The Money Tree - Part One
Where do I even Begin?
Life requires money. Too dang much of it. I wish there were a way around that.
Life also has a funny way of keeping us in check at the exact moment we finally feel comfortable with our finances. Like when you haul arse to get your credit cards paid off, then the ENT says tubes…for the second time. Or when literally the day after you finally pay off your car, your HVAC dies. Then when you finish paying the medical bills from the tubes you get the license plate renewals, heartworm medicine for the dog, three birthday parties, and a leak in the ceiling. It. Never. Ends.
That’s not even counting pesky survival expenses, like rent/mortgage, utilities, groceries, insurance, gas, savings, car payments, daycare, clothing, food…oh, the FOOD. Keeping up is hard enough, let alone getting ahead. The financial responsibility of having and maintaining a family can be overwhelming and sometimes just flat out discouraging.
So how on earth are you supposed to find the money for recreation or travel when you’re already feeling tapped out just from living? Aside from winning the lottery or finding a money tree, creating some extra cash flow is more reachable and less painful than you think.
I’m a BIG believer in working smarter, not harder, whenever humanly possible. We are busy BUSY people and ain’t nobody got time to do anything over the millions of things we’re already doing. But if you want to travel, you need a plan. Here is a realistic, straightforward outline that will help guide your family down the road to financial freedom, and down the road to your next adventure:
Determine your monthly expenses vs. income.
Before you’re able to set a budget or determine what you can and can’t afford, first you’ve got to figure out what you’re working with. This is an easy exercise. Total up the cost of everything that sucks the money out of you each month: childcare, utilities, housing, gas, groceries, credit cards, loans, car payments, medical bills. Subtract that number from your total monthly income, post tax. The difference is what you’re working with. That’s your extra. If you don’t end up with extra, we’ll need to figure out how to get you there. You need extra. Kids are expensive.
Think long and hard about your family values.
At the end of the day, how important is traveling to you and your family? How much time and energy are you willing to put into making it happen, and what are you willing to give up? These are important questions you’ll need to ask yourself and answer honestly. If traveling sounds lovely but you’re kind of indifferent about it, there’s absolutely NOTHING wrong with that. Own it.
Teamwork makes the dream work.
If there’s a partner involved in your life and you share any financial responsibility with each other, it just won’t work if you’re not on the same page. You’ll both need to communicate openly and honestly to establish your shared values and create a joint plan for financial success that you’re both invested in and committed to.
Establish a family budget.
This is a biggie. I don’t think you can achieve any financial goal without some type of budget. Budgets come in a billion shapes and sizes; some are detailed, some are basic, some are weekly, some are monthly, some are loose and some are color coded. The good news and the bad news is that you can choose. It’s nice to have the freedom to find what works best for you and your family but the trial and error process can be challenging.
A good start is to use your monthly expenses from the beginning to create a list of the cost and due date for each bill. Then, work on dividing up your extra. What do you want to do with it, and what do you NEED to do with it? Emergency account? Savings? Debt? College accounts? Travel? Eating out? Entertainment? Appliances? Use your family values to guide your decisions. Try to think ahead to the pesky expenses that seem to pop up out of nowhere. License plate renewals? Vaccines for the dog? Christmas savings? Besides ALWAYS, when will the kids need new clothes and shoes, or when will YOU need new clothes and shoes? Plug those expenses into the appropriate month or paycheck. The more you can eliminate the financial unknown, the better.
If you value travel, wiggle even a small amount into your monthly extra somehow. Whether it’s large or small, the fact you’ve created a habit of saving is just as valuable as the amount.
If budgeting seems daunting, that’s because it IS, especially in the beginning as you’re establishing different habits and finding your groove. It can help to find a financial role model for guidance. Dave Ramsay (click here) and Suze Orman (click here) both offer some really valuable tools to help you develop a solid system of financial management (IMO – they’re a little hardcore). What worked best for me and my family was a hybrid of Pete the Planner (click here) and Tony Robbins (click here), who I think are a little more relatable to the everyday family.
Just like no single parenting book is going to apply to your exact child, no single system is going to apply to your exact family. However…what almost every financial expert and commoner who’s made it through the other side agree upon is one thing: YOU CAN’T IGNORE THE BIG D. Get your mind out of the gutter, I’m talking about DEBT.
Pay down your debt as aggressively as possible.
Similar to the stomach flu, debt makes me want to vomit. Upon closer inspection most people find their biggest financial issue isn’t the amount of their income, it’s the amount of their outcome, or the ungodly amount of money that’s sucked out of each check to pay off all the crap they owe, and interest on top. Work additional debt payments into your monthly extra, even if it’s small. Dave Ramsay’s debt snowball system (click here) is extremely effective in elimining debt. Medical bills, credit cards, student loans, car payments…get them paid off ASAP so you can actually KEEP the money you make. That’s true freedom, my friend.
Treat it like an expense.
Looking at your extra, decide on an amount to set aside each month for leisure/travel and and treat it like a non-negotiable expense. Even a small amount is an excellent start. It’s much less painful to pay for travel arrangements when you’ve been saving gradually instead of having to come up with a huge chunk of cash all at once. When you’re always building up money in the background your biggest stressor will be deciding where to go and when!
Throw it into a savings account.
You need to do something with the money you set aside each month. Open a savings account, throw it under the mattress, whatever you please…just get it OUT of your checking account and out of harm’s way. If you don’t want to spend it, don’t tempt yourself in the first place. Time for a trip account!
Live below your means.
This concept is often ignored just because it’s so simple. Figure out what you can afford. Spend less than that whenever you can. You can afford a $1200 mortgage. Does a $900 mortgage offer everything you need? You can afford brand new clothes for the littles. Do second hand stores offer you the same choices? Because we both know that $40 boutique outfit lasted all of two days before it became too dirty, too small, or too stained with someone’s bodily fluid. You don’t have to deprive yourself, but living AT your means leaves you with little to no extra and living ABOVE your means leaves you with debt. No good. The less money you spend, the more money you save, and the more money you can funnel back into your pot of monthly extra…and your trip account.
Lower bills wherever you can.
Switch to a cheaper cell phone plan. Cut or reduce your cable package and just hang with Netflix and good ol’ DVD’s. Renegotiate your car or homeowners insurance premiums. Remind your littles for the millionth time that lights, in fact, can be turned off.
Make some sacrifices.
This is a classic needs vs. wants scenario. Do you NEED a bigger, more expensive car? Or is your smaller, paid-off car doing the job just fine for now? Your washer broke so you need a new one, but do you NEED the $800 magical rocketship front load washer, or can you settle with the $400 one that does everything you need if it means more money goes into your trip account? Can you eat out one less time a week? Again, this goes back to your values. What’s most important to you?
Plan ahead whenever possible.
I know the struggle is real and all you want to do at the end of the day is die of tired. It’s enough to think ahead to tomorrow let alone next month or next year. If you’re able to muster up the mental energy, plan ahead. This will allow you plenty of time to research destinations and figure out how much you’re going to need to make it happen. This will also allow you time to look at your budget and adjust the monthly extra going into your trip account accordingly. Some things can’t be planned and last-minute adventures are fun too, but for the most part the further in advance you plan, the more money you’ll save and the easier saving will be.
Get creative to make extra money.
Do you have the time laying around to pick up an extra job on the side? Didn’t think so. All is not lost; an extra job may not even be necessary. With a little thinking outside the box, there are other ways to increase your cash flow…
Which I’ll talk more about in The Money Tree: Part Two. (click here to read it now!)