The Complete Guide to Budgeting, Investing, and Paying Off Debt

Money management… A touchy subject for anyone, and many people seem to get immediately overwhelmed. We all want the quick and easy solution to our biggest problems, but please, take the full 15 minutes out of your day to go through this entire article in detail.This is as simple and effective as we can possibly make budgeting, investing, and paying off debt, and you will use the following information for the rest of your life. Follow the instructions and we will cheer you on the entire way. Here’s a quick overview of what we’ll learn.

First, a budget. You find out exactly where your money is going every single month, down to the dollar. Second, you find out where you can start reducing expenses, and you enjoy the challenging game of watching your profits increase with every cut. Third, you take that newly found cash to save, invest, eliminate debt, and work towards financial freedom. It’s not always easy, but it is simple. It takes time, but the time is going to pass anyway. Wouldn’t you rather get started now for the sake of future you?

 

BUDGETING

Month by month, week by week, day by day. If any of us currently follow a budget at all, we usually only check in at the end of the month. The rest of us wake up with good morning texts from bae… nope, it’s just a message from our bank telling you how much money we don’t have. Brutal.

If you’re really going to get a handle on your money, you need to break it down even further. If your food budget is $500 this month, it’s much more effective to know you can spend $125 a week, or $75 on a Sunday groceries trip and five $10 meals until next Sunday. That’s trackable and manageable.

A good 50% to 75% of your expenses are going to be fixed and essential, like rent, car payments, and utilities. 20% – 50% of your expenses are variable, like food, entertainment, and shopping. A non-negotiable minimum 10% of your expenses will now be going towards capital, which means saving or investing (perhaps paying off debt, initially).

 

EXPENSE CATEGORIES TO TRACK

Here is a list of comprehensive categories where everyone spends, or should be spending, money. We’ve added explanations for the more unique categories, and you will probably include additional ones important to you as you create your own budget.

  • Home
    • Rent & Mortgage
    • Supplies (Dishsoap, repairs, etc.)
    • Utilities
  • Food
    •  Groceries
    • Restaurants
  • Auto
    • Fuel
    • Insurance
    • Repairs
  • Health
    • Payments (Insurance, gym, etc.)
    • Maintenance (Haircuts, vitamins, etc.)
  • Fun
    • Shopping
    • Entertainment (Bars, movies, etc.)
  • Capital
    • Investing
    • Savings
    • Giving (Donating funds, meals for the homeless, etc.)
  • Debt
    • Payments

After just a few months of budgeting, you’ll know exactly how much you spend in each category, and where you can start to save money and accumulate wealth. At the end of each month, you’re going to end up with a profit or a loss, just like a business. Our goal is to increase profits, of course! The most successful businesses reinvest those profits to grow even higher. That’s what our capital categories are for, and we will explain that very soon.

 

PICKING AMOUNTS FOR EACH BUDGET

It’s pretty tough to give an exact number for a category, because everyone lives drastically different lifestyles. Your rent could be free while living with your family, and someone else’s rent could be $3,000 a month on a big home mortgage. So instead, take your monthly income and multiply it by these percentages for a good idea of a budget.

  • Home: 40%
  • Food: 20%
  • Auto: 10%
  • Health: 10%
  • Capital & Debt: 10%
  • Fun: 10%

 

SCHEDULING BUDGET CHECKS

You don’t have to update your budget every single day, but at least once a week you should sit down and go through your revenue and expenses with the tool of your choice. This is 15 minutes a week that makes you richer for the rest of your life, so don’t miss it.

