Week 5 - The Goals and the Path

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Let’s make a plan! 

Welcome to Personal Financial Success, brought to you by VIN, the VIN Foundation and drip.vet.  

Today let’s talk substance. Let’s talk planning. 

If you are following the theme of this course, Financial Success is all about Planning for Success.

If you need a less subtle reminder of the theme:  A PLAN IS ESSENTIAL FOR YOUR FINANCIAL SUCCESS. 

It’s not hard, it’s just about getting into the habit of planning. Know that it will seem like work until it’s part of your routine.

Just like anything else in life, we need to know where we are going and plan the path we need to take to get there. 

So the first step is deciding where we are going. What are our goals? What is financial success to you? What do we want to accomplish? 

It could be paying for part of your education, saving for a wedding, or house ,or car or saving for travel after graduation, we’ve got to identify our goals. We’ve also got to build an emergency fund. 

I want you to actually write these goals down. Once you have that vision in sight, then we need to start looking at a path to get there. 

The cornerstone, the foundation, in any path to financial wellness is a plan.

And your plan and path starts with a budget. 

Why do we need to talk about a budget? Every single financial expert says that financial wellness begins with a budget.  Successful business owners and managers live by their budgets. A budget is your map. You can’t get to where you want to go without a map, that’s why the budget is important. 

Next step, let’s define what a budget is. 

Budgets are the key to successful finances, projects, and businesses. 

They are nothing but predictions of a financial future, with expectations for income and expenses. So the definition of a budget is an estimate of your income and expenses over a set period of time. Usually a month. 

So why should you budget? Here are the reasons: 

• A budget helps you execute a plan, and having a plan is key to being in control of your finances. 
• A budget is also key for communication, particularly among partners and significant others.
• A budget will help reduce anxiety around emergency expenses (which you should always plan for). 
• A budget helps individuals, partners and organizations discuss, decide and set their priorities. 
• A budget is very helpful for planning to eliminate debt. 
• When you look back at prior months, a budget reveals where you’re spending too much, and helps you control your impulses. 

But more importantly to me, budgets are a method of setting priorities. They help you communicate to yourself and to others what is important, what deserves your money and attention. They help you decide where you should spend your money. This is where your goals come in. 

For example, all businesses, governments and large entities use the budgeting process to focus on what they deem important for the future. For example, a city council might decide that fighting homelessness is a priority for the coming year and will carry out that mission by dedicating money in the form of expenses to homeless shelters, education, jobs and health services.

Another example would be a business focusing on the future by budgeting a percentage of their expenses for research and development. Believe it or not, every organization, every government, every business operates with some level of scarcity of resources and has to decide where those resources should be allocated. 

Now, when we take that to the personal level, you (or in the case of couples, you and your significant other) are setting priorities, and fulfilling those plans with a budget. That’s why we set goals first. 

For example, on your personal budget, you may set a goal of a trip overseas, which means you need to save, which in turn means that you must reduce expenses elsewhere. You may decide that you can save for your goal by reducing your restaurant or entertainment expenses. So your financial plan would reflect that goal, that priority. 

So, we need to know where we are going, set some goals and priorities, then we need to start on a plan, a path, a budget. 

Before we start on creating a plan, let’s assess our current situation. 

Anything with the word “Personal” in the name is about YOU!  We call this “Personal Financial Success,” so we need to concentrate on you. 

You are the only person that can truly understand your history, current situation and future goals. 

No one else has access to everything you have experienced, what you are currently thinking, or what you are planning! 

A major theme of this course is personal empowerment and responsibility. 

You are the only person that can control your personal finances and you are ultimately responsible for their control. 

As such, we will guide you through quite a bit of personal reflection. We want you to be in the habit of actively searching your brain, being 100% honest with yourself, and looking for ways to improve. This improvement often focuses on building new, healthy habits around your finances. As we discussed, simply knowing how to do this stuff is not the end goal. Our goal is to have you apply these techniques to your actions in the real world. Actually doing the things we discuss are what’s needed to get to financial wellness. 

