I invite you to discover your own spending strategy, the one that allows you to live your best life, free from financial stress and filled with possibilities and joy.
Step 1: Let’s determine the size of your spending jar–your annual spending rate (ASR). Take some time and, using Excel spreadsheet, make 2 columns: Must Have—Must Pay and Nice to Have—Choose to Pay.
Now, enter your monthly necessary expenses into the Must Have—Must Pay column: rent, food, cloth, transportation, utilities, medical insurance, student loans, taxes, etc. Next, enter your arbitrary expenses into the Nice Have—Choose to Pay column: phone, computer, car, gas, insurance, TV subscription, entertainment, eating out, etc.
Step 2: add monthly amounts from these 2 columns and multiply by 12. This amount is your annual spending rate, ASR. Make sure that your Nice Have – Choose to Pay amount doesn’t increase every year!
If you truly want to achieve financial freedom, you must know your ASR in order to be aware of your spending habits. Your monthly spending rate is very important but I prefer to calculate the annual spending rate because there are a few expenses that you have to pay annually.
Let’s determine the size of your 911 Fund—your 12 month survival fund. This should be fairly easy since you already calculated your ASR (annual spending rate).
Now that you have your Must-Have—Must-Pay amount and Nice-to-Have—Choose-to-Pay calculations ready, all you need to do is to add most important items from the Nice-to- Have—Choose-to-Pay list of expenses to your Must-Have—Must-Pay expense amount.
To calculate your Short-term Fund, add all your up-coming debt obligations (mortgage down payment or tuition amount, cost of a new car, etc.) and retirement contributions. It is expected that you may not know all your short-term up-coming needs at this moment. Thus, simply keep this calculation up-to-date as your situation changes.
Read more on this topic next week.
To your Health, Wealth and Happiness,
Millen has a way of opening up conversations that not only make you feel safe to talk about money, but her questions have been so profound that they have made immediate shifts in my mindset and my circumstances have changed almost immediately too, including more money showing up, but more importantly, more and more opportunities. I have found new and inspired direction, and am feeling a lot more peaceful and excited about life in general. Millen offers so much value and a solid advice! She is a big picture thinker and it is infectious! Thank you, Millen, from the bottom of my heart and the top of my soul.
Millen Livis is a gift to humanity. Millen is very generous with her time and energy, sharing her vast life experiences and strengths, empowering me to become a better human being. Millen has impacted my life spiritually, emotionally, physically and financially, by her encouragement and clarity. I have not said, “Thank you!” enough.
Millen brings together an interesting mix of feminine wisdom, clear logic, assertiveness and humility in all of her interactions. With her warmth, intelligence, diverse experience and passion for ‘Dare to be the best you could be’ message, she inspires other women to reach for the goals they set for themselves.
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