I am currently undergoing the rigorous process of learning accounting and getting our financials in order. My wife is an influencer and we both run a graphic design business together. There are a lot of transactions and expenses involved in our day to day and it needs to be sorted properly. Once everything is organized and a system is set, we can optimistically come up with a more accurate budgeting roadmap. Don’t worry once all finances are organized we will go see a real Accountant to help us with the finer details of our business.
Budgeting is one of my favorite things to do. I love to visualize where our money is going and what we can potentially save it on. My mind wanders and I start to get dreams of grandeur. If we save x% every month we could be making $x! I once planned out our early retirement by 40. But that’s not how life works most of the time. We have no intentions of avoiding Starbucks or never taking a vacation. We want to enjoy our life now, not wait 10 years to have fun. Also we plan to have children. There is no way we are going to take away the opportunity to have precious memories with family vacations or events. Some of those memories are the happiest moments in my past. That’s why we don’t plan to be cheap in life, but to live it to the fullest. To do that, we need a budget to get us there. We may not be cheap, but we also don’t want to go bankrupt. It has to be budgeted properly.
Get a Clear Picture of your Finances
I’ve mentioned in my first blog post my wife and I are nearing the end of our debt repayment. It was a long journey, but we can see the light at the end of the tunnel. Since that is almost finished, we have to start discussing the next step for our money. There is a lot to save for, but only a finite amount of money coming in. So we need to prioritize what is most important to us. We always used to avoid this moment because of our debt. Seeing that growing number was so intimidating and embarrassing, so we unfortunately avoided budgeting. Which most definitely made things worse.
The first step was organizing all of our expenses. We desperately needed to separate our business and personal finances first, by setting up an LLC. There needed to be some separation between the two. That would help us better organize everything to see how much money we truly have leftover each month.
I started reading books on Accounting and financial reporting to help us make sense of all the financials in our businesses. There was a lot to learn, but just knowing the basics definitely helped us begin structuring all of our costs and profits efficiently. I have always had fun create rough excel sheets of our monthly finances, but it was never accurate or done properly. I may have never included purchases made for the business or forgot a bill or subscription here and there. It was always just to get a basic idea of where we stood. But now with a lot of studying, every single dollar spent was being tracked and any other expenses were covered.
One key point we took away from our massive debt was to be smarter with our money. By breaking down every expense and all our bills we could have a clear picture of everything. Where we stood each month could also help us identify what next month may look like. You can start to see trends and begin making rough predictions of future growth.
Prioritize Goals
Let’s say after all our expenses and liabilities, we have $5000 left over. The greedy side of me immediately begins thinking about how much we could immediately save and how much it would be worth in 10 years if we continue to invest that amount. However there are other milestones we need to save for. We want to start a family, but we don’t want to start until we are in a house. And if we want to buy a house, we need to move from our current neighborhood in Brooklyn. That means we need a car. We were able to get by without one since we were close to everything, but not anymore. So that means on our list is: House, Childcare Expenses, Car & Investing.
Figuring out what to save for first, or the proper way to allocate specific amounts to each item is difficult. It’s hard to figure out and can be quite stressful. We need to save enough of a down payment so our mortgage is reasonable each month, so that should be our biggest priority. Buying or leasing a car may create difficulty for us when we are ready to buy the house, so that would have to wait.
The first step in our plan was figuring out what was most important to us. That was the house. Unfortunately I was currently obsessed with the idea of investing. I looked for ways to take a small percentage each month to begin building our portfolio, but the more money I take away for this, the longer we would have to wait to buy a house. So I changed my perspective. We were saving to build our assets, which in turn was a form of investing. Not what I had in mind, but it convinced me otherwise.
If we purchase a home, we can use it as a means to boost my wife’s blog content, since she specializes in home décor. It was already becoming a struggle to come up with new content in our small New York apartment, so with more space comes new opportunities and more money potentially coming in.
Luckily, my brother in law was looking to upgrade his car. So we took advantage of that situation and agreed to buy his car from him in the next few months. It was cheaper than other alternatives and we would avoid auto loans affecting our mortgage. Preparing ourselves financially for moments like this make it all worth it. By budgeting, we know in a few months we will have the capital needed to purchase the car from him and still save for a down payment.
Determine Time Line
Our goal was to begin looking for houses by the end of the year. This meant we would need to hustle and begin saving to meet that goal. However, our debt was still not down to 0 and that was most important. We decided to find ways to speed up that step. With lower debt, our credit score would go up further and with that, better rates on our mortgage. It was a win-win.
So there were three things we could do to speed it up. We could find ways to make more money. Finding items to sell or taking on commissions through our graphic design business. There were options and we were ready to put in the extra hours. The second option was to find ways to cut our expenses. There were subscriptions we hardly used and we didn’t need to order out every night. Luckily my Mother in law began cooking dinner for us every night since my father in law was hospitalized with COVID-19. That saved us a fortune in food costs. We only purchased groceries for the other meals. The last option was to push our target date back, but that was something we really didn’t want to consider.
Setting Plan into Motion
Now that we knew saving for a house was our next big goal in life, we had everything set into motion. We were bringing in more work and saving money each month. Our debt repayment was now being cut short by over an entire month now. We are still on track to begin house hunting by the end of this year. We have 3 months, but we are feeling confident and optimistic. What are some of your goals this year and how to do you budget for them?