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Achieving Financial Freedom Through Budgeting

What is a Budget?

The Money Nerve Budget

Many people consider budgets as a negative part of your financial plan. Let’s take a second look! A budget is a marvelous tool for calculating the money flowing in and the redistribution of that money to live your life in the best way possible. A budget can help you with money choices today, decisions in 6 months and a plan for when you no longer work. Knowing where your money comes in and goes out will help you formulate a manageable budget that can accommodate several goals.

Best Practices

  1. underestimate your earnings ( be sure to jot down after tax dollars, not your salary)
  2. Overestimate annual expenses; because “things happen!”
    Of course, some parts of the country have a low cost of living, and other areas have a much higher cost of living. You will need to take into consideration as you formulate your budget.

First, determine how much you want to save. Pay yourself first. You may only save $25 a week, and that’s okay. If you set up an automatic draft, it is not as painful, because it goes straight to the savings account. Then when you get a raise, set up a second draft and route money to a long term savings account. This cash can be used to purchase property, save for retirement or other long term goals you have set.

Where does My Money Go?

It is easy to find the average wage and cost of living by each state on the Internet. Since I live in California, let’s use those numbers.

According to the MIT Living Wage calculator, an adult with no children in California needs a living wage of $30,392 before taxes. This salary covers the essentials of housing, food, utilities, transportation, and taxes. There are no luxuries at this salary without some creative methods of saving/spending.

Housing will take the most significant bite out of your income. As a general rule, you want to spend no more than 30 percent of your monthly gross income on housing. If you’re a renter, that 30 percent includes utilities, and if you’re an owner, it includes other home-ownership costs like mortgage interest, property taxes, and maintenance.

Food costs also vary, but a good rule of thumb is to delegate 12% of your salary toward food. Again food prices by state and even by city: New York, Chicago, Los Angeles, and Seattle will be higher. You may want to utilize supermarkets that specialize in overstock or day-old bread. Another option is to cherry-pick Costco or Sam’s for some of their brand name, big bulk items like coffee, nuts, frozen vegetables, and even gasoline. Include groceries, eating out, and liquor when calculating the total food bills.

Adding a small child can add $220-$250 per month to that %. The USDA has prepared numerous food plans based on a thrifty budget to the most expensive of budgets. With careful planning, you might be able to spend as little as 9% on food costs. But, if you prefer to eat out regularly or purchase high-quality meats and organic produce, you could triple your bill. Click HERE to see the graph for January 2019. It is all centered on what is important to you. You may prefer to live in a tiny home and dine like a king. Or you may live in a large house and eat tuna fish every night. We all have different wants and needs. Your budget should be a reflection of what is most important to you.

Budgets Create Financial Freedom

When you have set your budget – follow it. As you accumulate wealth, you will see how mindful money choices can create financial freedom. You no longer miss payments or pay numerous late fees which results in more money in your pocket. Take a chance on you! Create a path for your finances, check every year and invest in YOU! I invite you to download this easy budget and get started TODAY!

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POSITIVE FLOW

Positive FlowDo you ever find yourself so completely immersed in what you’re doing that you lose track of time? All of a sudden you look up at the clock and realize that hours have passed and you missed dinner time? Think a minute about this. When does this loss of time and total engagement typically occur for you?

This could apply to a martial artist completely absorbed in perfecting a flying kick, or a violinist fiercely concentrating on a complex symphony. One may find still greater happiness working towards long-term, meaningful goals. Viktor Frankl, who survived a Nazi concentration camp, once said “What man actually needs is not a tensionless state but rather the striving and struggling for some goal worthy of him.” (Frankl, 1992)

According to The Pursuit of Happiness this loss of self-consciousness that happens when you are completely absorbed in an activity – intellectual, professional, or physical – is described in contemporary psychology as a state of flow. In order for a flow state to occur, you must see the activity as voluntary, enjoyable (intrinsically motivating), and it must require skill and be challenging (but not too challenging) with clear goals towards success. You must feel as though you have control and receive immediate feedback with room for growth. Interestingly, a flow state is characterized by the absence of emotion – a complete loss of self-consciousness –however, in retrospect, the flow activity may be described as enjoyable and even exhilarating!

A growing body of scientific evidence indicates that flow is highly correlated with happiness, both SWB (Subjective well-being) and PWB (Psychological well-being). Furthermore, it has been found that people who experience a lot of flow regularly also develop other positive traits, such as increased concentration, self-esteem, and performance.

In one study, 250 “high-flow” and “low-flow” teenagers were asked to report on their feelings and activities at regular intervals (Csikszentmihalyi & Csikszentmihalyi, 1988). The high-flow teenagers on average reported more time spent on “active leisure” activities such as hobbies, sports and homework. The high-flow teenagers also measured higher levels of self-esteem and engagement. Interestingly, however, the high-flow teenagers self-reported lower levels of fun than the low-flow teenagers.

Apparently, high-flow teenagers see their low-flow peers as experiencing more fun engaging in low-flow activities, such as video games, TV or socializing. However, the high-flow kids end up having greater long term happiness as well as success in school, social relationships and careers. If flow has such incredible benefits to our happiness, relationships and success, then why do people habitually choose low-flow activities?

Why do people, in the moment, choose another episode of American Idol over a game of pickup basketball? One hypothesis is that the high-flow activities require more initial motivation because they do require skill and concentration. In other words, high-flow activities are work! But work that pays off. Low-flow activities, such as watching TV, could contribute to depression and low self-esteem.

Thus, when we are actively involved in trying to reach a goal, or an activity that is challenging but well suited to our skills, we can all experience a joyful state called “flow.”  The experience of flow in both professional and leisure activities leads to increased positive affect, performance, and commitment to long-term, meaningful goals.

Take a moment to determine what is most important to you and what activities take you to a place of timelessness. Find your flow for a more abundant life!

Bob