Financial Plan

[bcampbell]

I just joined this forum and this is my first post. I discovered this forum while searching for some information about finances.

I'm not sure if this is the right place to ask this question but am hoping you can give me some suggestions or direct me to where I might go to get suggestions.

I would like to develop a plan for our monthly earnings. Up to this point, we paid our bills and lived on what's left. Probably much like everyone else.

Dave Ramsey's snowball effect and T. Harv Eker's "Secret of the Millionaire Mind interest me most.

Ramsey suggest paying off debt as quickly as possible.

Eker suggests establishing 6 accounts each with a percentage allotment of your take home pay. The necessity account equals 50% of your take home and you are to pay all of your on-going bills with the 50% allotment.

I'm very interested in establishing the 6 accounts. However, our on-going bills amount to around 75% of our take home. I'd have to lower the amount I put in the other 5 accounts to around 5% instead of the recommended 10%.

We live rather conservatively. The only expense that we could really eliminate from the above percentage would be our cell phones and our tv/internet. We've trimmed the fat as much as we can at this point.

I see value in both Ramsey's and Eker's plans.

I like the idea of paying off our debt as quickly as possible using Ramsey's snowball effect.

I don't think we will be able to pay off our debt as quickly with Eker's plan.

I'm very interested if anyone has utilized one of the above plans and how it worked out for you.

Or, if someone has any suggestions I'm open to your ideas.

Thank you!

[aelle]

Hey, maybe you want this post moved over to Business & Financial? It would probably get more feedback.

You haven't explained what your financial situation is, or your goals. It would be helpful to give you more specific suggestions. I personally really like Ramit Sethi's guidelines (slash expenses on what doesn't matter, automate, earn more) but they aren't suited to everyone.

Originally Posted by bcampbell

Eker suggests establishing 6 accounts each with a percentage allotment of your take home pay. The necessity account equals 50% of your take home and you are to pay all of your on-going bills with the 50% allotment.

I'm very interested in establishing the 6 accounts. However, our on-going bills amount to around 75% of our take home.

If you want to stick with that choice, you either need to downgrade your lifestyle some more, or get out there and earn more. Or both.
What's the deal with the 6 accounts? There might be a reason why this setup is necessary, but from the outside it looks like an extra barrier that will make you never take action (you think you'll set it up "later", ie never).

[Criseyde]

Welcome to the forum. I've moved your thread to Business & Financial, hopefully it will get more views and replies here.

[pjhaggerty]

Originally Posted by bcampbell

I just joined this forum and this is my first post. I discovered this forum while searching for some information about finances.

I'm not sure if this is the right place to ask this question but am hoping you can give me some suggestions or direct me to where I might go to get suggestions.

I would like to develop a plan for our monthly earnings. Up to this point, we paid our bills and lived on what's left. Probably much like everyone else.

Dave Ramsey's snowball effect and T. Harv Eker's "Secret of the Millionaire Mind interest me most.

Ramsey suggest paying off debt as quickly as possible.

Eker suggests establishing 6 accounts each with a percentage allotment of your take home pay. The necessity account equals 50% of your take home and you are to pay all of your on-going bills with the 50% allotment.

I'm very interested in establishing the 6 accounts. However, our on-going bills amount to around 75% of our take home. I'd have to lower the amount I put in the other 5 accounts to around 5% instead of the recommended 10%.

We live rather conservatively. The only expense that we could really eliminate from the above percentage would be our cell phones and our tv/internet. We've trimmed the fat as much as we can at this point.

I see value in both Ramsey's and Eker's plans.

I like the idea of paying off our debt as quickly as possible using Ramsey's snowball effect.

I don't think we will be able to pay off our debt as quickly with Eker's plan.

I'm very interested if anyone has utilized one of the above plans and how it worked out for you.

Or, if someone has any suggestions I'm open to your ideas.

Thank you!

What is the goal for this financial plan? Until I know what you want this plan to achieve, what's most important to you about it, I can't suggest suitable plans.

Do you want to be financially independent as quickly as possible? There's a plan for that, if that's what you want. Do you want to live as high status a life as is possible on your current income? There's a different plan for that. Do you want to feel a sense of peace and security around your money? There's a plan for that too.

But until I know what you want, I can't advise a particular plan or resources.

If you have no idea what you want, I would suggest you read personal finance books/blogs until you get an idea. Check out get rich slowly and the simple dollar- free personal finance blogs. Or check out the early retirment extreme blog- the guy achieved financial freedom in five years. These are free resources, I could recommend books etc. as well.

But until you're really clear on your goal (which this post wasn't) it's hard to recommend good resources.

[aelle]

Originally Posted by pjhaggerty

Or check out the early retirment extreme blog- the guy achieved financial freedom in five years.

7million7years.com achieves a similar point with a completely different method.

