Financial Planning for Dummies

Andy and I are both Type A control freaks. We are both constantly checking our bank statements - him for more business/tax reasons and me because I'm just a money hoarder. This can make financial planning interesting because we are both stubborn and find it difficult to give up complete financial control. He has always used a financial program to file receipts, so in the beginning he was really the finance-man. Although the program he uses makes it really easy come tax time and gives him everything that he wants to know, it wasn't giving me the information I wanted on an ongoing basis.

After just a few months of marriage, we determined it was easiest if we both let the other do their own thing, even if it meant we overlapped. In many ways we repeat what the other one is doing, just in a different way. At least we are both in the know that way, right? He continued to do his thing, while I started doing my own.

Enter these babies!

There is something about physically writing down your expenses that makes me feel more in control, but I really hated those dumb register booklets. They took up extra space in my wallet which was completely unnecessary since I don't write down expenses when I'm out and about. I know people tell you to do that, but I always wait until the payment actually goes through to write it down in the register. If you are afraid of overdrafting this is not a practice I would recommend, though!

Anywho, I created a larger, easier-to-write-on version of my register using Excel. It is colorful and I actually look forward to filling it out. I just print out a few blank copies at a time and keep it in my "Financial Worksheets" folder in our filing cabinet. I aim to update it every Tuesday, but there may be a week where I know we have more items on our statement, so I will update it earlier. I never go more than 7 days without doing this, so I can usually finish the entire process in no time at all.

After I've gone through the register and balance everything, I pull up my handy-dandy Excel Budget Worksheet. It is my one stop shop for finances.

Let me give you some background before I get back to my weekly process. When I created this for the new year, I started with a projected budget. Do this by taking each annual or monthly bill and then just estimate spending for other common expenses. I tried to find a balance between being too specific vs. too general. I did not want a list of 50 categories to sort through, but I also want them to be specific enough that I easily know which category an expense falls under. Occasionally I will add a category if I find a need for it. Once I get a few years of data under my belt, developing an accurate budget will be much easier.

By coming up with a projected budget, you can estimate how much you will save over the course of the months/year. If your projected savings is less than you want it to be, you can adjust your budget so you know you only have X dollars to spend in each category. I personally overestimate expenses and underestimate income, because I'd rather be pleasantly surprised with more savings. Creating a budget also allows you to compare your real spending with your projected budget, making it easier to adjust spending in the future.

The worksheet simplifies it all so you can focus on things individually, rather than feel overwhelmed by "trying to save". Before doing this, I really only focused on keeping my bank account above a certain number, but if you have more than one account that can be difficult. Plus by compartmentalizing and tracking, you will likely be surprised by the amount of money you spend on unnecessary things, motivating you to save even more! I may only be 23 but I'm already concerned about saving for retirement and paying for kids' college tuition!

Again, color and order makes me happy and I wanted to make the worksheet pretty so I look forward to updating it each week. As far as my weekly routine, I refer to the newly added items on my checkbook register and start with any income. It gets added to the appropriate column and then I do the same for expenses until all of the new items have been added. As the months go on, I continue to add to it each week.  I always do this in tandem with updating the checkbook register.  I do have a credit card, and I separate all of the purchases on those statements into the appropriate categories in the month the bill has been paid. For purchases made at Walmart or Target where I may buy several different things, I lump the entire amount spent into one category rather than separating out each individual item within the purchase (you may have purchased food, cleaning products, etc. all in one but don't worry about separating). It will never be perfectly divided, but just do your best. As long the expenses and income even out, you're doing well!

The wonderful thing about Excel is having the ability to use functions to create a running tally of income and expenses. As soon as I put in a number, the totals on the bottom and right side of each table are updated without me having to do anything. Therefore I always know the total of how much income each job has provided and how much expense has been spent in each category (monthly and annually). Below the Income and Expenses charts, the Savings chart is already set up to the function [Income - Expenses = Savings], so I consistently know if we have spent more or less than our income for that particular month. I've always been told the number one rule of finances is to make more than you spend, so by looking at things month to month I know to always aim for a positive number in the Savings column.

Another added thing I do is keep track of the totals in our accounts at the end of each month. I just do this to see if there are any patterns.

Even though I've been babbling a lot, this is a super easy system to maintain! Honestly it takes me about 15 minutes each week to do, and I know I'm always in control of where we stand financially.

Organizing Files with the Freedom Filer

Happy Tax Day, people! Since April is Tax Month I figured I might share some things that have made this tax season a little easier for Andy and me.

Since the beginning of time, I've wanted an appropriate filing system. I'm gonna be honest with you, until recently I knew nothing about taxes or what documents to keep/throw away (and I still really only know the basics). Andy files all of our receipts/bills into the computer because of the farm business so I don't have much of a hand in it. But there are bunch of other items besides bills we needed to start filing, so I did some research..

I don't have any affiliation with Freedom Filer but I've had my eye on one since watching this video posted on Alejandra.tv a long time ago (probably a year and a half ago to be honest). It was one of the satisfied gifts on my Christmas list this year because it's not something I would likely buy for myself. We got a filing cabinet and folders shortly after Christmas, and right away I got to putting it all together.

I mostly got the system because as I said, I had no idea where to start. The system comes with pages and pages of color coated sticky labels that are already printed. Could you do this on your own? Sure. But printing labels is a pain in the rear and takes forever (at least for me) - so that part is a win for me.

The system is broken down into color-coded categories, which makes finding certain files very easy: 

-Permanent items (red), such as birth certificates, education certificates, family history, etc. These are items that never have to be rearranged or taken out.

-Temporary items (orange) are things that have an end, such as leases and insurance policies. These folders will likely always be filled but need to be replaced with updated documents (ie. each year put in your new lease agreement or policy).

-Monthly items (green) are mostly financial related, like bills, receipts, and bank statements which you are constantly accumulating. 

-Tax items/Archives (blue) would be any tax forms (1099, W2, or returns) or things that need to be written off as a work expense.

-Resource (purple) and Active (gray) folders are sort of miscellaneous. Things like coupons, to-do lists, and any other ongoing items belong here.

It also comes with a guide that gives a lot of helpful hints on how to set up and organize the system - SUPER SUPER HELPFUL. It sounds straight forward but it's definitely important to read before you do anything. Then you can figure out which of the labels you'll need and buy appropriate folders from there (I definitely got more than I needed because I skipped this step). Most importantly the guide breaks down each category and each of the labels provided within. So it gives you examples of items to be filed within every single label provided. I chose to get colored folders for each of the colored labels, but if I were to do it again I would use all one color and let the colored tabs speak for themselves. Then I wouldn't have to worry about having the right of number of folders for every color - I have a lot of extras. 

I should note that I only used about 1/3 of the labels they give you. There are a lot of repeats that I didn't need. And as I said, Andy already had a system for receipts so I basically didn't need that whole section (perhaps I can someday get him to convert to this way, but I doubt it). There is a label for literally everything you could possibly think of - every type of account or purchase or form out there. You're destined to not use them all. The labels are general though. For instance they say 'vehicle' instead of 'Ford Fusion' or whatever, so as your life evolves you can still keep the same file without needing to change it. You can add the letter or number stickers to personalize them if needed. It's sort of hard to explain, but it all works. 

Overall it cuts down the labor of creating your own file system if you need to have everything printed and matching like I do and don't know where the heck to start. I honestly think the guide is the most helpful part, as I could've just used that to form a list of labels to make. I saved all the labels I didn't use because I feel like our needs will change as the years go on (meaning more files). I've added new files a few times since I set the system up. It has reeeaallllyy cut down on the paper clutter in our office (which is still a work in progress).