When I was in my early to mid-twenties, I fell into every debt trap you can imagine. I’d moved to Maine with nothing more than my clothes and my beater car, with no job lined up. I was crashing on my sister’s couch and had defaulted on my student loans, because I had no way to pay them.
Fast forward a couple of years. I was married. My husband and I had opened and were carrying balances on three credit cards. If we were making minimum payments on the credit cards and staying current on utilities and our mortgage, I figured we were fine. Somewhere in the back of my mind, I knew we could do better, but every time my husband mentioned the word budget, I freaked.
I had a fear of budgeting. I was afraid to know where I stood. Much like the person who avoids going to the doctor because they don’t want to find out there is something really wrong with them, I avoided facing my finances. This all changed when student loan collectors began calling. It was time to own up, pay off and face my fear of budgeting.
Luckily mortgage rates were great at that time. We refinanced the house, paid off my student loans and our credit cards, and managed to lower our payment at the same time. We closed the store cards and kept one credit card, for travel and emergencies. We finally had a handle on all our bills and budgeted accordingly. We got ahead and stayed there. Thanks to that, I found I could afford to put money in my 401-K and started saving for the future.
Twenty plus years later, I have a stellar credit rating, and have financed two homes on my own. I drive a decent vehicle and have a healthy nest egg for retirement. Facing the reality of your finances, learning to live within your means and saving for the future, all begins with the budgeting.
“Sometimes the smallest step in the right directions, ends up being the biggest step of your life. Tip toe if you must but take that step.” -Unknown
One Step at a Time Budgeting
Step #1. Keep track of your earning and your spending. If you don’t keep an accurate count of what money is coming in and what is going out, it is easy to lose track of where the money goes and how much you can really afford. With modern technology, it is so much easier than you think. Sure, you can go old school and carry a notebook and calculate it yourself, or you can download one of many free apps. MINT came highly recommended.
(Android link MINT: https://play.google.com/store/apps/details?id=com.mint&hl=en)
(Apple link MINT: https://itunes.apple.com/us/app/mint-personal-finance-money/id300238550?mt=8)
Step #2. Understanding the difference between WANTS and NEEDS, and prioritizing your spending and saving accordingly. There are basic needs that must be met, before spending on things you want. For example, you know your car needs new tires and that you need it to get to work. You want the new iPhone, but do not need it. Common sense and good money sense tell you it is more important to take care of your tires and your car, for safety and to be able to work. Your old phone is working fine, so hang onto it and save up for the next upgrade.
Step #3. Finding ways to save a little every day, can really pay off. If you stop for coffee, 5 mornings a week and spend $3 per day, it may not seem like much. But multiply that $15/week x 52 weeks and you have spent $780 a year. If you work and buy lunch each day, rather than bringing it from home, even figuring a low end of $9 per day, five times a week; that’s $45/week x 50 weeks (assuming 2 weeks’ vacation) and you have spent another $2,250 a year. Together that is over $3,000! Of course, brown-bagging your lunch and brewing coffee at home bears a cost as well, but it is a fraction of buying from the local coffee shops and sub shops. Occasionally treating yourself is fine, but be mindful of what you are spending that could go toward other bills and other goals. Of course, shopping sales, thrift shops, clipping coupons and watching the sales fliers are other great ways to save.
Step #4. Save, save, save! There is a lot to be said for stashing money away, in retirement accounts, Christmas Clubs, savings accounts and more. It is a way to be proactive and prepared for future expenses, both wants and needs. Find a way to stash some away. I have never heard anyone say, “oh no, I have too much money put away”, but I have heard plenty say, “I have no money”. Think about it.
The Bottom Line
Burying your head in the sand, ignoring bills or obligations, or constantly asking others to front you a few bucks until pay day, will not help you get a handle on your spending and saving. We all need to be able to live within our means and save for our future and budgeting is the best first step.
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