Maybe you want to lose those stubborn 10 pounds, score a big promotion or run your first marathon. Whatever your priority, it all starts with setting a goal.
Financial priorities are no different. Whether you want to save for your child’s college education or get yourself out of debt, budgeting to help reach your financial goals allows you to determine what’s most important to you, make a plan to attain those goals and hold yourself accountable for success.
Still, when it comes to managing your money, knowing how to set financial goals and sticking to them can feel like opposite sides of the same coin. You might even find yourself asking, “How do I create a simple budget to reach my financial goals?” If you follow these three steps, you could be crossing the finish line in record time:
1. Pick a day to get started
Sometimes the hardest part of tackling a new project is simply getting started, especially if your to-do list feels like it’s never ending. There’s always tomorrow, or the day after that… right? To create a simple budget to help you reach your financial goals, pick a day and time to get started. Consider picking a time when you do your best thinking, are most focused and least likely to get interrupted. Maybe it’s Sunday morning over breakfast and coffee before kicking off a day of chores or on a weeknight after the kids go to bed.
Once you’ve landed on the best time to sit down and create a simple budget, add it to the calendar and schedule reminders on your computer or phone to hold yourself accountable.
2. Create a simple budget, however complex your finances
Chances are your finances are pretty complicated, with lots of moving parts. Things seem to be moving along nicely with your regular expenses like rent, groceries, transportation and entertainment… and then your carburetor goes kaput in your car and you must replace it right away. Or that toothache has become unbearable and requires a root canalâand you’ll have to cover some of the expense out of pocket. Just when you’re finally making a dent in paying down your debt and getting your finances on track, life throws you some curveballs. But that doesn’t mean you can’t create a simple budget.
One of the easiest ways to create a simple budget and stay on track is to follow the 50-20-30 rule:
50 percent of your income should address your needs, such as housing, utilities, healthcare and transportation;
20 percent should be put toward your financial goals, like building your savings and paying off debt;
30 percent should cover your wants or discretionary expenses, like shopping, entertainment and dining out.
Managing your finances with the 50-20-30 is a good first step when you’re first learning how to create a budget, but trying to deal with multiple financial goals within that 20 percent bucket can be overwhelming. When it comes to budgeting to help reach your financial goals, certified financial planner Jim White suggests taking your financial goals one step at a time.
“Make a simple plan to tackle debtâor maybe just one debtâthen when that goal is accomplished, work on a simple plan for the next debt,” White suggests. “A bunch of small victories goes a long way to changing your financial discipline and gives you a boost to keep moving forward,” White adds.
Similar to how you picked a day to begin the budgeting process, make a habit out of managing your finances by picking one day of the week and checking in with yourself at a scheduled time. After about two months, budgeting to help reach your financial goals can become habit forming. “When you focus on your goals on the same day every week, you are creating a habit, and a pattern, to follow,” says Karen Ford, financial coach and motivational speaker.
Budgeting to help reach your financial goals becomes even more effective when you’re reviewing your priorities every seven days and making adjustments to your spending and saving as needed.
“Make a simple plan to tackle debtâor maybe just one debtâthen when that goal is accomplished, work on a simple plan for the next debt. A bunch of small victories goes a long way to changing your financial discipline and gives you a boost to keep moving forward.”
3. Automate your financial plan
Now that you know how to set financial goalsâwhether it’s paying down debt, saving up for a car or putting money away for retirementâwhat’s next? Time to get moving! One way to do that is to automate your finances. By setting up automatic bill pay and account transfers, it will be easier to stick to your plan for paying monthly expenses and contributing to savings.
When it comes to paying your bills and learning how to set financial goals, consider automating the bills that you pay regularly, especially those that fall within the 50 percent budget category that covers your living essentials. To gain momentum with your savings progress, set up automatic transfers from your checking account to your savings account for the amount you wish to save each month. If your financial goal is retirement, you could even set up automatic transfers to an individual retirement account (IRA) so you’re consistently making progress. You could also arrange to have a portion of your paycheck automatically go into savingsâbefore you even have time to miss it.
By making automatic contributions to your savings accounts, you are “subscribing to the idea of paying yourself first,” says Riley Adams, CPA and blogger for Young and the Invested, a professional’s guide to financial independence. “By doing this, it removes the temptation to spend and takes any lack of discipline out of the picture,” Adams says.
Keep in mind that any time you automate your finances as part of creating a simple budget, you should monitor your accounts regularly. Check in to make sure your automated settings are up to date, that you always have the funds available in your accounts to cover your expenses and transfers and that your savings are growing according to your plan.
How to set financial goals in 3 steps
Once you find time to focus on your finances, create a simple budget and automate your payments and transfers, budgeting to help reach your financial goals is one habit that is sure to stick. By following these three rules and keeping yourself on track, you’ll be ready to build a solid foundation for your financial future.
The post How to Set Financial Goalsâand Crush Them appeared first on Discover Bank – Banking Topics Blog.
Months (and months) of grading papers, bringing work home on the weekends, staying on-point for all those young minds you’ve been charged with educating and finally… summer is here! It’s time to put your feet up and relax for a well-earned break from your awesome, and often intense, teaching career. But wait. How do teachers budget with no paycheck during the summer?
The summer paycheck gap doesn’t need to be a cause of stress for educators. You just need to put a plan in place to cover your finances for the months that school is out of session. You can follow these guidelines to create a summer budgeting plan that works for you:
Spread your income over 12 months
Bobby Hoyt, a former teacher and personal finance blogger at Millennial Money Man, says the beginning of the school year is always a “crazy time” for teachers. Your best bet to cover the summer paycheck gap is to have a budget in place well in advance of the bell on the first day of school.
