Budgeting for Financial Independence

Enjoy this guest post from longtime member and founder of the EconoMe conference, Diania Merriam. Diania provides wisdom on budgeting to meet your financial goals and how Republic Wireless can help you stick to your budget.

“A budget is telling your money where to go, instead of wondering where it went.”       John Maxwell

The word “budget” often makes people squirm.  For many, it brings up feelings of deprivation and restriction.  But if you’re pursuing financial independence, your budget can feel more like a close friend cheering you on towards your financial goals.

I like to think of my budget as a simple act of awareness around my money.  I started by tracking every expense to gain clarity on where my money was going.  From that position of clairty, I could then identify areas where I could cut back or where I could be more intentional about my spending.  The key for me is not just in developing a budget, but also continually engaging with it.  Every month, I evaluate how I actually spent against my spending plan and I decide if I need to make any adjustments to my budget.  I think the big reason why people get frustrated with budgeting is that they create a plan that is unrealistic. Then when they go over budget, it can be disappointing.  Evaluating spending against a budget often can help identify the areas where one is being unrealistic, and provide an opportunity to adjust accordingly.

One of the things I love about the FIRE movement is it provides a really clear target on how much you need to save to reach financial independence: 25x your yearly expenses.  Budgeting comes into the equation, because it helps you get really clear about what your expenses actually are, and thus determine the FI number you’re working towards.

That FI number, however, is only as good as the assumptions behind the number.  You need to be able to estimate your future yearly expenses, which is pretty difficult especially if you plan to retire young.  When you’re budgeting and tracking your expenses, you are able to look back at your historical spending over many years and changing circumstances.  This will allow you to come up with a better estimate on future spending.  For example, when I quit my job earlier this year, I looked back at my actual spending over the last 2 years to come up with a realistic budget.  This gave me confidence that I could take a big bet on myself and pursue self employment, because I could clearly see that I had a 2 year runway in liquid savings.  Having an intimate understanding of how I spend money, gave me clarity on how much money is actually enough for me.

Since my Republic Wireless phone is always on me, it has become a great tool for budgeting!  I use a free app called Spending Tracker, where I log every expense at the time I’m making a purchase.  This allows me to quickly look at how much I’ve spent in each category at any given time.  Then I can make informed purchasing decisions and ensure I don’t go over budget.  I also track my net worth on a free app called Personal Capital.  I’m literally able to look at my full financial picture at any time right on my phone, it’s very convenient!

Budgeting is a great way to help you understand your behaviors and preferences, and you can experiment with different levels of spending that will allow you to enjoy today, but also save for tomorrow.  If you find budgeting to be a painful exercise or a source of shame, this could be an indication that the gap between your income and expenses isn’t large enough.  In this case, it would serve you well to look at increasing income or take a hard look at spending behaviors.

Finally, a key benefit to careful budgeting is the opportunity to identify ways to reduce expenses.  And this can create what is known as a “double whammy” effect in your pursuit of FIRE.  Reducing expenses allows for more money that you can put towards investments now. But it also means that your FI number (25x annual expenses), is lower and therefore you’ll be able to reach your target faster.  When we first start engaging with a budget, we’ll find a ton of ways to optimize.  Perhaps we’ll find a cheaper place to live, save money by cooking more and eating out less, find cheaper home or car insurance, and change our phone plan to Republic Wireless (I did all of these things!).  But it’s easy to go on autopilot after that initial phase of optimization.  I would encourage us all, whether we started budgeting years ago or just yesterday, to continue to look for ways we can optimize expenses.  If we keep upgrading to more affordable ways to get our needs met, we’ll reach financial independence that much easier!

If you want to learn more about the FIRE movement, check out the The EconoMe Conference which is an event I created.  We just completed year 2 on November 13th and 14th at The University of Cincinnati. Stay tuned for news of upcoming events.

 

Dump Debt Together for Financial Independence

Guest post by Elle Martinez, Republic member, host of the Simplify and Enjoy podcast and financial independence advisor with Couple Money.

headshot of elle martinez, financial independence advisor

Like many married couples, my husband Rob and I started off with two completely different views when it came to money.

Married with $30K+ of Debt

When we got engaged, he was a newly minted college grad, and I was wrapping up my senior year while working part-time at a paid internship. 

