{"id":17724,"date":"2022-01-14T08:32:00","date_gmt":"2022-01-14T13:32:00","guid":{"rendered":"https:\/\/einvestingforbeginners.com\/?p=17724"},"modified":"2022-06-01T15:29:02","modified_gmt":"2022-06-01T19:29:02","slug":"individual-financial-planning-guide","status":"publish","type":"post","link":"https:\/\/einvestingforbeginners.com\/individual-financial-planning-guide\/","title":{"rendered":"No-Nonsense Financial Planning Guide for the DIY Individual (Pt1: Expenses)"},"content":{"rendered":"\n

Success in financial planning comes down to a few key principles<\/a>. Define your goals, curb your desires, and have patience and discipline. Make the right decisions and habits.  Have the right plan.<\/p>\n\n\n\n

When it comes to managing your personal finances, it\u2019s not a game to win overnight\u2014it\u2019s more like a path to follow, one you try and follow the rest of your life.<\/p>\n\n\n\n

So how can you make a solid financial plan for yourself?<\/p>\n\n\n\n

Well, I\u2019m not a financial planner.<\/p>\n\n\n\n

But\u2014we\u2019ve written a ton of articles on this blog to help people start and continue on their path to financial freedom, through some no-nonsense advice learned from the school of hard knocks.<\/p>\n\n\n\n

Let\u2019s talk about the three core pieces of good financial planning:<\/p>\n\n\n\n

  1. Income<\/li>
  2. Expenses<\/li>
  3. \u201cProfit\u201d<\/li><\/ol>\n\n\n\n

    Just like so many moral decisions can be decided with the simple statement\u2014treat your neighbor as yourself (the golden rule)\u2014so many personal finances decisions can be decided with one rule\u2026<\/p>\n\n\n\n

    Spend less than you earn.<\/strong><\/p>\n\n\n\n

    It seems that much of the world believes that \u201cif I just made a little bit more money, I\u2019d finally be able to get my finances together\u201d.<\/p>\n\n\n\n

    Being around the personal finance world a long time, you start to realize that this mostly isn\u2019t true.<\/p>\n\n\n\n

    \"\"<\/a><\/figure><\/div>\n\n\n\n

    It may shock<\/strong> you how many people make 6 figures a year and yet still live paycheck-to-paycheck. And you may be even more shocked<\/strong> how many people make less than 6 figures, yet are millionaires (shout out to The Millionaire Next Door<\/a>!).<\/p>\n\n\n\n

    So let\u2019s get down to that bottom line.<\/p>\n\n\n\n

    Simple examples you can apply to your own financial plan to get your \u201cprofit\u201d up, by both spending less and earning more.<\/p>\n\n\n\n

    Starting with expenses\u2026<\/p>\n\n\n\n\n\n\n\n

    Simple Financial Planning for Reducing Your Expenses<\/h2>\n\n\n\n

    There are so many great tips that you can use, today, to cut your expenses in so many ways. In fact, we\u2019ve written a ton on the blog and I\u2019ll link to some of those great resources later on.<\/p>\n\n\n\n

    But, the reality is that a few major expenses make up the vast majority of most people\u2019s budget:<\/p>\n\n\n\n

    1. Housing expenses<\/li>
    2. Car expenses<\/li>
    3. Food (and drink) expenses<\/li><\/ol>\n\n\n\n

      Simply changing your habits in these categories and\/or making the right long term decisions can have a massive, lasting impact on whether you succeed or fail in your personal finance journey.<\/p>\n\n\n\n

      Some of these might not be fun to talk about, especially since changing them can literally uproot your life.<\/p>\n\n\n\n

      But hey, I never said this would be easy.<\/p>\n\n\n\n

      Housing Expenses<\/strong><\/p>\n\n\n\n

      For most people, the cost of housing can make up 25%- 33% of your income or more.<\/p>\n\n\n\n

      That\u2019s a huge chunk.<\/p>\n\n\n\n

      Whether we\u2019re talking about a rent check or a mortgage, this monthly expense can make spending less than you earn seem impossible\u2026 or, like a walk in the park.<\/p>\n\n\n\n

      The bottom line\u2026<\/p>\n\n\n\n

      How much you pay comes down to location, location, location.<\/p>\n\n\n\n

      I can tell you firsthand that even in a country as prosperous as the United States, there are MASSIVE differences in the cost of living expenses depending on where in the country you are.<\/p>\n\n\n\n

      And if you\u2019ve lived your life in the same place all your life, you might not realize just how massive these differences are.<\/p>\n\n\n\n

      For example, I grew up in Southern California, in an area where living expenses are definitely above the average in this country.<\/p>\n\n\n\n

      By moving to a lower cost area at a younger age, I was able to halve<\/strong> my rent. That\u2019s with the same (or more) square footage and proximity to nice areas, by the way.<\/p>\n\n\n\n

      And then, while living here (Raleigh, NC), I learned that you can reduce your rent\/mortgage even lower by driving a little further out, and have met people who felt my new rent was expensive compared to theirs.<\/p>\n\n\n\n

      Everything in this world is relative, and this isn\u2019t always apparent unless you zoom out.<\/p>\n\n\n\n

      Not heeding this basic reality and applying it to your individual financial plan can make your whole process feel like running home in the snow, uphill both ways.<\/p>\n\n\n\n

      What\u2019s someone to do then?<\/p>\n\n\n\n

      Uproot and leave your old life behind just to chase financial freedom?<\/p>\n\n\n\n

      That may sound like a simple solution and yes, it can make a massive difference. Whether that decision is right for you comes down to so many things in your life\u2014relationships, career, children, family, interests, preferences\u2014the list goes on and on.<\/p>\n\n\n\n

      Simply moving to a lower cost of living area to reduce your monthly housing expenses has many moving pieces and may not be right for everybody.<\/p>\n\n\n\n

      Like with so many things in personal finance, there are tradeoffs<\/strong> to each path.<\/p>\n\n\n\n

      You have to decide what\u2019s right for you and your family, which can force some hard looks at yourself and potentially uncomfortable ideas and conversations.<\/p>\n\n\n\n

      But it\u2019s worth going through because if you\u2019re on autopilot in this regard, well that\u2019s not really a great financial plan.<\/p>\n\n\n\n

      At the very least, take a hard look at how much you pay and how you could potentially reduce it\u2026 both in the short and long term.<\/p>\n\n\n\n

      Car Expenses<\/strong><\/p>\n\n\n\n

      Second to housing expenses are car expenses, especially if you have a large appetite for certain big, shiny objects.<\/p>\n\n\n\n

      As much as we might like to think we\u2019re making the right choice on our vehicle(s) decisions, the end game to our financial progress may be greatly hindered just because we have the wrong beliefs on it.<\/p>\n\n\n\n

      Cars are tricky because like housing (and food!), it\u2019s pretty much an essential in most areas of the country\u2014especially for those having to go back into the office.<\/p>\n\n\n\n

      It\u2019s also tricky because you don\u2019t want to live on the two extremes:<\/p>\n\n\n\n