Author, Wealthy by Design (2013)
NY Times Best-seller
President and founder of Empyrion Wealth Management Inc. for 22 years, offers clients straightforward unbiased financial advice
Appearances include Fox News and Fox Business as well as CNBC’s The Call, The Today Show and Good Morning America; Contributes to well-known mainstream radio shows and newsprint such as the Wall Street Journal, Worth Magazine, and Marketwatch
Married to Charles, four children
Kimberly Foss: Wealthy by Design
THE MONEY DISCONNECT
Financial expert Kimberly Foss says many people are disconnected with their money today. With many financial accounts automated (i.e. direct deposit, auto pay, etc.), numerous people don't know exactly how much money they have or where it is going. She says the physical connection people once had with their money is lost. As a result, it is hard for people to maintain a budget. It is important to get back to money basics and know how much cash one has and precisely how it is being used. Once that is established you can structure a financial plan, set financial goals, and decide how you would like to invest your money. Reconnecting with your money and having an accountability system is what is needed to have financial success.
It has been proven that when people have a physical connection with their money they make better financial decisions. For example, if there are two people grocery shopping, one with cash and one using a debit or credit card, the one with the cash will make better choices and will probably have the better buys.
REVISITING THE 50/30/20 RULE
Many of Kimberly’s long-time clients know her favorite investment statement, “Stay diversified, stay the course.” One of Kimberly’s basic financial principles is The 50/30/20 Rule.
The 50/30/20 Rule splits everything into three main categories:
1. Core Expenses (also Essential Expenses) - No more than 50% of your pay should go toward Core Expenses, which are the fundamentals to living: Housing, Food, Utilities, and Transportation
2. Tithing, Retirement, and Debt reduction - A Minimum of 30%of your pay should be allocated to build a strong financial foundation.
Tithing - 10%
Retirement contributions, savings contributions - 15%
Debt payments, if you have debt - 10%
These contributions and payments are made after you pay your Essential Expenses before discretionary or "all other spending," but before you do any other spending.
3. Discretionary Spending: AKA "All other spending" - No more than 20% of your take-home should be
Allocated to discretionary which include but are not limited to:
Cable, Internet, Cell phone plans, Childcare, Dining and Entertainment, Gym fees, Hobbies,Pets, Personal care, Shopping, etc.
While deception (or things you think you need, like takeout food) items are the last things you should buy in your budget, never feel guilty for enjoying or purchasing a little indulgence of a nice dinner as long as you've taken care Core and Saving first.
THE 30-DAY MONEY CHALLENGE
To help people reconnect with their money, Kimberly has a 30-day challenge. She has tried it with her various clients – some with multi-millions of dollars and some that are just starting out. The results are helpful and revealing.
The challenge involves four glass jars. Three of these jars are clear and are each assigned for the parts of the 50/30/20 Rule (50% for Core Spending – bills, necessities, etc.; 30% Tithing, retirement, debt reduction; and 20% for Discretionary Spending – dining, entertainment, child care, cell phone, shopping, etc.). The fourth jar is opaque (you can't see through it at all). This jar is for special, designated savings (something one is saving up for, like a vacation, technology, etc.) or an emergency fund. With this exercise a person would have to budget his or her income for a month and actually see where their money is going. Only cash is used for all financial transactions for the month and kept in the specified jars. It is essential that people track their dollars and not receipts. This will get them reconnected to their money. Not only is it important to see where the money goes, it is important to track it and write it down. This is especially true in discretionary spending. Most people get in trouble in this area. One needs an accountability system and to pay in cash.
At the end of the challenge, Kimberly says most people find it to be a positive experience and they become more frugal with what they buy or even how they use things. It is good for people who have the means to live below their means – this is one of the keys to financial success.
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