As I mentioned in my post yesterday, I am not a financial expert. Please know that the plan below is what works for me, and something I have found to work for a few other horse people. Money is a personal thing, and the outline listed below may not work for you. I do think that the plan below could work for anyone, but that doesn’t mean it is the right thing for you. Typically, places in the country that are expensive to live in have higher salaries, but we know that is not always the case. I have found that the financial plans that work the best are the ones that are the easiest to follow. There is a little initial leg work involved in setting this up, but once you start doing it, it should be easy to maintain. It doesn’t matter if you only have one income coming in to the house or two, if you have kids or not, the plan is simple and is really just looking at what comes in versus what goes out.
The Horse Owners Financial Plan is based on percentages and I created it so I could live a balanced horse owning life. Most of your income should go to your living expenses, but you should also plan part of your income for horses, savings and of course fun. Yes, life is life and some months you will get a surprise bill, but this plan is about living life in a balanced way and saving for the rainy day so when those surprises come, you can handle it. You can tweak this plan if needed with a few extra percent on one thing or another, but the plan and how it is presented is how it has worked best for me. It really isn’t very complicated. Below is the Horse Owners Financial Plan in an easy pie chart, which basically sums up the plan in a neat little picture. All you need to do it take your bills from the last few months, see how they fit in with the chart, and adjust as necessary. Easy right?
Okay, so how do you find out what your bring home salary is? Take a look at your paycheck (and your significant others pay check if you have two incomes) and figure out if anything comes out of it (such as health insurance, school tuition, child support, retirement savings, etc). If things come out, add them back in, if nothing comes out then just take the number on your pay check and multiple it by how many pay checks you get a year. Write that number down, that is you income after taxes. We will use it to do the math for everything else.
Living expenses should be less than 50% of your bring home income:
- Mortgage/Rent/Property taxes
- Utilities such as water/sewer/electric/gas
- Health Insurance
- Basic food needs/cleaning supplies
- Cable/satellite/internet
- School tuition
- Student Loans/Credit Card Minimums/other debts you already have
The first category, and the largest, is living expenses. This category is a hard one because some things that we consider living expenses are actually things that are more to make our life comfortable and not actually essential. I used to believe in the idea that your mortgage should be 40% of your income, but as a horse owner that just doesn’t work. I had to make major cuts in my quality of life (heat set to 60 in the winter, no internet at home, etc) because at 40% going towards the mortgage the other living expenses were killing me. It wasn’t until I became a two income household that I really felt financial stable (get it) again. As someone with a horse, the best thing you can do to be financially sound is to keep all of your essential living expenses to 50% or less of your bring home income.
If you do the math and you find that it doesn’t work out, think about what can adjustments you can possibly make to get down to that 50%. For me, I got lucky, my husband came along giving me another income source without any extra work 😉 Before him my living expenses ranged from 60-65% of my income and I can tell you first hand, just being able to get that number down below 50% has made a huge difference in my life. If anyone hit 50% or less on their first round of calculations I am very impressed with you! For the rest of us, can you find a way to get to the 50% mark?
Here are some questions to ask yourself if you are spending over 50% of you bring home income on livings expenses. Do you really need to live the way that you live? Have you called the cable/internet provider to tell them you will cancel (which sounds scary, but they have always given me a discount for at least a few months whenever I do it)? Do you need both TV and Internet services? Can you make adjustments to your grocery bill? Does your child have to go to private school/Do you have to pay for their college tuition? Hopefully you don’t have any number 7 items, but if you do, ask yourself how long it will take to pay everything off if you only pay the minimums and how much more money will you have once you do?
