The Personal Finance Secret I Never Learned About In Business School
It’s delicious. I graduated with a degree in finance, but I knew nothing about personal finance.
Sure, I knew my way around spreadsheets and could manage them in my sleep. After all, the core of our studies taught us how to research financial records, analyze a company’s financial situation, and get into other technical issues.
But when I found myself buried in student loan and credit card debt, I found myself turning to Google
“HHow will I pay off my debt?”
The list of so-called tips and tricks was endless. I’m sure the financial principles themselves made sense, but for whatever reason, it felt impossible to stay on the road for more than two or three days at a time. Mental exhaustion and fatigue were real.
That’s when I realized that the reason the tips and tricks weren’t helping me at all was that none of the articles talked about the details and thinking behind the tips. These articles were spitting out financial recipes (so to speak) without dealing with the humanity behind our financial decisions.
In some ways, personal finance is very similar to food. We understand the basic principles behind each. In terms of finances, spend less than you earn – for food, spend less than what’s hot.
As simple as these facts seem, the emotional and psychological factors behind each are very complex. How do you deal with debt emotionally? How can you create new habits to replace old ones? What can you do to stay in the frame of mind to achieve your goals?
Fast forward to that and within one year, I was able to pay off my entire debt amounting to $77,000.
Budget Mom was my first passionate attempt to share what I learned – the real thing help knowledge – and people to make a difference in their lives. If finance majors like myself have never been taught even the basics of personal finance, how challenging should it be for the general public to sift through endless information to find practical financial advice?
Each blog post and Instagram post is published with one common goal: to truly help people wherever they are.
Today, I want to share a simple financial secret that you won’t learn in business school.
Simplifying Financial Life
When you think of budgeting and personal finance, what other words come to mind?
Seriously… before you finish reading this article, I kindly ask you to name the top three words that come to mind first.
There is no right or wrong answer to that question. However, I want to use this point to illustrate a personal finance narrative.
Chances are that the word “organization” is not among those top three words.
Planning your finances may sound simple, but often the simple answers run deep and are often overlooked. This is one of the many important secrets that forever changed the way I approach my budget.
Without organization, you may find that your finances cause stress and strain. By planning, you will find it easier to face the challenges ahead and stay motivated throughout your journey.
Let me give you a concrete example: Budget Categories.
Budget categories are important because they help us see trends and identify personal spending habits. For example, money spent on rent or mortgage payments may be in a different budget category than money spent on food.
Some of the more common categories include income, utilities, savings, housing, transportation, food, debt, insurance, personal care, entertainment, education, childcare, and more.
If we do not have enough budget categories (which means we have simplified too much), then the information presented is not enough to notice any trends. Let’s say all my variable income is classified under “miscellaneous” or “allowance.” If my variable spending is hidden behind one category, then I won’t be able to see exactly what I spent on clothes, impulse buys, or even take-out food.
Always remember the purpose behind it why you are doing something. In this case, the purpose of the budget categories is to help us identify spending trends. Oversimplification hides the very data you want to see.
On the other end of the spectrum, having multiple budget categories defeats the purpose of planning and streamlining. Our minds are filled with information instead of working towards our goal.
Now, this is where the “personal” of personal finance comes in. Even though I’m an Accredited Financial Adviser (AFC), I can’t tell you for sure what your budget categories should be. You need to know yourself and your habits well enough to create categories that make the most sense to you.
One thing is true. If you focus on simplicity, never sacrifice efficiency for efficiency.
A passionate coffee connoisseur, for example, can create a separate budget category for coffee. However, a person who drinks coffee occasionally, may classify those expenses under “food.”
Another example would be streaming services. A family that only subscribes to Netflix can classify that under “entertainment.” But a family that subscribes to Netflix, Hulu, Disney+, Prime, HBO, Apple TV, etc. you might create a separate category called “subscriptions.”
Find a balance between simplifying your budget categories while maintaining the integrity of the original reason: to be able to identify your spending trends and habits.
The Budget Channel Makes Home Simple
We do our best work when we feel calm and happy. And we work best when we’re in a space that facilitates those feelings.
Enter: budget channels.
I highly recommend that everyone use a budgeting channel in their life. A convenient budgeting channel is one where everything you need about your finances is within easy reach. Your bills are there. Highlighters, pens, and sticky notes are available. In other words, you don’t need to search anything else. When you sit down at your budget station, you have everything you need to manage your finances.
So why is this important?
First, this relates to the larger theme of “organization” in more ways than one. Sure, you organize your home, but you also remove any potential obstacles to productivity.
I can’t tell you how many times I used to sit down on the couch and turn on the TV to work on my budget. Twenty minutes later, I would sink into whatever was on the screen, funds forgotten. It’s easy to get distracted. On a budget channel, you can focus on what you’re doing.
It also gives you the opportunity to dream big about your financial goals. I encourage people to create a visual channel board that allows you to visualize and visualize your dream. If your budgeting channel allows you to be productive and constantly reminds you of your long-term goals, how can it be anything but successful?!
Here’s the best part: a budget channel doesn’t have to be trendy.
When I lived in my 800 square foot apartment, my budget station was just my kitchen table with a bookcase next to it that held my finances. Others have shared on the Budget Mom Facebook group that their channel is a cart. As long as your finances are in place, you’re golden.
Organization Adapts
Organization and simplification are skills.
You should learn it and practice it every day.
How many of us have cleaned our homes and put everything in its place, but during the week, things are not put back in their place? Before we know it, things are messed up again and the cycle repeats itself.
That is why it is important to commit to the organization in our daily life. It’s an everyday thing.
At Budget Mom, every product, every blog, every course, and every resource is not only focused on finance, but helping people achieve their goals through financial organization through envelopes, worksheets, and workbooks. It’s a visual approach that touched me and I’m excited to share with the world.
The truth is that you don’t need to spend money to get your financial house in order. Start with a 3-ring binder from the dollar store and start organizing your financial plan in your binder. You don’t need to go out and spend money on all these organization and simplification tools.
Simplifying the way you manage your money and the organization you bring to your routine is important for one basic reason – to gain awareness and clarity about your money so that you are informed enough to take action. Without action, there can be no growth.