 On the plus side, we were both great at finding cheap eats and usually hung out at low cost and free events around town. On the down side was the debt we carried. 

I had two credit cards and a car loan. Both of us had student loans. 

One night after we got engaged we decided to share our ‘numbers’. It was a bit of an awkward experience, but we’re grateful to have laid it all on the table. 

After that chat, I was motivated to pay off my credit cards before the wedding. It felt wonderful to have that win.

Paying Off Debt Together

Once we got back from our honeymoon, it was time for us to figure out a budget that we were both happy with. It also meant syncing up with what goals we wanted to achieve. 

Looking back on those first years, we made some key decisions that had a huge impact on our finances and marriage. 

Live on One Income (Even as Dual Earners)

This choice was initially out of necessity. With my internship, we were taking it semester by semester. 

We kept all of our essential expenses under his income while my internship pay was used to pay down the debts, build our savings, and work toward other goals.

As you can imagine, we weren’t rolling in money when we first started, but even then, with this system we were making progress and enjoying ourselves. 

Go for the Big Wins on Bills

Another key decision we made was focusing our energy on big wins when it came to bills. Yes, there’s value in looking at your entire budget, but when prioritizing time and energy, we prefer to look at the three big expenses first – housing, food, and transportation. 

As I get into in my book Jumpstart Your Marriage and Your Money, it took real effort and honest discussion honing on what we really wanted. However it’s been worth it. 

Keeping your expenses on target in those areas can move the needle when it comes to your goals. 

Another area where we saved significantly (and many families can relate!) is with our smartphones. 

As I was hunting around for options, I discovered Republic Wireless. With their plan I could cut my phone bill in half. It was too tempting an offer, so I took the leap. 

Nine years later, I’m still a Republic Wireless member. Why? It’s all about the value. Not only were their prices really affordable, but they had some fantastic phone options. 

I quickly fell in love with durable and flexible Motorolas. 

That’s something we learned while paying our debt and saving – focus on value, not just on price. 

Monthly Expenses = Essentials + Things We Love

With some in the personal finance space, spending is bad. I’ve read some crazy stories of the extremes people go to reduce spending to the absolute minimum. 

We take a more nuanced approach. For us, we try to avoid unconscious or mindless spending. We’re okay with spending on the people and things we truly enjoy. 

Take our food spending. We do save quite a bit cooking at home, but we’re also spending on better quality produce and meats. We also are willing to host cookouts at our home for several friends. 

Traveling is also something we enjoy, whether it’s day trips, weekend getaways, or big family vacations. 

Whether it’s food, spending, or tech we do like hunting for deals, but we also see money as a tool and not the end goal. 

Enjoying the Financial Independence Journey (Not Just the Destination)

As we were paying off our debts and sharing our wins and lessons learned, I began to hear about the financial independence movement. 

While the FIRE gets much attention with the media, because of the goal of retiring early,  we were intrigued with more flexibility that comes with FI.

As parents with two kids under ten, we want to enjoy this special time with them. 

As I share on Couple Money and my podcast Simplify and Enjoy, SlowFI and CoastFI are two wonderful options for families wanting to carve out their path that fits their needs and timeline.  

Charting Our Own Path

By paying off our debts, saving, and investing, we’ve opened up options with work and have more flexibility with our schedules.

This past year has certainly had its challenges and not sure how this year will go, but learning to work together on our finances and goals makes me eager to see what’s ahead! 

4 Unexpected Ways To Save On Your Expenses Each Month

Let’s face it – everyone would be perfectly fine with shaving a few pennies here and there from their monthly expenses. From grocery bills to your utilities, there’s plenty of opportunities for you to save – you just have to find them. If you’re looking to save some money on your monthly expenses each month, try some of these tips to keep your spending on track and your bank account in the green.

Go Grocery Shopping

Did you know that the average person spends more than five times more per month when they order out instead of doing their own grocery shopping? Eating at home is an effective and fairly easy approach to shaving your expenses. There are even some helpful tips to approach grocery shopping where you can save even more.

Using manufacturer’s coupons in weekly advertisements is a great way to curb costs when hitting the checkout line. Or, try ordering online using curbside pickup rather than wandering the store and potentially buying things you don’t actually need.

