So I have already discussed that step one in my journey was doing what I can to make sure my finances are in order. Luckily, they are in decent shape. According to some statistics I found online everything is pretty much in line when it comes to our budget and the national average (and yes, I realize I should be doing a lot better than average and I intend to do so in the future). The only place we are out of whack is how much we spend on vehicles. This will change when my car is paid off in 19 months.
Now imagine this, step one is interconnected with step two, which was to set some goals. So I set a few goals. Don’t worry, I didn’t use any complicated method to set my goals. Nor did I sit down and try and set goals for every aspect of my life. I have tried doing that in the past. Twice. Planning out my whole life just does not seem to work for me. I find it too time consuming, too inaccurate (hard to plan my every action and goals do change), and too annoying to keep up with.
So what I did is I thought of a handful of goals that have a time frame out to about five years. Although I’ve discussed these goals with Skye, I have not even written these goals down as of yet. This will be the first time they appear in a “concrete” form.
Here are my goals. I’ll discuss them in more detail below.
1. Take the CPA review and pass the exam – Starting Jan 2008
2. Have credit cards paid off by Dec 2008
3. Move to new location when Skye graduates – End 2008 or beginning 2009
4. Purchase a house – Sometime in 2009 or 2010
5. Have a business of my own – Prior to the end of 2011
Let me explain the thought process behind coming up with these goals and what I hope each one will accomplish.
Take CPA review and pass exam – Starting in Jan 2008
This goal is fairly obvious for those who know me. I went to school for accounting and received my masters in it. Most of my work since graduation has dealt with accounting in one way or another. This goal is a natural progression of the process that was started when I choose accounting as my major. But that is only part of why this goal made the list, and a small part at that. The main reason this goal is on the list is because I think it will help me start my business when the time comes. I feel that having those three little letters after my name will lend credibility and trust to me from both future clients/customers and from lenders. I think most people place a decent amount of respect and value on the CPA designation because of the testing/standards involved and the experience necessary to gain the certification.
Pay off credit cards by Dec 2008
This is where the first step ties in with the second step. Around about December of 2006 I sat down and made a spreadsheet to show me how long it will take to pay off my credit cards by paying different payments at different times. It showed me that we should be able to pay them off in two years by being financially disciplined and living below our means. This will help me start a business by improving my credit and eventually lowering my expenses (no more credit card payments), which will allow for more money to be used in the business.
Move to new location when Skye graduates – End 2008 or beginning 2009
Skye will be graduating from grad school probably at the end of 2008. Since she’s focusing on medical libraries we will need to move to where ever she gets a job. We both figure it will be a lot easier to get a job in accounting than it will be to get a job at a medical library because there are a lot more positions open for accountants. Moving will help out my business endeavors because we will move to the most opportune location within a certain radius of her work. This new location will be where I start my future business.
Purchase a house – Sometime in 2009 or 2010
I plan on purchasing a house sometime in 2009 or 2010. This will give us up to two years in our new location before the deadline comes. I’m planning it this way for a couple of reasons. First, this will provide us with some time to determine where we will prefer to live in our new geographic location. Secondly, this will give us the time needed to ensure we get the best deal for our house. My experience in real estate taught me that if you have patience and the ability to walk away if not satisfied you would get the best deal. Purchasing a house will help my business by providing an available source of credit/financing if needed.
Have a business up and running by Dec 2011
This gives me five years from when I really started thinking about my own business until I get it open. I have every intention of having a business operational considerably before this date, but Dec 2011 is my outside limit.
As you can see, I have put a little bit of thought into my goals. Each goal has a personal as well as business related aspect. Also, each goal has a tentative deadline.
Now, I’ve given myself a financial checkup (budget) and I’ve prepared a road map (goals) to where I’m going. My initial preparation for this journey is complete. From here on out we will be discussing ‘scenery’ as we march forth on this epic journey.
