works well to have one person that is the engineer and one that is the builder. The engineer is the one that likes to build the worksheet and make modifications to the upcoming month. The builder is the one that may have most of the spending responsibilities, paying the utilities and checks what is flowing in and out of the bank account. Whatever role you have, both are important, and both need to work together. 

Single friends, you will be the engineer and the builder. It is important to have a trusted friend or family member that can be an accountability partner. Because in the beginning of building in financial principles, it is helpful to have someone that is a bit more experienced that you can connect with. 

Ok so let’s get started building a budget! Our four main supports are always going to be:
Housing, Utilities, Transportation, and Food. 

Housing—including insurance and HOA dues should be no more than 25% of your take home pay. This will be discussed more in an upcoming video.  

Utilities—remember to watch what your heat and air conditioning are set on.  Set these a little higher in the summer so that the air conditioning is not constantly running or lower in the winter and bundle up with an extra layer of clothing.  Turn things off when you’re not using them.  Remember little changes, over time, make a big difference.  

Transportation —avoid buying a car until it is absolutely necessary. When you do buy a car, save up for a good used one that you can pay cash for. Other ways to save money on transportation:
-Shop around for car insurance
-Carpool: If you’re married, can you share a car. Especially in today’s world when many people are now working from home. Do you really need two cars? 

Other categories that we need to have in our budget: Giving, paying off debt, clothing, medical, and kids activities. Some of these items will have fixed cost like a mortgage, rent and debt. Others will fluctuate such as medical or food. Food can be a big budget buster so watch it closely.  A family of 4 should budget around $1,000 a month for groceries and eating out…if you’re eating out. 

Budgets are to help us manage and evaluate. They bring awareness to when we’re overspending and moving off course and help us to course-correct quickly—this intention leads to freedom, confidence and less stress.  Anyone can do a budget whether you’re single, married, or living paycheck to paycheck.  You do not need to be a CPA to do a budget.  And to help you with this, we have a sample budget in the resource section.  What I need you to do is to take your spending record and your non-monthly expenses and use these to build your budget.  In the next video lesson, we will learn how to pay off debt. Let’s be done with debt so that we can move that budget category to something fun!  

About 20 years ago, I was a senior leader in a Fortune 500 multinational retail company, living the high life. I had a great salary and a great lifestyle, and suddenly, due to some internal management issues, my level of the organization was designated for elimination and I was out of a job. The biggest challenge was that we were living paycheck to paycheck, with virtually no savings. Fortunately, I was given a generous severance package which lasted until I found work, albeit at a lower salary.

When I got to my new company, a fellow team mate introduced me to a new and different way of handling my income. Different to me that is, as the principles have been around for as long as the world has existed. These principles taught me how to create financial margin in my life, and how to save for the future and plan for life’s largest expenses. And when my job was eliminated for the second time in my career, I was ready and able to continue life without the stress of paycheck to paycheck worries.

You’ve already heard about some of these principles…build a spending plan or budget, eliminate all debt except your mortgage, build a starter emergency fund of $1000, track all spending. If you haven’t, feel free to watch the prior videos in this tract before we proceed.

The next step, however, is to build a fully-funded emergency fund of 3-6 months of living expenses. For most of us, six months of living expenses is the right amount; I know I needed all of that 6 months to find a good job and replace my income both times. Once you have figured out your monthly budget, multiple those living expenses times six and plan to build your emergency fund to that level.

So if your normal household expenses are $4000 per month, you will need an emergency fund of $24,000. (The only time to consider a 3-month emergency fund is if you are a dual-income, no kids couple, or you are empty nesters with little financial obligations beyond living.)

Do whatever it takes to build that emergency fund, and then don’t touch it except for true emergencies. Work extra jobs, sell stuff, move to lower cost housing, delay any purchases that are not absolutely necessary, stop eating out on the town until that fund is built. Emergencies are not oil changes on the car, vacations in the Caribbean, or a big green egg for the backyard barbecue…those are planned and saved for expenses.

This is a fund where the soul purpose is to have cash on hand should your employment or income cease for a period of time. This is true rainy day money. This is money that will allow you to continue to pay your bills if the unthinkable happens—You want to be prepared and not stressed.

