Say Goodbye to Living Paycheck to Paycheck: Choosing Your Budgeting Direction

Choosing your Budgeting Direction

This post is part of a series.  To start the series from the beginning, click here.  To browse through the series, click here.

Deciding between Reverse Budgeting and Forward Budgeting is one of the first things to do when creating your budget.

Reverse Budgeting in three steps

    • Determine your savings goal
    • Save a set amount each month to reach your goal.
    • Revisit your goal and adjust as necessary

Reverse Budgeting is good for you if any of the following apply:

    • You have a hard time sticking to your budget.
    • You succeed with a strict and well planned structure.
    • You know how much money you will need and when you will need it by.
    • You prefer to have clear goals

Forward Budgeting ‘Forward Roll’ in three steps.

    • Project your future savings.
    • Roll over extra funds at the end of each period
    • Repeat

Forward Budgeting is good for you if any of the following apply:

    • You are disciplined with your money
    • You succeed with a flexible schedule
    • You prefer fluid goals

Take this quiz to see which budgeting type suits you best.  Feel free to use a made up name. Or, if you prefer to take the quiz by hand, the questions and scoring are listed below.

Which Budgeting Type is Best for You Survey

1. You earn $100 extra cash.  What do you do?

      • a. Put it towards rent or other bills
      • b. Put it in a savings account
      • c. Buy something for yourself
      • d. Enjoy a night on the town

2. You are saving up for a new car and need $5000 more.  What do you do?

      • a. Put a set amount into savings immediately after each paycheck
      • b. Watch your spending carefully and spend as little as possible
      • c. Work overtime and put as much money into savings as possible
      • d. Get discouraged and give up

3. Which of the following best describes your five-year plan?

      • a. I live life one step at a time. Plans will change so why make plans?
      • b. I have specific goals and have strategized how to achieve them.
      • c. People actually plan that far in advance?
      • d. I know where I want to be and I will take whatever path presents me with success.

4. How do you prepare your grocery list?

      • a. I don’t, I shop each time I need to cook.
      • b. I prepare a shopping list before and only veer from it occasionally.
      • c. I don’t write a list but I have a general idea of what I need when I go.
      • d. I eat out, so I don’t grocery shop.

5. How do you handle household chores?

      • a. I write a to-do list and check each item off the list as I complete it.
      • b. I let it go as long as possible then clean right before company comes over.
      • c. I have a routine that I follow to keep me on track.
      • d. I don’t clean unless I have to.


Add one point for each of the following options you chose.

        Question 1: a or b
        Question 2: b or c
        Question 3: a or d
        Question 4: b or c
        Question 5: a or c


1-2 Points: Reverse Budgeting – You thrive in a structured environment.  You like to be in control of what happens and would prefer not to encounter many unknowns.  You’ve realized that money is not the most important thing in life.  Reverse budgeting is best for you because it allows you to create a structured budget to follow but still allows for carefully planned changes.

3-5 Points: Forward Budgeting – You are organized and proactive.  You know that there are multiple ways to reach an end goal and that as long as you keep moving forward, you will get there.  You are also responsible with your money which allows for some flexibility in the budget.  Forward budgeting is best for you because it gives you the freedom to make changes to your budgeting strategy at any time.

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Say Goodbye to Living Paycheck to Paycheck: Budgeting Basics

Budgeting Basics

This post is part of a series.  To start the series from the beginning, click here.  To browse through the series, click here.

Creating a budget is necessary in order to maintain financial freedom and live well within your means.  If you don’t have a budget, how would you know what ‘within your means’ really is?

There are so many different ways to budget and each person needs to budget in a way that works best for them.

One thing to think about is whether you will use Forward or Reverse Budgeting.  Reverse Budgeting is where you determine your savings goal for a future date and plan your savings based on that goal.  Each paycheck, you put aside the money for savings first and then divvy up the rest for other expenses.  Forward Budgeting or the Forward Roll is where you use projections to estimate your savings at a future date and you roll your extra money into savings at the end of the month.

Another aspect of budgeting is the budgeting system.  There are many different types of budgeting systems, but to keep it simple, there is a Cash System and a Digital System.  The cash system is exactly as it sounds.  All in cash.  No cards, no accounts, just cash.  The digital system similarly is all in savings accounts and credit/debit accounts that are primarily accessed digitally.

With either direction or system, there are many different tools that you can use to support your budgeting plan.  Some tools include the envelope system, the paper system, computer spreadsheets, and computer apps and programs.

Finding the right options for yourself can be a daunting task, but with some guidance, the right system can be chosen to maximize your productivity and potential success.

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Tips for Teenagers

This post is part of a series.  To start the series from the beginning, click here.  To browse through the series, click here.

It is at this point that the conversation switches from the parent to the child.  Teenagers are at an age when real responsibility starts to become apparent.  Getting to work on time for their first real job, maintaining the gas level in their car, and much more.  The responsibilities keep multiplying exponentially each day.