Thursday, March 15, 2007
Budgeting Benchmarks
I found these numbers online the other night (for the life of me I can’t remember where) that show national averages for budgeted numbers. Here they are:
Housing 32.9
Transportation 19.1
Food 14.1
Apparel 4.0
Healthcare 5.9
Entertainment 5.0
Personal Care 1.3
Reading 0.3
Education 1.9
Tobacco 0.7
Miscellaneous 1.5
Cash Contributions 3.4
Personal Ins and Pensions 9.9
For any of you who end up using these numbers for your budget I warn you to keep one thing in mind. If you do what the average person does, you are going to be average. So you have to ask yourself, “Do I want to settle for being average or do I want to be better than average?” Remember, the great men and women of history are not remembered for being average. They are remembered for going above and beyond what others did.
Housing 32.9
Transportation 19.1
Food 14.1
Apparel 4.0
Healthcare 5.9
Entertainment 5.0
Personal Care 1.3
Reading 0.3
Education 1.9
Tobacco 0.7
Miscellaneous 1.5
Cash Contributions 3.4
Personal Ins and Pensions 9.9
For any of you who end up using these numbers for your budget I warn you to keep one thing in mind. If you do what the average person does, you are going to be average. So you have to ask yourself, “Do I want to settle for being average or do I want to be better than average?” Remember, the great men and women of history are not remembered for being average. They are remembered for going above and beyond what others did.
Sunday, March 11, 2007
I married a genius!!!
Ok. So I have the best wife EVER! No questions asked. Skye found a way for me to be able to put my budget spreadsheet on here. Look at the bottom left side of this page (scroll down) and you'll see a section titled "Downloadable Files". You'll see a page with a pie chart on it. Click it once and it highlights, click it twice and a little window pops up. Now the text in this window looks a little garbled because she edited the HTML to make it fit. But you CAN see "Download". Click that and specify where you want to save the file. Wa-la. You have the spreadsheet I mentioned in my last blog.
My first step - Budget
Hello my faithful readers. It’s another week and time for another posting. Let me start by giving you a quick update on whether I’ve listened to my last posting and focused or not.
Believe it or not I’ve done a decent job of focusing for the week (don’t knock it, that’s an accomplishment for me). To help me remember my ideas and attempt to expand upon the good ones I started an entrepreneurial notebook (Skye’s idea). I’ve written down two ideas for businesses. One I really like and may or may not make something of it. The other is a gym idea I’ve had since I was working out heavily two years ago. Also, in my notebook I’ve placed numerous websites I heard about while listening to StartUpNation (SUN) radio. Haven’t had the time to check out all the websites, but that’s ok. Like I said, I did a decent job of focusing.
I’ve read more of my current book, Quality or Else, and refrained from buying any more books (although I did fill the buggy at Amazon.com with numerous books I plan on buying in the future). It happens to be the inspiration of one of the business ideas, the one I’m most excited about. I’ll discuss the idea at a later date. I’m a little over half way through.
I’ve told several friends and family members about my blog as well. Most say, “That’s awesome!” and say they’ll check it out. Some are more interested than others. It all serves my purpose of talking about my blog though.
Ok. I said I’d make that a quick update, so I’ll stop now.
What I’d really like to talk about today is the first thing I did to prepare myself for this journey, which just so happens to be a financial checkup, in the form of a budget.
To be honest, I made my little budget spreadsheet not for purpose of starting my own business, but to make sure that we have enough money for Skye’s schooling. She was about to start grad school and I wanted to make sure we had enough extra money in order to cover all the necessary expenses. In order to do that I needed to know what was coming in and what was going out. So I made a nice spreadsheet that has numerous tabs. A brief description of the spreadsheet follows. Unfortunately I don’t think I can post the spreadsheet here (if you can neither Skye or I see the way), so if you’d like a copy let me know and I’ll email it to you. I find it very useful.
The first tab is a monthly summary of our total revenues and expenses. So for any given month I can see if we had a surplus or a deficit. We tend to break even, imagine that. What’s the old saying, “Expenses will grow to match income.”? In our defense, the main reason our expenses match our income is because I’m paying down credit card debt I acquired while trying to make a go at real estate.
The next tab is a paycheck breakdown. What I do here is enter each paycheck that either Skye or I receive. On the left I place the gross amount. To the right of that I have before tax deductions, taxable income, federal taxes, state taxes, FICA, Medicare, and retirement deductions to arrive at net pay. This is the amount we bring home each payday. I have totals for each month and then at the top I have a grand total for the year.