Buying in bulk is another great way to free up your discretionary spending a bit. You’ll save on the price per unit and benefit from fewer trips to the store. Then, simply freeze the leftovers to use at any given time for quick and easy access as opposed to hitting up your go-to food delivery restaurant when hunger strikes.

Take A Closer Look At Your Subscriptions

How many times have you glanced at your bank statement only to notice you were charged for a service you barely use? If this sounds familiar, it may be time to take a closer look at your subscriptions.

Subscription-style billing is meant to fly under the radar so you keep paying each month without having to take an action. Luckily, many budgeting apps will notify you when you’re charged for subscriptions, allowing you to reconsider whether or not you still find that service useful. On top of that, staying organized and keeping track of what you sign up for will help you avoid unnecessary spending in the long run. Make sure to keep an eye out for the chance to bundle. Many companies have begun partnering to increase exposure so you can reap the benefits of a lower rate.

Buy A Home

This may sound like a big expense at first, but paying rent each month can actually be a huge money sucker compared to owning your own home. This is especially true when mortgage rates are low. Sure, you might pay more upfront in the short term, but if you’ve got enough stockpiled for a down payment and closing costs, buying a home may be the way to go.

A good way to estimate your monthly cost is to do a home search in your local area. Many real estate listing sites give you ample information on things like price per square foot, approximate mortgage payment, property taxes and home insurance costs. You can actually save up to $200 on your monthly living expenses by owning a home versus renting. Instead of throwing cash at something you’ll see no financial return on, you can start building equity you can cash in on at a later date.

Furthermore, you can cut back on your monthly utilities by installing energy-saving appliances throughout your residence once you’ve purchased your home. From ovens and stoves to lightbulbs and windows, the possibilities to be more economical at home are endless.

Get An Affordable Phone Plan

Of course, we had to throw this one in here! While having a cell phone is considered a luxury for many, we believe staying connected to others is a necessity. That’s why it’s more important than ever to have a reliable, affordable phone plan. By avoiding hidden fees and overcomplicated contracts, your savings can really add up depending on your specific cellular needs without compromising on service.

Some other tips for reducing your phone bill include connecting to WiFi frequently, and limiting your background data use whenever you can. Here at Republic Wireless, we’ll never charge you overage fees for data usage. We give you the freedom to add one time data whenever it’s needed, therefore keeping costs where it’s best for your expenses. 

Remember, your spending will fluctuate month to month, so there will be times when you should be more restrictive with your spending habits and others when you’re able to indulge a bit more. Fortunately, incorporating these easy tips into your budgeting plan is sure to provide some relief during difficult months and will pad your bank account during economic success.

Budgeting Q&A with Republic Member & Blogger – The Teacher’s Wife

Say hello to Republic Wireless member and Blogger, Sarah! Sarah’s blog, The Teacher’s Wife, focuses on all things related to sticking to a family oriented budget. From tips on financial planning and organization, to more personal notes, Sarah offers a variety of relatable and inspiring content.

We recently sat down with Sarah to catch up on her budgeting styles. Specifically how that plays out with her family and everyday household expenses. She shared the best budgeting advice she has received. We learned how that’s carried into her and her Husband’s monthly and daily financial decisions. Take a look at the great budgeting tips and tricks she shared!

What are you doing to stabilize things in your family budget during this time of uncertainty?

Our budgeting process hasn’t changed a whole lot during this time of uncertainty. After a lot of effort over the years, we are in a good rhythm when it comes to creating and tracking our family budget.

However, we have been even more intentional with our spending.  We are more committed than ever to sticking to our budget in these times of uncertainty.  We already keep our expenses as low as possible (we don’t have cable and we are Republic Wireless customers), but we have made some slight adjustments such as pausing our gym membership.

Thankfully, we have 6 months of expenses saved in a money market account for emergencies and we do not have debt other than our home.  This brings us a lot of peace in the uncertainty.

What is your process for monthly budgeting?

Within our household, I’m the “budget nerd.”  I like to crunch the numbers and create a plan, so I’ve always been very interested in budgeting.  I used to do this on an old Excel spreadsheet, but this became frustrating to my husband over the years.  He never had real-time access to the spreadsheet, so we weren’t on the same page as the month would unfold.