Horse expenses should be less than 15% of your bring home income:
- Board or the cost of supplies to keep the horses at home such as hay/grain/shavings
- Any lessons/training/staffing costs
- Hoof Care costs
- General Medical Costs
- Small Tack/supplements/blankets/etc
- Showing/Clinics/Fun
Horses are expensive, but there is a huge difference between the cost of having a horse in full training and showing every weekend versus someone who does partial care and only takes a few lessons a year. If you can afford it, and you like doing it, it is no one’s business if you spend $3,000 a month on your horse. Personally, Gen is not 15% of my income at the moment, but the 15% number would still work for me if he was because I could afford 4 lessons a month and 8-12 schooling shows a year in that amount. Maybe instead of shows it would be more worth it to me to do 2 lessons a month and board at an indoor. If I follow this plan, it doesn’t matter how I spend the money, as long as I am within the 15%, I can spend horse money however I want. There are times that you may spend more because you need more lessons, you are showing more, or because your horse is hurt and needs more care. As long as you budget for NORMAL horse expenses being 15% of your budget, you should still be okay and can take a bit from fun money or short-term savings if needed.
Normal is the key phrase. Yes, Gen can go 6 weeks without getting his feet done at times, but I budget and plan for once a month. Gen will always get spring and fall shots, but I budget for 8 vet visits a year because…well…Gen is just Gen. Most years planning for 8 is fine, but even the years when there are 15 visits, at least I had half of them in the budget! I also know that equipment costs can vary, but considering Gen is retired I only budget for a few halters a year along with his hoof supplement. The year that Gen was hurt I spent just about every penny I made, and some I didn’t make yet, on him, but that wasn’t a typical year. If you plan for normal, extraordinary should be survivable.
Fun Money should be 10% of your bring home income:
- Entertainment such as movies/books/concerts, etc
- Food that is more than basic necessities, such as restaurants or take-out
- Appearance items such as hair cuts, make-up, clothes, etc
- Going fancy with the groceries or buy expensive cleaning supplies
- Anything else you want but you don’t really need
I don’t feel like I need to tell anyone how to spend fun money 😉 I do find that if I take out my fun money in cash at the start of the week (which is typically how I do it), I am much better about staying within my budget. If I spend it all and then some in one week, I will try and just not spend any until I am back in balance again. I find that as a horse person, fun money is thought to be the money we spend on horses, leaving us feeling guilty when we go out to dinner with friends or want to buy that $5 coffee. Planning for fun outside the stable walls is something that we should all do because horses are fun, but sometimes even the most horse crazy among us need a break from the barn.
Short-Term Savings should be 10% of your bring home income:
- Paying off debt
- Vacations or trips
- Big horse shows/clinics/etc that you need to save up for
- Big ticket items such as saddles/new tires for your car/new boots
- Home repairs
- Gifts for holidays
I should really call Short-Term Savings “Planned Money” because that is really what it is. I do think it is important to contain horse money to the 15% under normal circumstances, but this is where a little extra can come from if needed. If you are in debt with credits cards, student loans or anything else, the best thing you should do is start to pay off some of the principle in addition to the minimum payments. Don’t throw all 10% of Short-Term savings towards debt though, the max you should do is 5%. One of the best ways to keep you financially healthy is to have savings available. I know I need new tires on my car, so instead of panicking in November wondering where I am going to get $500, I am saving up for them now, setting aside money each month so I have the money. I know a car purchase is likely coming in 2 years so I want to save for that now. Even if I do not end up spending the money on what I had planned, having extra cash on hand is never a bad thing.
Long-Term Savings should be 15% of your bring home income
- Retirement plan
- Down payment for a house or other item that will increase your personal wealth
- Stock market investments
- Any large savings that you cannot easily use
So this category is where I find a huge difference between single horse people and married horse people. I was a single horse person myself for all of my 20s, yet I was in the minority that I was saving for retirement. Most horse people in their 20s are just starting careers and it is hard to be able to afford yourself, let alone a horse at this time of life. I will be honest here, I did not put 15% towards Long-Term Savings during that time, but I did always commit to putting at least 5% towards retirement. It wasn’t much, but even by doing that little I am still in much better shape than people who did not do anything. Every bit counts, so while 15% should be what you aim for, anything is better than nothing!
So what do you think?
I know this was a long post, but if you are still hanging on you can see the chart below as to what this financial plan may look like for you. Please note these numbers are a rough guess. I assumed taxes at about 33% which is high for some and low for others. Does this look like something you could live with? If not, did it at least give you something to think about?
A Horse and a Half 