If you are like most people, at some point over the year, you will be faced with unexpected expenses that may bust your budget. Have you ever experienced an emergency where you did not have money set aside to pay for, perhaps a tire blowout, hot water heater repair, fence blown down during a storm, or your dog that gorged on the dark chocolate bar hidden in your child’s Christmas stocking which required an overnight stay at the pet hospital? Unplanned expenses are part of life, because, life happens…

No one expects the unexpected. And when it comes to our finances, unexpected expenses can quickly become a budget buster which leads to us making poor decisions with our money. At some point, we all experience life’s emergencies.

Non-recurring expenses CAN destroy a budget, but they don’t have to. With proper planning, we can face these expenses with peace and a sense of control when they do occur. By building them into our monthly budget, we can reduce the stress and anxiety caused when they occur.

You may be thinking, ‘I can’t plan when my car is going to break down, or will have a medical emergency, or a death in the family that requires purchasing airline tickets for the entire family.’ But, actually you can. You can build these types of non-recurring expenses into your budget so you already have money set aside when they DO pop up.

Let’s think of some non-recurring expense that occur during the year:

– Christmas: it comes around every December 25th
– Back to school – that one comes around every August
– Car Maintenance (Oil changes, tune-ups)
-Car Tax and Registration
-Income Tax owed
-New Tires for the car
– Insurance Premiums that are paid annually or semi-annually
-Vacation

There are also non-recurring expenses that may come around only every 5, 10, 20 years like:
– College tuition
– Replace a Car
– New Roof
– Replace HVAC system
– Daughter’s Wedding
– Dream Vacation

We can plan and save for these expenses so they don’t impact our $1,000 emergency fund. Then, when they happen, the money is there to pay for them.

So, how do we budget for both near term (those coming in the next year or two) and longer term (those 5+ years out) non-recurring expenses?

1. First, you need to identify how much money you will need for each item. Review your checkbook or bank statements for the past year to ensure you capture those expenses you may have forgotten about.

2. Then determine how much you think you need to save for each of those longer dated expenses (like a new car)

3. Next, determine how many months until you need that money. We have a non-monthly expense document that you can download from the Resource section to help you with this.

Here’s an example:
Let’s say we are in January. You know you will need $250 in August for back-to-school expenses. August is 7 months away. Divide $250 by 7 months and you will need to save $36 per month each month until August. When August rolls around, you will have $250 to use for school supplies.

Many people find it best to move these non-recurring budget savings into separate accounts. You may want to have a “Near Term” account for the shorter term non-recurring expenses (car maintenance, Christmas) and another account for Long term expenses (such as new roof or car replacement). These are separate accounts from your regular checking account as most of us spend the amount of money we have in our checking account.

Building non-recurring expenses in our budget helps to:
-break down large expenses into manageable ones
– ensure we can actually afford our lifestyles choices
– have the money available when those non-recurring expenses occur

You don’t have to be anxious about non-recurring expenses. By planning and saving, you can build margin into your monthly budget which will allow you to manage your budget with confidence and freedom from debt.

In the upcoming video, we will learn how to build a budget to help us reach our financial goals.

A couple of years ago, I had a Honda Odyssey. We called it the red roller. I loved that car. For a family of 5 it was reliable, comfortable, and decent on gas.  It was also the first generation with the electric rear closing doors. 

After about 10 years of use, those doors gave up on me and would no longer close electronically. We’d have to manually close them each time.  Well, when I took them to the shop to get it fixed, the mechanic told me it would be $3000 to replace the motors in them. 

At that point in my life, he might as well have said it cost a million dollars. I did not have the money and I did not want to incur debt because we had just paid off everything. See, I thought I was doing OK. 

So I did what any enterprising husband and father would do…I took them to a guy who said he could do it for much cheaper. Big Mistake. He made the problem worse as one of the doors would no longer open or close.  Lesson learned. If I would have had an emergency fund, I could have gotten my car fixed instead of having to buy a new car. 

Life happens, emergencies happen, and we need to be prepared. A $1,000 emergency fund can provide a buffer in these situations. Then if something happens…. and believe me, it will. We can build it back up again without going deeper into debt.  

In our last video we spoke about the importance of tracking our spending. As you are tracking your spending you will discover areas of savings opportunities which can build your starter $1,000 emergency fund.  