The teenage years are a crucial time to set the foundation for your financial success.  Financial security doesn’t come easy, it takes work.  But, there are many things you can do to get going on the right track.

Get a Job
Yes, of course, the way to get money is to get a job.  But, really at this time, the job is to teach responsibility and discipline.  By starting early, when you begin your career, you will know already have gone through the learning curve of holding a job.  Also, save as much money as you can.  No more 50/50 rule.  Just save, save, save.  You will be thankful for it later.

Get a Credit Card
Really!  But, be responsible with the credit card.  Credit is very important to your future success.  If you want to buy a car or buy a house, you will likely need multiple sources of credit.  It is quite easy to get credit at a young age because you haven’t yet done anything to negatively affect your credit score.  Start with a card with a low limit and pay off the card every month.

Just because you have a credit card does not mean you have a money fountain.  You still only have as much money as you make so spend wisely.  If you are worried about over spending, set a rule for yourself such as ‘only use the credit card for gas purchases’.  This way, you won’t be tempted to overspend but you will be building your credit.

Get Another Credit Card
No, I’m not kidding.  Once you have mastered having one credit card, spending a minimal amount on the card, and paying the card off monthly, get another credit card.  Banks love to issue credit cards to people with low risk.  On the flip side of this, banks are cautious about issuing credit cards to individuals without any credit who’ve been in the adult world for many years.  Don’t think you can just wait until you are 25 or even younger in some cases to apply for your first credit card.  The process will be much more difficult.

Do not, under any circumstances, max out your credit cards!  Do however be sure to keep each credit card under 33% of the credit limit at all times.  Remember, one day you will want to buy a large item like a house.  It is essential that you have a good credit score.

Live with Your Parents
I can hear it now.  “I’m 18, I’m an adult.  I don’t need to live under my parent’s roof.  I want my freedom.  I’m responsible. I just need out!”  Or something like that, right?  Of course, we’ve all had these thoughts.  The freedom from living on your own is fantastic.  But, with that freedom comes the responsibility.

Once you move out, you will have bills galore!  Rent, water, electricity, internet, phone, gas, food, and the list goes on.  There is no need to throw all of these responsibilities onto yourself so early in your life.

Chances are, if you move out young, you probably don’t have a job that allows you to pay all of your bills and save money.  You may even struggle to get all of your bills paid on time.  This is not how you want to start off your life.  Starting on this path will inevitably lead you towards a life of living paycheck to paycheck.

So, if at all possible, stay at home and save as much money as you can for as long as you can.   Let’s also put this into perspective.  Do you have a significant other?  Do you plan on getting married one day?  You’ll probably want a house at some point.

Houses all around the world cost different amounts, but let’s go with a standard $200,000 house for example.  You will not only need to have your sources of credit showing financial responsibility in order to buy your home, you will also need a down payment of 20%.  Yes, it is possible to buy a home with less than 20% down but it is way more expensive because of extra fees.  So, 20% of $200,000 is a whopping $40,000!

It is possible!  Without having to deal with expenses, you can almost literally dump your whole paycheck into your savings account.

Let’s say you make $10/hr and you work 20 hours per week during the school week and 40 hours per week in the summer.  That’s $200/week during the school year and $400/week in the summer.  Without including taxes, in one year, you could make $8000 during the school year and $4800 in the summer.  That’s $12,800 in just one year!  Back that down to $10,000 assuming taxes and other fees.  So, in just one year, you are a quarter of the way towards having your down payment.

Let’s say you start working at 17.  This means that it is possible to have saved $40,000 by the time you turn 21.  And yes, it is possible.  I did it and began looking for a home at 21.  I didn’t find my home until I turned 23 but that just gave me more time to save money.

Choose a Local College
Yes, college can be expensive but it is very important towards your future career and financial success.  By choosing a local four-year college, you can get a Bachelor’s degree with $30,000.  If you start school right out of high school, four years later you will be 22 and given the above example, you will have saved $50,000.  Paying for school leaves you at $20,000 and by 24 you will be back up to $40,000!  Plus, in those last few years you just may have landed a fantastic job paying $20/hr instead of $10/hr which would of course justify the expenses of living on your own.

Do Side Jobs
There are many opportunities for side work in the teenage years.  Babysitting, dog-walking, lawn-mowing, snow shoveling, concession stands, house-sitting, etc.  The teenage years also bring the most energy so do as much as you can while you are young because the older you get, the less energy you will have to take on side project.  As with every job, save, save, save!

Make Time for Friends and Family
While this may not seem like it can help you save money and avoid the paycheck to paycheck lifestyle, it definitely can!  Success happens more often when people are happy with their life.  Friends and family bring a lot of happiness and it is important to always make time for them.

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