The next tab is for our net revenue. This tab may be a little redundant because all it shows our take home pay. I guess I really just have it here because it shows our net pay, without all the ‘background noise’ of how we arrived at it.
The next tab is probably the most useful tab out of all of them and that’s the expense summary. Here I have the totals from each expense tab, by month. I also have a row across the top for grand totals by type. Another useful feature of this tab is I have percentages all over it. On a monthly basis I show what percent of total expenses each exp is. I also have the average yearly percentage per expense class. So if we start spending too much in anyone area I can pinpoint it immediately.
After this tab I have individual expense classes. For instance the first expense tab is for utilities. This includes items such as rent, renter’s insurance, phone, cable, gas, and electricity. The next tab is food. On here I have groceries and eating out. I have a total of eight separate expense classes and a total of thirty-five separate expenses.
I understand that I probably just spoke the equivalent to Latin to most people out there. For that, I apologize. Skye said she’s going to see if she can’t find a way to place a copy of my spreadsheet on here so all you’ll have to do is click on it and see what I’m talking about. Trust me, it’s more useful than it sounds.
The only thing that might bother you about this spreadsheet is that it must be updated on a constant, regular basis. I pretty much update it each evening that I’m home (we have a tendency to visit friends on the weekend). So each day I gather all receipts (if we have any) and place the amounts in the spreadsheet. It’s a bit of a chore at first, but now it’s a habit. Supposedly, you only have to do something for 21 days in order to make it a habit.
What you learn from the spreadsheet may or may not be a surprise. We learned that we spend more on our cars than anything else. We also learned that we ate out WAY TOO MUCH when we started keeping track of our expenses. Once you see where you are spending the money you can then determine if it is discretionary or not and what you can do to reduce it. For instance, with our eating out we cut back A LOT. We were spending more eating out then we spent on groceries. Now we spend a lot less on eating out then groceries.
So since I made the spreadsheet I know where money is coming from and how much we make and I know where we spend the money and where we need to cut back on our spending. I’ll be the first to admit that budgeting is not a cure all if you’re in financial troubles, but I do think that it is a very important first step to gaining financial health.
Right now I would give us a C in terms of financial health. We are not doing bad, but we are not doing well, either. But I would say we’re a C heading towards an A, instead of a C heading towards an F. The main items that are holding us back are 1) credit card debt and 2) Skye’s pay. Fortunately, both will be much better within two years. In two years the credit cards will be paid off and Skye will be graduating from grad school. Upon graduation she can expect to make two to two and half times more. Both of these items will help us greatly.
So remember, before you start your own business it’s a great idea to find out where you stand financially. If you’re in trouble you need to do what you can to straighten things out BEFORE you start your business because during your initial couple of years it will be fairly challenging to separate your financial health and that of your business. By the time I start my business I will be in good financial health.
(I’ll let everyone know if and when Skye figures out how to put my spreadsheet on here.)
Believe it or not I’ve done a decent job of focusing for the week (don’t knock it, that’s an accomplishment for me). To help me remember my ideas and attempt to expand upon the good ones I started an entrepreneurial notebook (Skye’s idea). I’ve written down two ideas for businesses. One I really like and may or may not make something of it. The other is a gym idea I’ve had since I was working out heavily two years ago. Also, in my notebook I’ve placed numerous websites I heard about while listening to StartUpNation (SUN) radio. Haven’t had the time to check out all the websites, but that’s ok. Like I said, I did a decent job of focusing.
I’ve read more of my current book, Quality or Else, and refrained from buying any more books (although I did fill the buggy at Amazon.com with numerous books I plan on buying in the future). It happens to be the inspiration of one of the business ideas, the one I’m most excited about. I’ll discuss the idea at a later date. I’m a little over half way through.
I’ve told several friends and family members about my blog as well. Most say, “That’s awesome!” and say they’ll check it out. Some are more interested than others. It all serves my purpose of talking about my blog though.
Ok. I said I’d make that a quick update, so I’ll stop now.
What I’d really like to talk about today is the first thing I did to prepare myself for this journey, which just so happens to be a financial checkup, in the form of a budget.