It’s all about building the habits and doing the things associated with financial wellness. Not just answering a multiple choice test, that shows you know the material. With that, let’s dive into a self assessment. 

Let’s focus on your current financial habits. It’s self reflection time! Get yourself in the mood to dig deep and answer these questions honestly. 

• What are your current budgeting habits? 
• Do you create a budget monthly? Weekly? Annually? 
• Do you review your actual numbers against your predictions regularly? 
• Does your financial anxiety or stress change when you near the end of the month or when your bank account sinks too low? 
• Do you let your budget slide when you get busy? 
• Do you stick to your budget when you are making decisions, or do you let yourself ignore it at times? 
• Do you have a budgeting technology tool that you use? Like a phone app, website, spreadsheet, or pencil and paper? Do you try to keep all of the financial stuff in your head? 
• Are you organized? Do you have folders for your bills, invoices, statements and other documents, either electronically or on paper? Or is everything kind of haphazard? 
• Most importantly, do you have healthy budgeting habits? 

Next,

• Are you “on your own” financially? Or do you rely on a parent, family member, spouse or significant other? Do they handle your finances? Could you make it without them? Not from an income basis, but from a financial knowledge and doing standpoint. 
• How do you track your bank account balance? Daily, monthly, wait till you get an overdraft letter in the mail or email? 
• Do you have a financial plan for this month, semester, school year? What is your plan to pay for veterinary school? 

• Are you using student loans to fund your tuition and living expenses? 
• Do you have a plan for how much you will borrow? 
• Did you take the full amount possible? 
• Do you have a plan to return part of that disbursement? 

Again - these questions are just to jog your thinking. To start the process. Take a few minutes to dive into the weekly and monthly routines around your finances. How much time and energy do you expend on your finances? Is there room for change and improvement? Be honest… 

If you are a hard “no” to a lot of these questions, that’s ok! We’re here to help and get you on the right path. If you do have healthy habits around your finances that's awesome! We’ll help you tune up, and solidify your plan. 

Lastly, if your financial habits are abysmal, if you came to veterinary school with credit card debt, if you have no plan whatsoever...that’s completely ok. If you are still listening and/or reading, then you are on the right path. 

You are exactly like about 70% of your classmates and the American population. But keep in mind, that same 70% are the people and veterinarians dealing with financial stress and anxiety. Those people are also more likely to experience depression and suicidal behavior. 

This is about YOU reflecting on where YOU are with your financial habits and making the active decision to improve, so you’re not in the group of veterinarians experiencing problems! 

Your financial wellness is achievable, it just takes commitment on your part! 

Once you’ve thought about your current financial situation and habits, let’s talk more about where we need to go and the path we need to take to get there. 

Back to the budget 

As we said, a budget is a prediction of your financial future. Said another way, you take a guess at what your income and expenses are, live your life during that period, then compare how your finances stacked up against your projections. 

At first glance this seems complex and a bit scary, but once you get in the rhythm, it’s quite easy. This isn’t about locking you in, or being inflexible, it’s about tracking and knowing where you are at. A budget is about knowing yourself and knowing how to improve and get better.  

But here’s the next level, in real time, when you have your budget up to date,  you can check before making a purchase or spending money. Your plan and priorities allocated money to certain expenses, and once you’ve spent that money, you're done, out. 

The budget allows you to make better decisions in real time. It allows you to stay on track towards your financial plans and goals. 

Let’s recap - the three major steps are 1) creating a projection or prediction of what your financial future will look like for a defined period of time, let’s say for one month. Next, step 2) you do your best to stay within those predictions for that month. Finally, step 3) you add the actual numbers up and compare them to your predictions. 

Now, how do we actually make a budget? For starters, let’s hone on the two major budgeting categories. 

First - Income and Expenses 

A budget is composed of two major categories, revenue and expenses. What’s coming in and what’s going out. At the end, the revenue has to exceed the expenses, creating what’s called a budget surplus. 

If the expenses exceed the revenue that’s called a budget deficit, the only thing that can result is heading further into debt, which is not sustainable over the long term. Sometimes the words budget surplus and budget deficit are used to describe where you land at the end of the month. 

