How to Manage your Personal Finances with Simple Budgeting
Connor Gillivan
I scale companies w/ SEO & content. Daily posts about the process. 7x Founder (Exit in 2019).
Graduating from College without a Financial Strategy
When I entered college at Quinnipiac University in 2008, I made a goal that by the time I graduated I would be able to fully support myself. My parents had shelled out thousands of dollars to support my growth throughout the first 18 years of my life and I was determined to lessen their burden once I graduated.
As I approached the end of my college career, I began to think more about the goal that I had set four short years ago. I had a paying job with the eCommerce business that I had helped to start and I was going to be paid to return to South Africa as the Country Associate for June through August.
While I had a steady income coming into my bank account, I had no strategy to manage my spending once I received the money every two weeks. My lack of strategy led to me spending an exorbitant amount of money in my final semester of college…money that could have been saved for the future.
As we all know, hindsight is 20-20, but there is no means of sulking on the mistakes that you made. It’s much more important to learn from your mistakes, understand how you can do better, and make change. So, I did just that.
Jim Cramer’s Advice for Managing your Finances
After realizing that I needed a strategy to manage my spending, I did what I always do when I need to learn something new: I read. As a recommendation from a good friend, I picked up “Jim Cramer’s Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)” to learn more about saving, investing, and the biggest mistakes that people make with their money. I read the book slowly over the next few months taking notes on each chapter and understanding where I could improve.
The book gave me an amazing introduction to the purpose of individual retirement accounts (IRAs), sound investment strategies, and how to avoid the pitfalls of poor money management. I highly recommend the book to anyone looking for an introduction to personal finances. It is a resource that I continue to return to as I grow today.
Finding my Break Even Point
While Jim Cramer’s book gave me a better overview of managing my personal finances, the most important activity that I completed at the end of my senior year was a personal budget focused on my break even point. Knowing that I wanted to afford all of my living and luxury expenses, I asked myself the question,
“What is the minimum that I need to make each month to live the life that I desire?”
As a soon-to-be college graduate, I wasn’t seeking the world. I wanted to be able to afford my rent, food, going out to the bars, car insurance, phone bills, utilities, and start saving. I opened a new Excel document and started to plot out the areas where I felt I spent the most money on a monthly basis and how much money I would spend on each.
Below is what I came up with in the Spring of 2012.
By completing a simple 30 minute activity, I was able to gain a stronger understanding of how much money I would need to earn each month to sustain the lifestyle I was interested in living.
We all have different break even points
Now, please remember that this is not the magic number for everyone. Each individual has different preferences in lifestyle that lead to different amounts spent each month. Be honest with yourself when budgeting and always overestimate to give yourself some wiggle room for unforeseen spending. Also, don’t leave out areas that you guiltily spend money on, i.e. shopping, eating out, home decor, etc.
A Two Tier Strategy to Managing your Financials
Fast forwarding to the present, my strategy for managing my financials has evolved and become much more organized. The Excel document has become more advanced, I have more accounts to manage, and the preferences for my lifestyle have been slightly altered.
To help those of you who are interested in making your financial management more strategic, I would like to introduce my latest strategy for achieving short and long term financial goals.
Read about my two step strategy to effectively managing your personal finances. Here's a sneak peek at what they entail. Read the rest here!