To be honest, I made my little budget spreadsheet not for purpose of starting my own business, but to make sure that we have enough money for Skye’s schooling. She was about to start grad school and I wanted to make sure we had enough extra money in order to cover all the necessary expenses. In order to do that I needed to know what was coming in and what was going out. So I made a nice spreadsheet that has numerous tabs. A brief description of the spreadsheet follows. Unfortunately I don’t think I can post the spreadsheet here (if you can neither Skye or I see the way), so if you’d like a copy let me know and I’ll email it to you. I find it very useful.
The first tab is a monthly summary of our total revenues and expenses. So for any given month I can see if we had a surplus or a deficit. We tend to break even, imagine that. What’s the old saying, “Expenses will grow to match income.”? In our defense, the main reason our expenses match our income is because I’m paying down credit card debt I acquired while trying to make a go at real estate.
The next tab is a paycheck breakdown. What I do here is enter each paycheck that either Skye or I receive. On the left I place the gross amount. To the right of that I have before tax deductions, taxable income, federal taxes, state taxes, FICA, Medicare, and retirement deductions to arrive at net pay. This is the amount we bring home each payday. I have totals for each month and then at the top I have a grand total for the year.
The next tab is for our net revenue. This tab may be a little redundant because all it shows our take home pay. I guess I really just have it here because it shows our net pay, without all the ‘background noise’ of how we arrived at it.
The next tab is probably the most useful tab out of all of them and that’s the expense summary. Here I have the totals from each expense tab, by month. I also have a row across the top for grand totals by type. Another useful feature of this tab is I have percentages all over it. On a monthly basis I show what percent of total expenses each exp is. I also have the average yearly percentage per expense class. So if we start spending too much in anyone area I can pinpoint it immediately.
After this tab I have individual expense classes. For instance the first expense tab is for utilities. This includes items such as rent, renter’s insurance, phone, cable, gas, and electricity. The next tab is food. On here I have groceries and eating out. I have a total of eight separate expense classes and a total of thirty-five separate expenses.
I understand that I probably just spoke the equivalent to Latin to most people out there. For that, I apologize. Skye said she’s going to see if she can’t find a way to place a copy of my spreadsheet on here so all you’ll have to do is click on it and see what I’m talking about. Trust me, it’s more useful than it sounds.
The only thing that might bother you about this spreadsheet is that it must be updated on a constant, regular basis. I pretty much update it each evening that I’m home (we have a tendency to visit friends on the weekend). So each day I gather all receipts (if we have any) and place the amounts in the spreadsheet. It’s a bit of a chore at first, but now it’s a habit. Supposedly, you only have to do something for 21 days in order to make it a habit.
What you learn from the spreadsheet may or may not be a surprise. We learned that we spend more on our cars than anything else. We also learned that we ate out WAY TOO MUCH when we started keeping track of our expenses. Once you see where you are spending the money you can then determine if it is discretionary or not and what you can do to reduce it. For instance, with our eating out we cut back A LOT. We were spending more eating out then we spent on groceries. Now we spend a lot less on eating out then groceries.
So since I made the spreadsheet I know where money is coming from and how much we make and I know where we spend the money and where we need to cut back on our spending. I’ll be the first to admit that budgeting is not a cure all if you’re in financial troubles, but I do think that it is a very important first step to gaining financial health.
Right now I would give us a C in terms of financial health. We are not doing bad, but we are not doing well, either. But I would say we’re a C heading towards an A, instead of a C heading towards an F. The main items that are holding us back are 1) credit card debt and 2) Skye’s pay. Fortunately, both will be much better within two years. In two years the credit cards will be paid off and Skye will be graduating from grad school. Upon graduation she can expect to make two to two and half times more. Both of these items will help us greatly.
So remember, before you start your own business it’s a great idea to find out where you stand financially. If you’re in trouble you need to do what you can to straighten things out BEFORE you start your business because during your initial couple of years it will be fairly challenging to separate your financial health and that of your business. By the time I start my business I will be in good financial health.
(I’ll let everyone know if and when Skye figures out how to put my spreadsheet on here.)
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