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What is the first thing that comes to your mind when you think finances? I’ll bet it’s not organization, right? But, it should actually be your first priority when getting your finances in order. Think of building a house; what is the most important facet of building a house? It’s your foundation! It doesn’t matter how great your blueprint is or how pretty the brick is that you’ve picked out, without a solid foundation, your new home will crumble.

The same is true when painting your financial picture. Organization is the foundation of your finances. So, where do we begin? Let’s talk about the dreaded “Budget.” I know – did you just get chills? As much as we hate the idea of budgeting, it helps map out your financial blueprint by outlining all of the income coming in and the expenses going out.

Start the process by adding up all of your income that comes into your household.  Next, add all of your fixed expenses like your rent or mortgage, utilities and car payments. Once you’ve added up your fixed expenses, subtract that amount from your total income. The amount of money left over is your disposable Income. This is the money you can now spend on variable expenses like gas, groceries and entertainment and yes, savings.

You’ve just built the frame of your financial house. Now, it’s time to set boundaries. How much should you spend on gas per month? What is your grocery budget? But, before you do this, let me encourage you to start a new habit this month. Once you’ve identified your disposable income, pay yourself first. Choose an amount that is comfortable for you and put it into your savings/emergency fund first. Then, budget the rest of your income to cover your variable expenses.

I understand that paying yourself first may not always be feasible depending upon your financial circumstances. If it is not, make a plan to start doing this because, let’s face it, life happens. Your car will break down. You will need new tires. You will have a pipe burst in your house. And, none of these things come with a warning. That’s why you need an emergency fund.

If your current debt load is the reason why you can’t commit to paying yourself first, let me suggest a method that will help you manage this process. It’s called the snowball effect. You may have heard of it. With this method, you pay off your smaller debts first and build from there. This gives you a sense of accomplishment as you work through your debt. As you pay off more debt, start redirecting some of that money into your savings for your emergency fund.

I look forward to seeing you move from building the foundation of your financial home to a finished product.

By:  Shanna K

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