To start, check to see if your school offers a year-round payment option. This would allow you to opt-in prior to the beginning of the school year to have your paychecks spread out over 12 months instead of the 10 or so months that you are working. “That way you’ll have a consistent paycheck no matter what time of the year it is,” says Kristin Larsen, personal finance blogger at Believe in a Budget. Even though your monthly pay will be lower with year-round paychecks, it could be easier to create a financial plan and manage the summer paycheck gap with the predictable cash flow.
If your school doesn’t offer this type of program or if you prefer to collect your standard paychecks and spread them out to accommodate summer, you can create your own 12-month paycheck plan to manage the summer paycheck gap. First, divide your annual income by the amount of months you receive paychecks. If you earn $57,000 a year and work for 10 months, for example, you’ll arrive at $5,700. Next, divide your annual income by 12 months, which in this example, would be $4,750. Finally, calculate the difference between those numbers. In this case, it’s $950. This is how much you would need to set aside from your monthly income to provide for two months of the same pay during the summer. You’re essentially putting money aside so you can give yourself a paycheck during your time off.
“Then, you’ll want to sit down and create a budget and find where you need to cut back and where you can still do the things you enjoy,” Hoyt says.
See if your school offers a year-round payment option. This would allow you to opt-in prior to the beginning of the school year to have your paychecks spread out over 12 months instead of the 10 or so months that you are working.
Calculate your standard expenses and summer extras
If you’re a teacher living with no paycheck during the summer, Hoyt suggests figuring out how much money you’ll need in the summer months to cover your standard living expenses. Think housing, utilities, groceries and transportation. The stuff you can’t live without. If you don’t have a baseline for your essential expenses, keep track of what you spend for at least three months, or sort through old credit card transactions and bank account activity by month. This should help you get a clearer idea of the minimum amount needed to cover your bills and and basic living costs. A summer budget tip for teachers is to use your highest expense month to forecast your summer costs so you don’t have to stress about coming up short, Larsen says.
Another summer budget tip for teachers is to anticipate discretionary seasonal expenses. Let’s face itâthere’s a lot of fun to be had over the summer, and the cost of extra activities and travel can really add up. Quickly. Luxury vacation or the summer festival circuit, anyone? Estimate how much you’ll need for your summer extras, and add those to the living expenses mentioned above. If any of your summer expenses recur annuallyâlike a standing trip with family or friendsâuse what you’ve spent in past years to arrive at how much you’ll need this time.
Whether you receive summer income from a year-round payment program or set aside money monthly to combat the summer paycheck gap, there’s a chance that your total summer expenses may exceed your summer paychecks. Read on for more summer budget tips for teachers that can help you plan for this difference.
Stash summer expenses in a separate account
If you’re stashing money away monthly to avoid the summer paycheck gap, creating a separate summer fund to contribute to throughout the year can be an effective summer budget tip for teachers. You could hold the portion of your paycheck you have set aside for summer in this fund, and look for other creative ways to add savings to the account. Bonus: If you put your summer paychecks and additional summer savings in a separate account, it may be easier to avoid the temptation to withdrawal for other expenses during the school year.
You earned it. Now earn more withÂ it.
Online savings with no minimum balance.
Discover Bank, Member FDIC
Consider parking your summer funds in a high-yield online savings account so you can earn interest while you work your way through the school year. If you plan ahead and won’t need to withdraw your funds for a specific amount of time (say 12 months), you could earn even more interest with a certificate of deposit.
Create a financial cushion
In addition to the money accumulating in your fund for the summer paycheck gap, it’s important to also have an emergency fund, Hoyt says. An emergency fund is just thatâa fund that is set aside strictly for emergencies, like car repairs or medical bills you didn’t anticipate. “It’s always wise to have an emergency fund, but especially if you have gaps in income,” adds Larsen, from Believe in a Budget.
While experts typically recommend saving at least three to six months of living expenses in your emergency fund, you can start small and add as your budget allows. Any cash set aside in an emergency fund will be helpful if an unexpected bill or expense comes your way, especially if it’s during the summer paycheck gap.
Consider a side hustle
If you think your summer paychecks and extra savings are going to fall a little short of your summer expenses, “consider a summer side hustle to pay for the extras that can come with warmer weather,” Larsen says. With no paycheck during the summer, a side hustle can be a good way to funnel more cash into your summer fund account.
According to Hoytâwho actually started his website as a side hustle when he was a band directorâmany teachers can use their skill set for side hustles related to their profession. For example, teachers can offer private lessons or tutoring within their areas of expertise. Teachers can also pursue unrelated side hustles, like flipping items in online marketplaces to bring in more money in anticipation of no paycheck during the summer.
A side hustle may also be a perfect opportunity to explore a new venture, especially when there’s no paycheck during the summer. Hoyt says a side hustle can even provide a route to a new career path. “The skills that teachers pick up throughout their careerâdealing with people, managing a high workload, having high standards for excellenceâtend to translate extremely well into entrepreneurialism,” Hoyt says.
Make it a summer to enjoy
Teaching has its challenges, but it also comes with the major perk of having some of the best months of the year off. Planning ahead and implementing these summer budget tips for teachers will help make sure that these hard-earned months of vacation are truly an enriching time.
The post Teachers: How to Survive the Summer Paycheck Gap appeared first on Discover Bank – Banking Topics Blog.