Use Google Calendar or another calendar platform to set weekly reminders. We’ve used a 4-week split for each month, regardless of additional half-weeks included. Businesses split their fiscal year into four quarters, which means we can pretend we go through a fiscal year we can improve upon every single month! For example, our budgeting breakdown might look like:

  • Week:
    • 1: 1st – 7th
    • 2: 8th – 14th
    • 3: 15th – 21st
    • 4: 22nd – End

On the 1st, 8th, 15th, and 22nd, you’re going to look back over the last seven days and update your budget. At the end of the month, you’re going to review the entire 30 days, make budget adjustments for the next month, and manually make any transfers or payments that are needed. You’ll wind up with a single number, a profit or loss. How much can you profit?

monthly-finances-check

 

BUDGETING TOOLS AND TIPS

You should choose to make all your payments with only cash or only a card. Using just one as much as possible will help you keep your transactions in one place. Using a card is usually best, because having all your transactions in an online database makes it much easier to understand where your money is going. There are a few tools out there that can help.

We’ll throw down a recommendation for Mint.com, even though it has some flaws and bugs. Once you sync your bank account, your transaction list will update consistently and Mint will do its best to auto-categorize where you are spending. You can create budget goals for each month, as well as check out charts to show you how much you spend on each category.

 

THE CONQUER TODAY RESOURCES SHEET

Here’s one of the most important things we’ve ever learned when it comes to managing your resources. “Set it and forget it” is not always a good thing. Sure, it may save you a bit of time, but guess what? You actually forget it! Over 90% of this process is going to be automated for peak efficiency, so that means you need to pay careful attention during your weekly checks and transaction categorizing.

For those of you who want the best possible shot at mastering money, we’ve created an extremely powerful spreadsheet for budgeting: Conquer Resources. Each week, you’ll log into your bank website and download an excel file of your recent transactions. It takes two minutes. Copy and paste them into your spreadsheet, and select a category for each transaction. That takes about five minutes.

The budget sheet will auto-update your income and spending by category, week-by-week. You’ll discover your exact profit or loss, every single month. We’ve been testing this sheet over the past quarter after discovering Mint just wasn’t keeping us accountable. Not only has it given us an incredibly clear picture of our finances, it also turned budgeting into the fun challenge of saving as much as we can to get that profit number up.

MASTER YOUR MONEY WITH THE CONQUER TODAY RESOURCES SHEET

Update this spreadsheet every week to:

+ Constantly monitor your profit and loss
+ Discover money “leaks” to save more cash
+ Keep yourself accountable and grow wealth

PAYING OFF DEBT

Eliminating debt is a real struggle for anyone. Your debt payments are just another fixed expense, like rent. You’re going to have to know your monthly payments, how long you’ll be paying off your debt, and how much you can increase your monthly payments in order to get out of debt faster.

For this valuable information, we’ve turned to the extremely high-quality blog, Optimistic Millennial. Besides consistently writing for Forbes Magazine, the couple behind the brand has gained first-hand experience by paying off $71,000 worth of student loan debt. Let’s take the top strategies from their Paying Off Debt After College Guide that fit directly into our process here:

My husband and I left college with $71,000 in principle student loan debt. While paying this back, we paid for a wedding and honeymoon, bought a house, made a $9,000 repair on said house, moved twice (once cross country), switched jobs, made donations, saved 15% of our income, and still lived life! In November 2015, we made our very last student loan payment. Here’s exactly how you we did it, and how you can too.

 

Step One:

Gather all of your debt in one place. This includes student loans, car payments, mortgages, and credit card payments. You can use this government website to find all the information on your student loans, and you should run a few free credit report checks from a websites like Equifax or Experian. You can start your free credit report checks here.

Arrange all of your current debt into a simple spreadsheet like the one below (or, just add a new sheet onto Resources). Make sure you know your interest rate, and don’t let this process get you down. We’re going to set this all up now so you don’t have to worry any longer.

debt-payoff-screenshot

 

Step Two:

Use the free debt reduction calculator here, and copy and paste your data from the first spreadsheet into this one. It’s going to ask you a few simple questions of how you’d like to pay off your debt, and then provide you with an exact payment schedule to follow for every single loan! This tool may seem complex, but it’s incredibly important.