[CoolBee]

Some recommend that your first priority should be to build a savings pot equal to one month (some say 3 months) salary and then pay down debt as much as possible which is another possible approach.
I used to do 'virtual bubble' accounts for myself but didn't physically split the money. I used separate columns in a ledger instead.

If saving a month's salary is really beyond what you want to do now, another approach might be to open a separate savings account and transfer say $10 a month to it by automatic payment from the bank (not sure what country you are in and what is available) and forget it. Even $5! I have done that for years and I have to say it's nice just now and then to suddenly remember I have £50 of money I had 'forgotten' to either pay an unexpected bill or buy an unexpected present with, or simply for some fun!

Another strategy I also used for years - about 15 until I moved countries and my life substantially changed - was to have all my income from all sources paid into a savings account with a reasonable interest rate. I started it when I was getting some payments weekly in arrears, some 4 weekly, some monthly and some cash payments randomly. Oh yes, and some quarterly in advance! Imagine if I'd spent that when I got it! Straight to savings!

Then once a month, I transferred a 'salary' to my current (checking) account equal to exactly what I needed for that month + £10 for a tiny bit of unexpected extras. So no matter what my income, I only gave myself a 'pay rise' to cover increased bills every year.

This is known as 'separate your income from your expenditure in your head' - they are to some extent unrelated.

[pjhaggerty]

Originally Posted by aelle

7million7years.com achieves a similar point with a completely different method.

Yes, his blog is interesting too. I recommend early retirement extreme because the method doesn't rely on earning 7 million dollars (which I think is unrealistic for everybody), it relies on methods that anybody with a decent income can access (decent being 30-40k/year)

[bcampbell]

I appreciate your replies. My goal is financial freedom. For me that means that I don't worry about money regardless if there is enough money to pay bills or if unexpected expenses occur.

Up til now, I've really stressed about money. I am in the process of changing how I think and especially how I feel about money.

I also have not been giving any money away and I would like to start doing that.

I'm 53 years old and a public school teacher. My wife and I also own a restaurant which, depending on the month, creates income. We also have 4 investment properties that are rentals. There is some cash flow there but it generally goes back into the houses.

I like the idea of knowing what I am going to do with my money. T. Harv Ekers promotes setting up accounts. The 6 accounts I am considering include: 50% necessities, and 10% each for giving, education, fun, investing, and savings.

I'm interested if anyone has utilized this kind of system and what were the results?

Thanks for your help!

[pjhaggerty]

Originally Posted by bcampbell

I appreciate your replies. My goal is financial freedom. For me that means that I don't worry about money regardless if there is enough money to pay bills or if unexpected expenses occur.

Up til now, I've really stressed about money. I am in the process of changing how I think and especially how I feel about money.

I also have not been giving any money away and I would like to start doing that.

I'm 53 years old and a public school teacher. My wife and I also own a restaurant which, depending on the month, creates income. We also have 4 investment properties that are rentals. There is some cash flow there but it generally goes back into the houses.

I like the idea of knowing what I am going to do with my money. T. Harv Ekers promotes setting up accounts. The 6 accounts I am considering include: 50% necessities, and 10% each for giving, education, fun, investing, and savings.

I'm interested if anyone has utilized this kind of system and what were the results?

Thanks for your help!

Not worrying about money is not a money problem, it is a psychological problem. There are people in worse financial situations than yours who don't worry about money, and there are people in better financial situations who do worry. I would suggest that the path to not worrying is to have a clear idea of where you're at. Worry is generally caused by uncertainty. Since the world is always uncertain, worry can be alleviated by knowing your position.

However, some things that can help you not worry as much-

save up some money so that you know you can meet unexpected bills.

lower your expenses below your income- so you know there is room to adjust if calamities occur.

beyond that though, you don't particularly need a particular investment scheme to achieve what you want.

Avoiding financial stress and worry is a psychological goal, not a financial goal. So you need new behaviors and mindsets, not money.

Being able to afford a particular dream or lifestyle is a financial goal.

[CoolBee]

Why not give the idea a good try for a few months and report back on how it goes, how it makes you feel etc?

Like I said, I sort of did it using what I call 'virtual bubble' accounts - ie budget columns in a ledger rather than actually opening a number of different accounts. It worked fine that way so each month I would add the requisitite amount to the ledger column and then take off any expenditures. In the UK household utility bills typically came quarterly, then a few years ago it became possible to pay a monthly plan based on typical expenditure which was adjusted every 6 months based on actual expenditure, so I did that instead for most things.

I agree somewhat with PHeggarty, that it's a psychological worry. From what you say, you are reasonably well provided for. I am just a couple of years younger than you and pretty well managed to 'retire' from full-time work when I was 47. I am contemplating returning to full-time work but mainly for non-financial reasons!

[Omarion]

Financial planning is one the most critical factor in every project and the person responsible for the feasibility is considered the most genius person.There are many professionals are involved in financial planning and their combined effort is resulted into a plan.