About a year ago, we started using the EveryDollar app and it has transformed the way we communicate about our budget.  I still crunch the numbers and create a preliminary budget based on the monthly income and bills.  Then, my husband and I sit down together to review, adjust, and agree to the final numbers before any bills are paid.

As the month unfolds, we each enter transactions into the app so we know at all times where we stand.  Each week, we sit down together for a few minutes to see where we are, so that we stay on track and make any needed course corrections.

What are some small everyday changes that someone can start making to ease into their budgeting goals?

If you are new to budgeting, be patient with yourself as you learn.  It can take a good 3 months before you feel more confident in your ability to budget.  You will make mistakes as you learn, but don’t give up!

As you begin, start slowly.  Pick one specific category where you will focus your efforts.  This could be anything – but I recommend your grocery or restaurant budget.  Either way, pick 1 category and focus on it for 30 days.  Set a reasonable budget for the category and STICK TO IT.  Once the money you’ve allocated has been spent, then STOP SPENDING.  If you habitually struggle with overspending, you might consider using cash only (yes, dollar bills!) for that category.

How often do you find yourself needing to revisit or shift around your budget, and for what reasons? 

We do our best to create a reasonable budget at the beginning of the month, but things come up that we didn’t foresee.  My husband and I touch base once a week for a “budget meeting” so that we can see how things are going and make any tweaks.  One category that we recently started was a miscellaneous budget.  This category helps for those random expenses that you can’t always predict – things like yearbooks, field trips, etc.

We also have separate savings account (that we call sinking funds) for things like home repairs, car repairs, and medical expenses.  Often things like a plumbing leak that needs to be repaired will come out of this account if we don’t have the wiggle room or ability to adjust in our monthly budget to cover the expense.

What is some of the best financial advice you’ve received that has always stuck with you?

The best financial advice I’ve ever received is very, very basic – if you can’t pay cash for it, then you can’t afford it.  In a world that operates on credit, this concept is archaic, but it’s so true.  If we don’t have the money to pay for something in cash (or from our checking account), then we don’t buy it.

This advice, and our commitment to avoid debt, has helped us to keep our spending in check.  This allows us to give to others, save for the future and also enjoy some of our money – stress free.

Have you found success in teaching the art of budgeting to your kids? If so, what tools have you used for teaching simple budgeting skills and ideas to different ages?

Most of our discussions about budgeting have been on the fly as we go about our day-to-day life.  The kids observe us talking about and handling money, so they sometimes ask questions about it.  They’ve also seen us give them a budget for things like birthday gifts for their friends.  Up until this point, most of what they’ve learned has been through normal, everyday life situations.

We have just begun to be more intentional with teaching our kids about budgeting, so we are very new to it.  We recently purchased a teaching tool that we’ve been using a little bit.  We’ve begun to work through the material and the kids love earning a little bit of commission if they do their extra weekly chores.  This has been very helpful in teaching them financial responsibility.  They are learning how to give, save, and spend their own money, even if it’s only a couple of dollars per week.



Sarah is one of many Republic Wireless members who have gone on their own personal journey to financial wellness. We’re encouraged and taking our own notes after our conversation together! Make sure to hop on over to
The Teacher’s Wife for a variety of topics on household budgeting and organization.

Do you have some budgeting insights of your own to share alongside Sarah? Perhaps there is something you do similarly in your own personal budget. We’d love to hear about it. Reply below in our Member Community and share any financial knowledge you find beneficial!

Long-Term Savings: Planning for Retirement

When should you start saving for retirement and other long-term financial goals? How should you do it? There are so many day-to-day expenses and concerns that it can sometimes be easy to let long-term plans fall by the wayside. The great news is that technology and access allow everyone ample opportunity to start saving as soon as they are ready and in easy ways to make sure that plans are in place for later in life!

When to save for retirement?

We all would love to save as much as possible as early as possible, but there are a number of things to make sure you take care of first:

  1. Do you have an Emergency Fund?
  2. Have you eliminated Credit Card and Personal Student Loans debt?
  3. If you have kids, are you saving appropriately for future school plans? See our post on Saving for College and 529 Plans

The general rule of thumb is to start saving as early as you can. The reality is that’s not achievable for everyone- but it’s not too late! Regardless of when you plan on retiring (for most people, it’s around age 65-70), every month and year investing your money is better than not, assuming your situation allows for it. Most checking and savings accounts at your bank offer very little interest (under 1% per year) and don’t bode well for growing your money over a long period of time, so finding a way to save something on a consistent basis that earns a little more has a lot of potential.