 

Step Three:

Set up automatic payments for as many of these debts as you possibly can. Some loan providers will even give you a small discount for doing this! Automatic payments ensure you’ll never fall behind, and they take out the stress of making manual payments.

That’s it! No matter how much time it’s going to take to pay off your debt, you’ve set a plan in motion. You can now focus on reducing expenses and making more money to improve your lifestyle. You’re going to have to make some tough choices, like saying no to that vacation, finding free weekend activities, and eating the same things over and over (healthy eating can actually be much cheaper). It’s worth it.”

 

SAVINGS

At least 10% of your monthly income should go into savings until we hit a certain amount, and then a custom split between savings and investing. We’ll go into investing after this. Aim for 20%, because this is one big game to see how much money we can make. If possible, this is in addition to your debt payments!

Dave Ramsey, the owner of a popular money management program, recommends the very first saving benchmark you should reach is a $1,000 absolute-emergency fund. This is a great idea, and if you’re taking home $2,500 a month, you could hit this in 3-4 months.

The next benchmark you might want to aim for is six months of absolute minimum living expenses, in case the worst happens. Perhaps you can live off of $1,500 a month, so this might take 1 – 2 years to accumulate.

You can also choose to build up this second benchmark more slowly while you start exploring investing. Regardless, 10% – 20% of your income, every single month, goes to saving and investing. Almost every bank has an automatic savings transfer option. Go ahead and set up an automatic savings transfer of 10% now, and you can continue to adjust that down the line.

 

INVESTING

Investing is a mystery to most people, and that’s why no one ever really dives in. Let’s try and simplify things. What we are about to share with you comes from the monster of an investment book, MONEY by Tony Robbins. He interviewed the top money managers in the entire world and asked, “If you could tell your children to do just one thing with their money, what would it be?”

Very quickly, here are a few definitions. There are risky ways to invest with the potential of higher returns, and there are extremely low-risk ways to invest like just keeping your money in your savings account.

Buying “shares” of stock is betting on the success of a single company, like buying shares of Apple and being relatively sure they are going to grow for quite some time. Buying shares in a “mutual fund” is betting on a combination of stocks and other instruments to help spread your bets over different companies, locations and more. And finally, buying shares in an “index fund” is like betting on the entire stock market as a whole.

 

COMPOUND INTEREST

Compound interest is, in a nutshell, the ability for your money to make you more money. Sounds pretty great, huh? The more money you invest and leave in your investment account, the higher amount of interest you’ll earn on that money. That compounds until you start receiving greater and greater returns.

Now that we know those things, here are a few incredibly scary facts:

  • 96% of actively-managed mutual funds fail to beat simply investing in the market.
  • 49% of mutual fund managers don’t hold money in their own fund. That’s right.
  • Hidden fees in mutual funds will cost you hundreds of thousands of dollars over time.

WTF. Just like in any other industry, investing is dominated by marketing. Companies market their funds as the greatest fund in the world so they can get your money, and the human brain is always trying to chase the next big thing so we fall for it.

The game is rigged, so let’s not even play. Don’t try and make money by frequently trading stocks, don’t look for the newest hot investment, and don’t watch the market go up and down month by month.

It’s frustrating to be a successful investor, because it feels like you’re barely making any money, you have no instant gratification, and you have to take away money that you could be spending that month. Try and short circuit your brain by thinking with your long-term future instead.

 

ETF’s

What both Conquer TOday and Tony Robbins recommend are ETF’s. These are the funds with the lowest possible fees, diversified investments, and categorized by large-scale industries like “Emerging Markets” or “US Growth”. Low fees are very important, because every dollar you pay in a fee for a company to manage your money is a dollar less in compound interest you’ll make over time.

There are plenty of firms out there that offer ETF’s, but we recommend Vanguard. Open a Vanguard account, purchase a few shares of one or two long-term growth ETF’s, and set up an automatic monthly transfer of 10%-20% of your income, or whatever split between savings and investing you’ve chosen. Give Vanguard a call, they will be more than happy to help (because they get to hold onto your money, of course)!

