Flexible Budget

Flexible Budget

When you want to give an excuse to why you can’t or won’t spend money on a particular product of service, the average human being will blame it on the budget. “It’s not in the budget.” “I have to check my budget first.” “I don’t think my budget will allow it.” “I have to see if it will fit in my budget.” These are the many budget phrases I have been subject to listen to as I have asked people to buy from me and you know what it funny? I’ve never seen a person with a written budget before.

Actually, I take that back. There was this one married couple that had a planned out budget that the wife did every month to make sure their money was always accounted for. I applauded them, but in my mind I was condemning them, because I knew the only reason why they had such a strict budget was because they weren’t making enough money to begin with. Now, I don’t want to be the guy to tell you that you should never have a strict, carefully planned budget because the best companies in the world have budgets. But for growing companies, that budget can get stretched out sometimes.

For my hardcore budgeters this is for you. For my non-budgeters (almost everybody) this is for you. The flexible budget is for those who are looking to grow their success Empire. It’s difficult to progress financially if you’re on a fixed budget plan, and yet at the same time it is easy to lose track of your funds if you are unaware of how much money is going in and out. So I wanted to give you something that will allow you to recognize your important expenditures as well as your optional expenses that can be altered and manipulated. But most importantly, I wanted to bring into the equation the concept of contemplating new ways to grow your money in the short-term as well as in the long-term. I wrote out a small list, according to priority, on what you should be most concerned with on a daily basis and where you should start your budget transformation.

Prioritizing your  budget

1. Income: Money received from work or through investments.

The first step to creating a thriving flexible budget is first understanding how much money you are making right now. This is important because this is what you have been preparing for since kindergarten; making a living. The question is though, are you making a living or are you just surviving? Now, it is possible for a person making one million dollars a year to be barely surviving if they are over exerting their funds, but for the most part I think it would be wise to believe that most millionaires are living pretty comfortably. I can’t say the same for the average person. I know in America, only 5% of the population is able to retire financially independent. Meaning, they don’t have to go back to work if they don’t want to without compromising their current way of living. I’m not advocating that everybody needs to become a millionaire, though I think everyone does, but I do believe that everyone should have a certain income goal in mind.

According to the U.S. Global Investors, in order to be considered in the top 1% a household needs to have a combined income of over $500,00 a year. A household needs to be at about $150,00 in income to be in the top 10%. And to reach the top %20, a household would have to capture a combined yearly income of $100,000. I know that these numbers can seem big, but it’s not out of reach for a household to reach $100,000 in income when the average income in the U.S. is just over $50,000 a year. Since we live a world where it is commonly seen for both parents to be working now, this can definitely be done and should be done.

It is my opinion that everybody should be fixed on the income figure of $100,000. If you want more, I say go for it, but you should never want less. Why? Because it’s going to make your flexible budget that much harder to manage. You need wiggle room so that you can grow your money in the long run as well as enjoy it in the short. It’s difficult to do that and pay bills when you’re only making $50,000 a year. The budget can become devastatingly compromised which will affect your current living situation as well as your future living situation when it is time to retire.

To wrap this section up, if your household is not bringing in at least six figures in yearly income, then this should be your biggest focus when it comes to your budget. You should be asking yourself everyday, “how do I get to the $100,000 mark.” And yes, technically you could use investments to help you get there, but you have to be careful and do your due diligence in researching the subject because you don’t have a lot of money to play with in case you make a bad investment.

2. Bills: An amount of money owed for goods supplied or services rendered, set out in a statement of charges.

When it comes to flexible budgeting, your income should be your number one priority. What we find instead, is that most people’s mind is focused on bills. Here is a tip; the bills are not going to change unless you add-on another bill or stop paying for one of those bills. The only thing that has the flexibility to really change is your income. 

You need a car, you need a place to stay, you need a phone, you need your utilities, and you probably need the internet. Could you get a used car? Sure. Could you live with your parents? Possibly. Can you survive without your phone? I’m sure you can, but that’s not living. That is called surviving. If you want to live, make the money and understand what your bills entail.

If you have more bills than you can remember off the top of your head, and I mean recurring payments, then you should definitely make six figures your income goal; that way you won’t be bound to counting every penny that goes out every month. The goal is to lightly track your expenses, not have to watch over them like a hawk. If you want to pay a small rent at your parents house, carry around a flip phone, and drive a 20-year-old ford pickup, then making even $20,000 a year can be comfortable for you. But I know people and I know you don’t want to live that way. I also know that you don’t want to have to calculate your budget on the regular because like everybody else, YOU DON’T HAVE TIME. So be sure to make your money and to make your bills an automatic payment that is not a true worry of yours.

