This month's newsletter officially starts our "Ethan" Series, introducing the idea of a spending plan. It also highlights the Infinite Banking Concept (IBC) for efficiently managing expenses by financing purchases through an IBC policy and redirecting payments back into it. The newsletter provides a framework for the plan and references scripture to support financial stewardship. Hope you enjoy!
SPENDING PLAN:
Do You Know Where Your Wealth Is Going?
Written by: The Legacy Project
Don't lie: do you truly know where your money is going? We’ve helped a ton of people take back control of the banking function of their life, and it typically starts with helping folks figure out where their money is going! If you’ve seen any of our live presentations, you know about our “leaky bucket” illustration. We all works hard day-in and day-out to get those multiple streams of income, but we hardly pay attention to the holes in our bucket. One of which is our budget. Many of us work hard to earn money, but what is the best way to make the most of it? How can we balance taking care of our needs and wants while also planning for our financial future?
Regardless of your stage of life, these questions are meaningful, important, and applicable. Let's find an answer, including concepts proven by those who have effectively created a legacy. Essentially, we are talking about a budget or, more rightly, a spending plan! A budget implies constraints, while a spending plan implies empowerment! Warren Buffet once said, "Do not save what is left after spending, but spend what is left after saving." A budget is simply a spending plan that considers estimated current and future income and expenses for a specified timeframe. At a macro level, a spending plan keeps your spending in check and ensures your savings are on track for the future.
There are various ways to create a spending plan, but the most sustainable approach over time is the "10-20-70" strategy. This formula splits your income after taxes into three parts. The first part is 10% for charitable donations, the second is 20% for savings, and the third is 70% for living expenses and debt reduction. We suggest you consistently use the "10-20-70" approach to experience its benefits.
A spending plan...
Enables a plan for your money! With a spending plan, you spend what you can afford. If you stay with it, you won't overspend.
Puts you in control of your money! This feature allows you to tackle any unhealthy spending patterns that may have developed. Additionally, having a spending plan helps you stay responsible for yourself. Ignoring your spending habits puts money in control over you. However, managing your spending habits puts you in control of your money.
Sets a mindset of permission to save and spend! A spending plan creates peace of mind by allocating funds for spending and saving. It reduces financial stress, a leading cause of family tension.
Creates preparedness for emergencies! We all know that life is full of surprises. An emergency fund is crucial to avoid dipping into other funds and keep spending on track.
Empower a healthier and happier future! Having and using a spending plan can help you build the precise savings you need for the future!
Let's look at what a spending plan framework might look like. However, before you start developing your plan, it's important to understand these three important caveats.
Once you achieve the "10-20-70" plan, stay disciplined to maintain it!
It's okay if you need to do a step-up plan over time to accomplish the "10-20" part of the plan.
Remember, this is a template framework; you should build your spending plan based on your unique situation!
The following page includes a rudimentary example of a monthly budget that is applicable to a household or family. While there are infinite budget templates out there, the intent is to look over each of line item and ask yourself if you know how much money is being spent in that respective category. Do you know how much you spend on groceries and restaraunt spending each month? If you don’t, you may be shocked at the size of the hole in your “leaky bucket.” We recommend you print this page out.
It's important to consider what to do when you receive a large amount of money. This is best answered by looking first at what you do not want to do. It is really easy to “nickel and dime" away your lump sum, and have very little to show for it! Unintentional spending can lead to a “leaky bucket” situation where, next thing you know, there little left of that once large amount of money. Instead, focus on making wise investments or using the money to pay off debts or bills. Either way, having a plan is what’s important.
Peyton Manning once said, "When you receive a large sum of money, you might make unwise decisions without the right guidance." Taylor Swift also said, "Be on the lookout for a windfall in your life, and make sure to intentionally use it to further your top financial goal." Experience suggests that having a plan in place for lump-sum payments is the best approach. Use the money to make a difference in investing in your life or future or eliminating debt. Often, lump sums are hard to come by and don't happen frequently. So, when you receive one, make sure to make it count!
The final question we will address is: What is the correlation between a Spending Plan and the Infinite Banking Concept? The Infinite Banking Concept (IBC) is an incredibly effective and efficient tool that can allocate some or all of the expenses in your Spending Plan. For instance, if you use an IBC policy to self- finance the purchase of a vehicle, you can make your monthly vehicle payment from your spending plan and direct it back into your IBC policy. As we have discussed in previous articles, recapturing third party interest into your own banking system optimizes your cash flow and allows you to snowball your cash into an avalanche of wealth. This same approach can be applied to any item in your spending plan. When it comes to creating a spending plan and leaving a legacy, Robert Kiyosaki puts it best: "It's not about how much money you make, but rather how much money you keep, how hard it works for you, and how many generations you can keep it for." By living within your spending plan, you'll eventually be able to keep your hard-earned money, put it to work for you, and create a lasting legacy. For those interested, some scripture references support managing your finances responsibly. Scripture reminds us that everything on earth belongs to God and that we are responsible for being good stewards of the resources He has given us. We want to share three scripture references that highlight this approach:
"The plans of the diligent lead to profit. " -Proverbs 21:5
"A wise person thinks ahead. " -Proverbs 13:16
"Honor the Lord from your wealth. " -Proverbs 3:9
Start being responsible for your wealth today. Use the budget template; use the 10-20-70 plan; schedule a call with us… no matter what you do, decide to take ACTION! For a more detailed budget template, or an in-depth analysis and help going over a budget, schedule a call with us! We have successfully helped dozens of families “find” sufficient money in their budget and start practicing IBC without adding a single cent to their income or changing their monthly spending habits. Check it out.
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