Written by: Makinsey Ekman
The hardest thing to do as an adult in this modern age is creating a budget that you can actually stick to. It's hard to know the most effective way to save money or pay off debt, mostly because there are so many conflicting opinions. I have listened to many different financial advisors who all have differing ideas. My take away from all of these myriad of opinions is that everyone is different.
Something that works for one person might not work for another, simply because each of our drives and goals for our lives varies so much. There is nothing wrong with doing things differently, especially when it comes to budgeting. My advice is to read what I write and then listen to a few financial advisors and see what they say. Take all the things you learn, mash them up, and make them into something that is useful for you.
Timing is Everything
I have always struggled with having a budget that I only look at once a month. It's easy to forget how much you have in the world of debit cards and online transactions. One financial advisor I listed to suggested pulling out all the cash you needed for the month so that you could physcially see the money leave your hands.
The funny thing I discovered, though, is that I was more willing to part with physical cash than to use my debit card. It's something about when I can't see how much I have I always think there is less in my account. No idea why that is, but I quickly scrapped that idea. Next, I was listening to a fellow mom on youtube who was talking about weekly budgets.
She implied that it didn't matter how often you got paid, but the point was to look at your account and balance the books every week. This constant checking made it so that I wouldn't run out by the end of the month or forget any bills. I instantly took this idea and ran with it. I got out old faithful, a spiral-bound notebook and pencil, and wrote down everything I pay for in the course of a month and when I would get paid.
At the time my husband and I were on opposite pay weeks, so we actually had something coming in every week (I got paid on the 1st and 3rd week of the month while he got paid on the 2nd and 4th). Every Friday when the money came in I would count that as income for my bills the next week. Sometimes the basic bills (like rent) would exceed our income that week, but it could always be made up the following week(s).
Debt, Debt, and... more Debt
The best quote I've ever heard about this is, "debt is a product". Just look at the ad posters on the walls around you. People sell debt, things like credit cards, just like it is any other product. You will see a billboard about a vacation to the beach with a happy family smiling at the camera, but the ad is actually for a credit card whose point system could earn you a vacation.
If you don't have debt you can't own a home or get a new car. I get that the point is to prove that once you have debt you will work to pay it off, but those dollar signs always feel like a noose getting tighter and tighter. I am so over it, and so together, my husband and I came up with a break up plan for debt. First, we picked the debt that we could pay off the quickest, whichever was the least amount of money no matter what the interest rate was.
We made a chart (looked like a thermostat) with the amount owed at the bottom and then our monthly payoff goals went up until we got to zero. Every month we would black out the portion we paid, and it was so nice to see the debt disappearing. We would still pay the minimum amounts on our other debts, bills, savings, etc. but all the extra stuff went towards that payoff. Once we reached that zero we would celebrate (go out on a date, buy something we really wanted, whatever). Then we would start on the next debt and keep going. Three years later all we have left is student loans and a mortgage.
Trimming the Fat
The hardest thing about making a budget is sticking to it, so my recommendation is to have a "budget buddy". That buddy could be your significant other, or a family member, or even a good friend. It doesn't matter whether they know your finances or not, because a budget buddy's only job is to get you to think before you spend. You need to pick someone who isn't a pushover and won't let you get away with wasting your money.
Make your budget and put in there everything you think you spend in a month for even the smallest things (personal grooming, entertainment, eating out, etc.). When you want to buy something under $50 that either doesn't fit in your already selected categories or exceeds them, bring it up with your budget buddy. Come up with a plan to pay yourself back, and if they agree that you can get said item, go for it.
For anything you want to buy that is $50 or more, bring it up with your budget buddy and come up with the same plan like you did before, but this time sit on it. This idea came from yet another financial advisor who said that if you really need something you can wait for it, but if it's just a passing fancy you will forget about it in a day or two. Give yourself those two days to see if you really need it, even if it's on sale it can wait. This has saved me from "over bargain shopping" more times than I can count.
For Example
Even though I do an old fashioned paper and pencil budget every week, I do have an excel spreadsheet into which I input all of that information, so that I can keep track of my monthly and yearly spending habits. At the end of each year my husband and I will really look at those numbers and work harder to make better spending choices.
As hard as it is to see all that waste (for us it's mostly eating out), it's important to face your shortcomings head on. You can't change by keeping your eyes closed and head to the ground. Sometimes the mirror is the hardest thing to look into, but you have to do it.
Here is a copy of the spreadsheet I use. Feel free to copy and change whatever you want. I only have one example month on there so when you update it for yourself make sure to add the following months into your formulas or the calculations won't come out right.
You'll notice that at the end of the example month there was $6 left over. Normally, I would put that $6 towards a debt (the credit card) so that my monthly balance will read as zero. You always want to end each month at a zero, and if you were in the negatives use the next month to make back what you lost.
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