If you don’t have one already, ask to start a ROTH account. A ROTH is a special type of investment account that allows you to grow your money tax free. Taxes are the largest fees of all, so this is a huge deal. Your ROTH account can hold the ETF shares you’ve purchased, and you can contribute up to $5,500 per year.

Many companies offer 401(k) benefits, and there are mixed reviews on these programs. However, if they will match the amounts you deposit, that’s a great investment opportunity. It’s a 100% return right away!vanguard-screenshot

 

MOVING FORWARD

Money isn’t everything, but it is a tool in our lives to help us live healthier. So, take it seriously. Once you really start to budget and pay attention to a few dollar difference in a lunch, you’ll start feeling more competent about money. Those dollars turn into hundreds at the end of the month. Those hundreds turn into tens of thousands over your lifetime. To recap, here are the steps:

  1. Set a monthly budget, and follow it.
  2. Set up automatic savings transfers, debt payments, and investments.
  3. Start cutting your expenses by any means necessary.
  4. Revise, work with surprises, and look for ways to make more income.

Leave a comment: Are you actively budgeting? Where can you cut your expenses? Also, a guide like this is hard to customize for everyone, since we all live different lives. So, please give us feedback if you have children, multiple homes, an alternative lifestyle, or unique expenses! Let’s make something together that will benefit everyone. Remember to download that spreadsheet!

MASTER YOUR MONEY WITH THE CONQUER TODAY RESOURCES SHEET

Update this spreadsheet every week to:

+ Constantly monitor your profit and loss
+ Discover money “leaks” to save more cash
+ Keep yourself accountable and grow wealth

WANT A FREE PRODUCTIVITY JOURNAL?

8 Comments

  1. Patrick McWilliams

    I’ve been budgeting with YNAB, which has been really helpful. My wife and I have found ways to cut expenses with television, cell phone service, house heating, etc.

    Reply
    • Jordan At Conquer Today

      Hey Patrick, just checked out YNAB, looks great. Any solid tips about cell service? I’d personally like to cut my bill down!

      I’m also Netflix only and bike to work which saves a ton.

      Reply
      • Patrick McWilliams

        My wife and I use Republic Wireless, which has saved us a ton of money on our monthly bills.

        Reply
  2. Martin Berisford

    Great tips here! Are there any UK/EU alternatives to Vanguard/ETF stuff? I’ve had a browse and can’t find much but maybe that’s because I’m not quite sure what to look for!

    Reply
    • Jordan At Conquer Today

      Hey Martin, I just called Vanguard and they weren’t able to offer an alternative. A quick search that I’m sure you’ve found is that most ETF’s are US based, which means you’ll be subject to more taxes than it’s worth.

      My recommendation would be a phone call to the top 3 investment companies in your area and ask what is the closest equivalent to an ETF for them (lowest management fees available). Google the funds they recommend and compare them to Vanguard ETF performance, maybe?

      Here might be a good list to get started:

      http://www.morningstar.co.uk/uk/news/144058/top-10-investment-trusts.aspx

      Reply
  3. I’ve been using Buxfer for a few years now. To me personally it’s the GO TO app.

    – Shared expenses (I know what my buddies owe me, and the other way around)
    – Reporting is very convenient
    – Budgets with roll-over
    – Very flexible tagging. (Automated rules)
    – Reminders of transactions

    I’ve tested lots of apps in the past.
    – Mint
    – Fentury
    – Google finances
    – YNAB
    – Quicken
    – Few more…

    Here’s a referral link. It doesn’t benefit me or you so you’re free to use it as you please.
    https://www.buxfer.com/acceptInvite?e=2779700bf8b31f22295221aef4e4311

    Reply
  4. Nic Vermillion

    “A budget is just telling your money where to go, instead of wondering where it went.” – John Maxwell
    Thanks for the tips on how to

    Reply
  5. This is so simple!

    Reply

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