Areas that you will notice, and question are: Could we cut back on going out to eat? Maybe…we should do some meal planning before going to the grocery store. Food can be a huge budget buster.  

Other items to keep an eye on in tracking our spending: 

• Am I shopping online for unnecessary items because they keep coming up on Instagram, Facebook or Tik Tok?  
• Could we drop a few streaming channels, Netflix, ESPN+, Hulu, Disney+?  
• We can sell some items that collect dust around the house.   

As we adjust from the awareness that tracking our spending brings to light, we can take that money and quickly move it to the emergency fund. You can simply set up a savings account with your bank and begin making regular deposits.   

Do you go out to lunch a couple of times a week? Just by eliminating one lunch out per week can add up to $50 in a month. If you are a two-income household that could be $100 in a month. With just one adjustment what if you build in more intentionality?  

For example. If you are a family of 4 and stop ordering soda when you go out to eat and switch to water; it is better for you health wise and you can save a lot of money. 

Every dollar is important, and you can accomplish this emergency fund with as much intensity as you are willing to put into it.  As you go further in your journey of building in financial principles, you find these emergencies pop up less and less because you are living a life of intentionality—which leads to peace and freedom. 

An emergency fund is not that open line of credit on a credit card. This is cash that can be accessed in a true emergency.  And here is what we’ve found: if we are being intentional about savings and staying out of debt, emergencies are exceedingly rare because you are confidently planning and spending.  

I can attest to this.  My family now has a 6-month emergency fund, which you will learn more about in a later video, and as a result, I do not freak out every time I need to buy new tires. 

As you consider that, I would like you to continue to track your spending.  As you look at your spending, I would like you to identify 1 or 2 things that you can sacrifice to help you build your $1000 emergency fund. 

And as a reminder, we have a spending record worksheet in the resource section you may download. 

In the next video we will learn how to plan for non-monthly items like Christmas and birthdays, insurance premiums, car, and home maintenance. So, let’s get to saving up that $1,000 emergency fund!  You can do it!!! 

I’m going to ask you to do an exercise. It’s not anything that is super physical, yet it may make you a little uncomfortable. Close your eyes wherever you are. If you’re listening to this while driving, do not close your eyes wait until you get to a safe place.  

Ok, to those of us that are at home or in an office, close your eyes and keep your eyes closed during this exercise.  Now your exercise is going to be thinking through how you are going to get to your car.  Do you have to get up out of a chair and cross a room?  

Maybe you have to walk downstairs? Do you have to open a drawer or a door to access where your keys are stored? Are they at the bottom of your purse or a backpack? Then how are you going to make it out of the house or office to get to your car? Do you have to step outside, cross a parking lot? Do you have to go down steps to a garage?  

The simplest task, something that you likely do every day can feel like a huge challenge when our view is obstructed. Now open your eyes and think of going to your car with your eyes open and the lights on. That seems much less daunting doesn’t it? 

Tracking our spending is the same way. When we don’t track our spending, we cannot make informed confident financial decisions. From where we want to go out to eat or how will a car repair be made.  This leads to a lot of stress because we are living in a constant world of financial guesswork. There is no foundation for accurate information, no place to get started or know where to course correct.  

When we track our spending, we become aware – it is like opening our eyes and turning on the light in a dark room. We know where every dollar is going and we can begin to control how that money is flowing though our lives. It also helps us to make confident and informed decisions about where we are headed.  

You may think, ok, awesome. I can easily pull up my bank or credit card statement and track my spending.  This is the bank tracking your spending and the challenge with that is those purchase have already happened. This is not being intentional with your money. We need to be in the moment with how our money is flowing in and out.  

You may be thinking, ok so how do I start tracking my spending? You can jot down purchased items on a piece of paper or a small notebook. Many of us have these things that you are watching me on right now.  There are apps that can help you record your spending or even something as simple as making a note in the notes app on your phone. We have a spending record worksheet that is in the resource section that you may download. Every time you make a purchase, when you pay a bill and within a couple of weeks you will quickly discover where your money is going.   

In upcoming videos, we will learn about how to enter this information into a budget. Our next video is an important one; it is on building a $1,000 emergency fund.