Many people live by the rule of thumb that you should be saving 10% of your pre-tax income for your own retirement. If you were to earn an average of 3% per year (a modest return, given Bonds have had an annual return of 4.62% over the last 10 years) from your investments and invest $1,000 per month, here’s what that potential could look like ( http://www.helpfulcalculators.com/compound-interest-calculator):

Over 10 years, with your $120,000 of automatic deposits, you will have earned over $19,500. Over 30 years, you will have earned over $220,000 with your consistent monthly deposit!

How to save for retirement?

Our friends over at LendEdu recommend that you pay down your student loan debt as quickly as possible, so that you can then divert those funds into your retirement savings. A couple great tips include:

  • Pay more than the monthly minimum, as frequently as you can
  • Send any windfalls (e.g., bonuses, tax return) straight to your student loan debt
  • Consider refinancing your student loans to a lower interest rate

I was extremely fortunate to come out of college and be able to save within the first few years. My plan is to retire around the typical age, so I could have over 40 years of investments! What I love is how everything has an auto-withdrawal directly from my paycheck, so I never see the money and it goes directly into an account to start saving. I have lived by the general rule of thumb, so 10% of my pre-tax paycheck per month goes into retirement savings. Here are some of my favorite ways to save and invest for retirement:

401(k)

One of the simplest and most appealing options is a 401(k) plan. This is typically offered by your employer and many will match a percentage of your contributions as a way to incent you to save- that’s free money!

Usually, they will say, “We’ll match up to 4% for your contribution.” For example, if you make $75,000 per year, and you save 10% every month toward 401(k), then your employer could match the first 4% of that, so that’s $3,000 every year of additional money they are giving you to invest! 401(k) investments go in pre-tax, and most are done automatically via payroll each month.

Once you sign up and start saving (the limit is $18,500 per year; $24,500 for those age 50 and above), you then get the option to select a Mutual Fund full of stocks and/or bonds which offer annual returns typically between 7%-8%. Once you turn 59 ½, you can then start withdrawing, paying taxes at that time.

And don’t worry, if you leave your current job, it’s easy and free to rollover your 401(k) into a standard IRA so that it keeps earning annual returns.

IRA and Roth IRA (Individual Retirement Account)

If your employer doesn’t match 401(k) contributions or you’re interested in saving more, IRA and Roth IRAs are great ways to invest for retirement and take advantage of some really neat tax laws, while also leaving you some room for other options.

For a Traditional IRA, you invest money now, pay no taxes at the time of contribution, and only pay taxes when you withdraw after you turn 59 ½. A Roth IRA is the same concept except you pay taxes now and no taxes when you withdraw after turning 59 ½. So why would you do one vs the other? The answer is your current situation and your plan for when you’re older:

Do you think you are making more money now than you will when you start making withdrawals? Then a Traditional IRA is likely the best option for you. You are assuming that you are paying more in taxes now than you will when you’re older.

On the other side, if you believe you’re making less money now than you will when you start making withdrawals, then a Roth IRA is probably the best option. Many younger professionals just starting in their career take this path, capitalizing on their lower income now, paying taxes right now and letting that money grow tax-free over 30 or so years.

As with the 401(k), once you sign up and start investing (the limit is $5,500 per year; $6,500 for those age 50 and above), you then get the option to select a Mutual Fund to start earning annual returns.

Both of these have a very cool feature- if you’ve had the account for over 5 years but are younger than 59 ½, you can withdraw up to $10,000 penalty-free for the purchase, repair, or remodel of a first home. So, while you’re saving for retirement, you’re also leaving yourself options on buying your first home!

Stocks and Bonds

Finally, if you want to save more and get a little more control over your retirement, investing directly in Stocks and/or Bonds can be a great way to do that. If you are knowledgeable about the Stock Market, Robinhood offers free trading, while if you don’t know the first thing (or just like having an expert do it), Betterment is another great option that will invest for you for a very small fee. You just select the level of risk you are comfortable with and they will do the rest.