3. Emergency fund: An account where you set aside funds to be used for unexpected expenses.

You’ve got the income (or at least you’re working on it), you’ve got the bills taken care of, and now it’s time to save for a rainy day. This is not your investment fund. This is literally just an in case of an emergency account. You might lose your job, the economy might crash, your car might get totaled, somebody in your family might become horribly ill, you just never know. In light of these and other possible setbacks, it is important to get yourself prepared. I like to use Dave Ramsey’s rule of saving for a 6 month spell. So, whatever your income per month equals when added together for 6 months, that is how much you should have saved away in your emergency fund. It’s a brilliant plan and highly under utilize. Why? Because people typically don’t make enough money to pay their bills, let alone save for the future. So once again, we need to get the income up. As that raises to more comfortable levels, we can then begin to save for a possible drought. But understand, you won’t have to put money in this account forever, just until you reach the 6 month mark.

4. Investing: Expend money with the expectation of achieving a profit or material result by putting it into financial schemes, shares, or property, or by using it to develop a commercial venture.

Here, we are talking about putting your money into entities and systems that will give you some type of return on your money. This can be in real-estate, stocks, bonds, start-ups, mutual funds, IRA’s, Roth IRA’s, or 401k’s. This is a tricky subject and I would like to warn you on the implications that many financial advisors will make. Investing your money with a financial advisor is not like trusting a doctor to perform surgery on you. A doctor has to go through intense schooling to be made sure that they are competent and know exactly what they are doing. A financial advisor only has to prove that they are certified in knowing the rules and regulations of working with securities. There is no proof that they know how to invest money in such a way that will make you a significant return. So before you put all of your faith in a financial advisor, first make sure that you focus on raising your income, get your bills paid for easily, build up your emergency fund account and then get some background knowledge and terminology by reading these two books.

The Cashflow Quadrant by Robert Kyosaki 

the cash flow quadrant

Money: Master the Game by Tony Robbins

money master the game

5. Miscellaneous Expenses: Often a general ledger account in which very small amounts are recorded.

This is where we spend money on frivolous things. Like the movies, going out to eat, birthday presents, chew toys for the dog, music concerts, etc.. Typically nothing too crazy goes here except maybe the occasional vacation that you take your family on. It’s good to have money to spend on outside of your obligations. I want you to live, not just try to survive. Imagine if you were living exactly the way you are now and you doubled your income. If you’re the average income earner, that would make you a six figure earner. That leaves room for a lot of extra spending. But understand this, your extra spending doesn’t have to be limited to entertainment. This is how you can pay for your self-education. The books, the courses, the seminars, the lectures, the events, the webinars, the coaching, and any other way you can get your hands on the knowledge needed to build your dream life. This is your chance to invest in yourself for you are the ultimate return on your investment if you take it seriously. I want you to live, but I also want to you learn.

6. Dreams: Your greatest desires that you wish to manifest in your life.

This is a flexible category, because if you’re an entrepreneur this might fall under number 3 for you. Meaning, if you’re dream is to build a multi-million dollar company, or at least a passive income generating company, you’re going to have to invest most of your funds, outside of your bills, back into your company. In this case, your dreams come first. But if instead, your dream is to travel to a new country every year for a two-week vacation, then this dream will need to stay in its rightful place here because you are first going to need the income, your bills taken care of with no worry, an emergency fund set up, an investment plan that can pay off your vacations, a self-education program, and finally you won’t want to have to strictly hold your time to work for 50 weeks out of the year just so you can afford to leave the country for 2 weeks. That’s living for 2 weeks out of the year and surviving the rest of your life. You will not be happy this way, but you can be happy if you have enough in the income bracket.

7. Debts: Something, typically money, that is owed or due.

The least important of them all. How is that? Well, just in case you are skeptical about what I might say next, take a look at your government. Doesn’t really matter which one honestly. How about the United States of America. They treat the National debt like an I.O.U.. And if the government is supposed to be comprised of our greatest leaders, then we should follow their example. And there example is, as long as you’re making a substantial amount of the money, the debt isn’t that big of a deal.

Don’t misunderstand me, I’m not saying that you should never pay your debts. You definitely should, but don’t feel obligated to do so if it’s going to hinder your other 6 categories. If you’re making $100,000 a year you will have no trouble getting a car or finding a place to live. Money always talks. It speaks a lot louder than your credit score. This does not mean you should purposely have a bad credit score, just don’t stress out about it, it’s not like a test score. It won’t keep you from graduating.

These are the main concepts of focus to execute a flexible budget. It’s not scientific or based on data per se, but it is based on logic, experience, research, and creativity. The reason why it can work incredibly well for anybody is because anyone in the top 20% income bracket can definitely live a comfortable life and if you follow the other guidelines loosely, you will still gain the knowledge and awareness to build an almost indestructible financial life for yourself.




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pursue your dreams

Mel Jones the BEAST