Financial Planning Tips From a Budget Savvy Mom

I wasn't born with a silver spoon in my mouth. Our father was a below average wage-earner while our mother stayed home handling our finances. Growing up, I witnessed how she stretched out our father's hard earned money to maximize purchases while having side hustle just to make ends meet. She'd never lectured me on how to spend wisely but seeing how she did things and all the hardships that came with it, I knew back then that money doesn't grow on trees. This here was the truth that drove me to be frugal.

When I was a kid, whenever I see a rich person, the usual thought was they were from a well off family. Now, the rich people I knew were actually not born rich, they were self made. They may not be millionaires (yet) but they are enjoying the financial freedom which is a goal for many of us.

Financial freedom means having enough savings, investments, and cash on hand to afford the lifestyle we want for ourselves and our family - while having a passive, re-generating income that will allow us to retire or pursue a career without being limited by our earnings each year. Unfortunately, a lot fail to achieve this. But why some were able to have this kind of independence? Because these 'some' are in action to save up!

• They value every penny
• They stop throwing away their money
• They plan their budget
• They do not splurge themselves with unnecessary things
• They cut down credit cards
• They spend it on investments
• Most importantly they have goal and they have the drive to reach that goal

A lot to chew in one bite.

For most of us, saving alone can be difficult to practice in daily life when there are bills to pay, mouths to feed and necessities to buy. No more capacity left for investment. However, the road to financial freedom starts somewhere. 

If you have savings, you will have extra cash. A money that you can put into investment, which eventually will have ROI (return on investment). ROI becomes an income which you can invest again. That becomes a re-generating, passive income for you. All because of the small amount you started to save today. Start small, think big.

When it comes to saving, the hardest part is getting started. And it makes it more challenging if one is not a big time earner. One rule that fits all: SPEND BELOW YOUR MEANS.

If you want to save but you don't have a concrete plan, below are some general guidelines (applicable to married or single person) that hopefully can help you kick start your own financial plan:

Evaluate your financial status 

Are you always running out of cash? Do you feel like you are spending more than you should?  Are you sometimes behind your bills because you thought you have enough only to realize you have overdue bills and ended up paying penalties? Do you ever wonder where your money goes? You want to cut down your spending but you don't know which one? If you answer yes to one of these, you need to have a serious evaluation of your finances and start making a plan. Think about your goal - to be debt free, to have emergency savings, to buy a house, or it could be simply knowing your monthly expenses.

Start your plan with your goal in mind.

Create a Budget Plan

Create a weekly / bi-weekly / bi -monthly / monthly budget - whatever suits you. A budget plan is a tool that can help you check your spending habit, track where your money is going, keep your expenses below your income and help manage some oversight.

Come up with a realistic list. Remember to write down a basic list of needs first, bills and their due dates. 

If you are over budget, run down your list again. Cut down some, remove others, shuffle. 

Pro tips: 

1. Allocate budget for bill payments in advance. If the due date is on every 24th of the month, set a side the needed amount from your 15th of the month payroll.

2. Allocate at least 10% of your monthly earnings to your savings. But if you are on stage of still recuperating financially, try cutting down some expenses. Whatever you can save, put it in your savings.

When you are done with your list, stick to it! It is very important to stick with your budget plan as it will affect your bills payment schedule as well. 

Revisit your budget every payday. It takes time to make this a habit and it takes a few actual run to come up with a consistent, reliable budget plan. 

Trim away credit cards and pay up your debts

Proverbs 22:7 says "The rich rule over the poor and the borrower is slave to the lender." You will never experience financial independence when you owe someone money you still don't have.

Prioritize your debts right away. 

If you have multiple loans or outstanding balances from more than one credit cards, apply for a credit consolidation. Averaging the interest rate of your existing debts and comparing it to the fixed interest rate when you consolidate it, you'll end up paying for a lower interest rate. Also, a portion of your monthly payment goes into paying the principal amount which means you will be able to pay ALL your debts in less than the time you would have should you opted to just paying the minimum amount. 

Pro tip: Incorporate your debt repayment strategy in your budget plan.

Another step to taking control of your money is to stop borrowing.  

Credit card is not a necessity but it can be beneficial and it is such a great alternative to cash. If you opted to have one, choose a credit card that offers great deals yet lower annual fee. But remember, the miles or cash-back you earned are only valuable if you're not falling into debt or paying interest. So always pay off your credit card in full each month. 

4. Start an emergency fund

Some says save for an emergency fund first before paying off your debt.

Personally, I want to work on clearing debt first. You can't really kick-start your financial future if you're carrying a ton of debt. And prioritizing emergency fund would have you ending up paying more on interest rather than cutting off your debt.

You don't need to be totally debt-free to start saving for your emergency fund. When you are in a point where you have room to save up, stash some for your reserves. Your emergency fund should amount to at least 6 months worth of your expenses. Should the unthinkable happens, you will be able to avoid total ruin.

5. Investment

Life insurance is not the investment I'm talking about here. Life insurance should be accounted already in your monthly budget as this is a necessity.

Why do investment comes after monthly budget, and debt and after emergency fund? Because you need to be in good enough financial shape to start investing. Investing happens when at the end of the month, after the bills are paid, you have extra few dollars you can put towards your future. 

Another misconception I had before, investing is also trading. These are two very different methods of attempting to profit in the financial markets. Trading is short term while investing is putting money away for a long period of time. 

Pro-tip: Don't put money into investment when you know you need it in 6 months time.

Above are practical tips but I want to add one more that is as important as the rest.

6. Give HIM what is due to Him and not just what's left

Honor the Lord with your wealth and with the first fruits of all your produce; then your barns will be filled with plenty, and your vats will be bursting with wine - Proverbs 3:9-10

In Malachi 3:10, God said to test Him on this. 

The more you give, God will return to you. There is no way you can outgive God. You will get something back in ways you will never imagine and you will never lack for anything.

At some point when we were knee deep in debt, we stopped giving the 10%. Because we want to have that extra more cash to pay our debts. But our debt was never cut down because there was always something needing an extra cash too - such as our car's transmission blew up, tire alignment needed, car had been vandalized we need to pay for the insurance deductible, then another, and another. We paid our debt some chunk at one time, but we also took credit lot of times.

Giving him the 10% back is proving your faith in Him and trusting Him with your finances. When you trust in Him, God will take care of you, His provision will always be upon you.

In closing, budgeting is a one step closer to making a solid financial plan for yourself. If you haven't started yet, now is always the best time to do it. And remember, this process is not an overnight thing. This is a journey. It involves your commitment. Most importantly, you are working for your future life so all the effort put into it will always be 100% worth it.