Why so…budget?

Imagine this scenario.

It’s finally Friday. You’ve long yearned for this day to arrive because it’s been incredibly tiring and demoralizing at work. And you’ve decided you want to hang out with your buddies. You all meet up at the nearest pub to enjoy a few beers and to chow down on a cheeseburger. Then next Friday arrives, rinse and repeat. Then Fridays become Thursday and Fridays. Rinse and repeat.

gourmet-cheeseburger-1100.jpg
So very tempting – said everyone, ever!

Now imagine what your wallet or purse looks like after a month of this. After 6 months. Then calculate after a year! Frightening, isn’t it?

Why do I budget?

Like many, I didn’t grow up with an understanding of budgeting and personal finances. I didn’t quite understand the concept of savings and how this eventually could compound, leading to early retirement. And like many others, I figure my job would always be there and be my primary source of income. C’mon, let me eat that burger!

However, as I’ve grown older over the years, I realize now how so very important budgeting and savings is. I’ve worked in corporate finance for the past 8 years supporting both multi-billion conglomerates to billion dollar ecommerce platform companies. In each of these I was in charge of managing millions and billions of dollars worth of budgets including operating expenses, capital expenditures as well as partnering with executives to drive the growth of the companies. It’s this that lead me to understand and build out my own budgets.

So how did I budget for myself? Because I was an excel nerd (love it!), I decided I wanted to build a financial model for myself that would show me my budget in a way I could understand. I also leveraged the way I learned it at my job to build out my template. The data to support my model would be from Mint – I personally love this tool and encourage others to use it.

My Budget Tool

Here are a few of the capabilities I’ve built into my tool below. I look at my budget like I would with managing any business – through a P&L (profit and loss). Here is how I break it down within my household budget (numbers are for demonstration purposes only):

General P&L by Month

One Man Party Budget Budget Snapshot (what I will target for the year with a monthly re-forecast)

One Man Party Budget-Budget Summary

Annual Budget Analysis (review by years)

One Man Party Budget-Annual

Long-Term Financial Budget Analysis (review where my budget could be 10 years down)

One Man Party Budget-LT model

There are many more applications and views within my budget tool, but these are a few that allow me to keep both my finances and goals in check. I don’t want to work forever!

Thoughts over the years

I hadn’t realized till writing this post, but I’ve been managing this budget tool of mine since 2009! I have nearly 8 years of solid financial data; with this, I can and try to make better decisions.

For example, based on my P&L results I knew my internet two-year rate was coming to an end and would spike up to nearly $75! A’int nobody got time for that! So I called the internet company, informed them a competitor is offering a lower price, and just like that, they provided me with a new, lower rate! Simple, easy, and all it took was 5 minutes on the phone!

I hope this post helps you think about your own budget and, with a little bit of effort, you, too, can change your habits and start saving better. When you have the data at your disposal, you no longer guess or wonder – because you know now.

As always, feel free to leave a comment, thought or suggestion. Enjoy the weekend, everyone!

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Path to Freedom!

What if you didn’t need to work till 65?

Say what?

We all daydream about those days. You know, the ones where we stare aimlessly with lifeless souls at our computer monitors in desperate hopelessness wishing we were off in some remote island, sipping away on our mai tai’s or any drink for that matter! I know I do. And far too often at that!

So I thought about it for the past few weeks – what can I do to exit this never-ending cycle of work/eat/sleep, only to repeat the damn cycle all over again the next day. FIRE.

So you want to make a fire?

With some smore sandwiches? Sure! But no, not in this particular instance. What I’m referring to is FIRE, i.e., Financial Independence/Retire Early. Really well-known bloggers such as ERE and Mr. Money Mustache run independent blogs that document their journey towards FIRE, and it’s a very simple concept.

Basically, it’s…are you ready? Savings. That’s it, savings. You heard it correctly. Most of us have consumed our lifestyles around personal consumption, including things such as purchasing the latest fashion, buying new electronics, and eating out (mmm…lattes). But this very lifestyle is what is hurting our abilities to save for our retirement, and to for some, living paycheck to paycheck.

I decided I want to avoid this because I’ve made a personal decision and goal to retire early. I want to live life on my own terms, not on others, and in particular not on someone else’s watch. FIRE will help me achieve this very goal!

What next, dude?

Thankfully, ever since I graduated back in 2009 I’ve been keeping track of my budget very closely with the help of mint and my beautiful, sexy budget model. Eh, budget model you say? Yes! I love this thing.

When I graduated from college and entered the workforce, I learned this cool tip in excel called pivot tables. And for those of who work in excel everyday, this is a must-learn function (will save lots of time analyzing data quickly). It was during this period that I built my very first budget model version using mint data. And wow has it gone through many iterations. My wife thinks I’m partially insane due to how much I focus/rebuild/analyze my budget model. But its this very tool that’s allowed me to investigate key variances, overspending, and even fraudulent activity. Without this sexy beast, I’d have no idea what I was saving. Perhaps I’d be living paycheck to paycheck.

Thanks to the budget model, I was able to achieve several things. These include building an emergency fund, maxing my 401k, investing into my taxable accounts and fully paying off my student loans. Without this tool, I can’t imagine how swamped I would have been.

Well, cool brah

Thanks brah! I hope you enjoyed this post as I plan to update this blog with many more future updates. That FIRE goal of mine is very much achievable, and with the latest budget updates for both my wife and I, we’re slowly creeping towards that retirement!

For those who don’t already, start budgeting! I recommend using mint to aggregate the data – it will help categorize expenses and lay out the data in a easy to read format. Then you can leverage it to create pivot tables and savings calculations.

Well, till next time! Chat with you soon!