The Stock Market is a risky place, no doubt, but even with the occasional downturn (see 2008 Financial Crisis), the returns tend to average out over the long-term to around 7-8% annually. The generational words of wisdom say you should temper your enthusiasm during the good times, be optimistic when things look bad, and try to buy and hold for as long as possible to get that average return.

There is a lot to consider when saving for retirement. Your personal situation will dictate most of what you’re able to do, but there’s a reason why these various avenues exist for retirement options: it’s so you’re able to customize to your situation and still think about your long-term financial future. Again, it’s not too late to start saving now! If you’re feeling like you could use some help, financial advisors exist all across the world for very reasonable fees to help out.

As always, feel free to leave comments as well as your own learnings and insights into the world of saving for retirement!

9 Best Budgeting and Financial Planning Apps

In essence, these 9 apps are built to do very similar things: help you budget your money, make paying bills more convenient, and remind you what needs to be paid when.

1 Mint

  • Money manager and financial tracker from the makers of TurboTax®
  • Bring together your bank account, credit cards, bills, and investments, net worth, free credit score, and more!
  • Save time and money by keeping track of your finances in one place
  • Bill pay reminders so you don’t have to worry about late fees again!
  • Get your credit score for free along with tips on how to raise it

Download now

2 Mobills: Budget Planner

  • Create customized monthly budgets that work for you
  • Track spending and be reminded of it
  • Adjust budget when necessary
  • Add expenses, income, and make transfers on the go
  • Credit card management

Download now

3 Monefy – Money Manager

  • See spending distribution in an easy-to-read chart
  • Get detailed spending info from the records list
  • Manage categories
  • Synchronize using your Dropbox account
  • Simply insert expense amount… no other data necessary

Download now

 

4 AndroMoney (Expense Track)

  • Easy-to-use personal finance tool
  • Multiple accounts and support account balances and account transfer
  • Sync with other devices
  • Simple, custom budgets
  • Trend, pie, and bar charts for expense and cash flow

Download now

 

5 Home Budget Manager Lite

  • Track expenses, incomes, and bills
  • Unlimited accounts
  • Bills Reminder
  • Set budgets for categories
  • Statistics graph to see where your money has gone categorized by incomes, expenses, budget vs. expense, etc.

Download now

 

6 Money Manager Expense and Budget

  • Financial planner, expense tracker, and personal asset manager
  • Record personal and business transactions, generate spending reports, review daily, weekly, and monthly financial data, and manage your assets
  • Credit/Debit Card management
  • Instant statistics
  • Budget and expense management

Download now

 

7 Money Tracker

  • Advanced personal finance manager
  • Flexible reports with drill-down capabilities
  • Ability to schedule, enter, analyze, and project your expenses months and even years ahead
  • 8 powerful fully customizable reports with tables and charts
  • Photo attachments
  • Data synchronization between 2+ devices

Download now

 

8 Expense IQ Money Manager

  • Serves as an expense tracker, budget planner, checkbook register, integrated bills reminder, and more!
  • Track your daily expenses quickly and easily
  • Detailed and interactive reports
  • 12+ reports and charts to analyze spending patterns
  • Set monthly budgets to accounts categories and check their health bars
  • Get warnings if you exceed your budget

Download now

 

9 My Finances

  • Will help you manage and control your home budget and expenses
  • Ability to create color-coded categories and subcategories to make the data clear
  • Ability to manage multiple accounts
  • Pay recurring flat-rate bills with ease by setting repeated operations and frequency
  • Predicts your total income and expenses based on your planned operations
  • Tracks your history and follows your earnings and payments
  • Tells you which category(ies) you spend the most in to help you better prepare and save.

Download now

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I hope that these budgeting apps will help make your life a little more organized (hopefully get rid of some of the awful paper clutter). Bills are just another one of those things to keep up with. Let an app do it for you so you can spend less time worrying about when your bills are due, and more time doing what you love (in my case shopping… which is why I need a budgeting app).

If you’ve tried any of these apps in the past, comment below about your experience! Do you use a life-saving financial app that I didn’t mention? Post it here for others. The best part about apps is how easy they are to use and share.

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