So this helps us get started with creating your budget. You need to know your income and expenses on a top level to start making your budget. 

Income

We’re going to start with income. This is where you total all the money coming into your control. I’m not using income as taxable income, like money earned. I’m saying all the money that you can use during this budget cycle. Common places where veterinary students get money. Places to check include:

1. Student loans. If you filled out a FAFSA, you should have a disbursement, what is left over from paying tuition. This sum of money is meant for your living expenses, books and other costs of school. That money is meant to last you through the semester, so we need to divide it up on a monthly basis. 
2. Scholarships - if you were awarded scholarships, either as part of your financial aid, or private scholarships, put that total down.
3. Parents/family members/spouses and significant others. If someone is sending you money on a regular basis, or has given you a lump sum of money, let’s account for that and total it into our income.
4. Work - are you working during the semester? What can you expect from your pay? Remember, we can’t use your gross income (before taxes, the amount of hours, times your hourly pay) we need your take home pay, the stuff you can spend after taxes are taken out. 
5. Savings - do you have a nest egg from work this summer or before veterinary school that you plan on living off of? How long does it need to last? Until next summer? Are you going to be able to work some over the winter break? Let’s divide that total by the number of months it needs to last. 

If you have other sources of “income” or money coming it- make sure you total it and list it. These are just the common sources of income for veterinary students. 

Then we look at our expenses 

The way I think about it, expenses really break down into monthly and weekly expenses. It just naturally lays out for me into monthly semi monthly and weekly expenses. We want to make this as easy as possible on ourselves. So if you think of it differently, no problem, it all adds up to the same place eventually. 

Examples of monthly expenses are: 

1. Rent or other housing expenses. 
2. Your utilities such as electricity, gas, water, sewage, trash service, internet 
3. Your Credit Card payments (if you have any) 
4. Insurance payments, such as health, car, life or disability insurance
5. You Car payments or lease payments 
6. Your memberships and subscriptions. (I’m talking about gym, online services, subscriptions, etc. 
7. Your cell phone service 
8. Don't forget about Cable, Netflix, Hulu or other TV services 
9. Then any regular medical visits, medications
10. Pet and animal expenses (wellness plan or insurance) 

You should have a fairly standard amount every month for these expenses. Yes, electricity and gas will change some depending on your usage, but overall they’ll be fairly predictable. These monthly expenses are usually called “recurring” expenses. 

Then let’s look at your more “discretionary” expenses for our weekly budgeting. I give myself a weekly budget, and it’s easier to track and control these expenses. 

Basically I’m breaking them down into smaller, more manageable time frames. 

Examples of weekly expenses include: 

1. Food/Grocery
2. Gas/Transportation. 
3. Restaurants and take out 
4. Any entertainment - hit or miss in vet school right! 
5. Clothing
6. Personal needs
7. And lastly, miscellaneous 

Your weekly budget should “reset” every week. It’s a small time frame to think about and easier to manage. If you have these discretionary items calculated and set up on a monthly basis just divide that number by 4.3  this the average number of weeks in a month). 

And lastly - then we look at your semi monthly expenses. This may be quarterly, or by semester. Association dues, memberships, parking passes, stuff like that. We don’t want to forget these, because they can really add up. Flea tick medication for your pets or heartworm prevention is another example of the semi-monthly stuff. 

This is super important- build in some savings for an emergency fund. It seems kind of counterintuitive if you are living off of student loan proceeds, but we have to have an emergency fund. 

Next, build some in for stuff you know is going to go wrong. 

Take the time today to calculate your weekly expenses and enter them into your budget. We are preparing for next month, to ensure that your budgeting is easily done! We want to be able to check that box on your “to do” list and have that feeling of accomplishment. 

Today’s little task is to open your budgeting technology tool and make sure you can track your budget on a weekly basis. Look at those discretionary expenses and break them all the way down to a weekly basis.

So in summary - today we discussed the theory of budgeting, the planning, the path. We did a little self reflection of where we are currently at, and lastly we talked about the substance of how to build a budget. 

Thanks for reading and remember, take small steps forward every day!