Have you ever seen the bumper sticker that says, “Money Talks. Mine says goodbye.”? As I talk to more and more people about ways to break away from debt, they often feel like money is leaving even faster than it comes in.
They go back to that Robbing Peter to Pay Paul mentality trying to please everyone asking for money – and I’m not only talking your bills, I’m talking about other things that sneak up on you and take what little wiggle room you might have, like picture day at school, a field trip, the “I’m too tired to cook tonight, I’ll just grab something quick.” Those things will pull the rug right out from under you if you’re not careful.
If you feel like all your money says is goodbye – it’s not your money’s fault. It’s you. Yes, that’s right, I’m putting blame on you (Don’t feel too bad, I’ve been just as guilty.)
What you have been doing wrong is you have basically allowed your money to control you instead of you controlling your money. The amazing thing is how often it happens and you don’t even realize it. The good news is YOU have the ability and the authority to take that control back!
I’m going to help you take control – but before we go into battle, we need to devise a plan. A strategy. When talking about paying your finances, your number one tool is a budget.
Wait… I know I said the dreaded “B” word – people HATE that word because it makes them think they are tied down and can’t have any fun, but honestly here’s where it gets GOOD…I promise!
Before we talk about the actual structure of your budget, let’s lay some ground rules:
Rule # 1: You’re not in the business of pleasing everyone! Some people might not be happy that you’re taking control of your finances, and that’s ok. If they hold you back, they are part of the problem.
Rule #2: Just say No! You need to get into the practice of saying “NO.” – It’s ok to say no. It’s ok to say no to your kids, it’s ok to say no to your spouse, it’s even ok (and often necessary) to say no to yourself. You need to have the courage to stand up and take the responsible stance.
Rule #3: Not everything has to be a “NO”- as I mentioned in my last post, I have built into my budget to address those “impulse” buys. Giving yourself the ability to say “YES!” sometimes, really helps to defeat that feeling of being “tied down” by your budget.
Ok. So here we go – your budget should be divided up into three main sections:
GIVING, SAVING, SPENDING
Yes, it really is THAT easy. You’ll notice the order that those are listed in. This is very important to taking control of your money.
Before I go any further, I’m going to let you know that I am a Christian and I believe in tithing. Tithing is giving the first 10% of your income back to God. I know that not all of my readers may share my faith – but it is still vitally important that “Giving” remains at the top of your budget. An alternate to giving to a church would be to donate to a charity that you support.
If you are a Christian, and you are not currently tithing, it’s likely because you’ve had your budget upside down and have been taking care of your “spending” before your giving and saving. I want to challenge you, as you build your budget, to take a leap of faith and start tithing – I have witnessed amazing things more than once as a result of tithing.
As you move towards getting out of debt, you’ll find that you are encouraged to give more. For our purposes, as you begin this process, let’s keep the Giving section to no more than 10%. If something extraordinary happens, where you feel like you need to give more, consciously build that into your budget.
Have you ever heard the line, “Pay Yourself First!” – Employers use that a lot to get their employees to sign up for the 401k plans. It’s a great rule of thumb, but there are some flaws in it, especially if you’re battling debt.
Over your lifetime, you’ll have lots of Savings Goals that you’ll set up, this plan will help you reach those goals, but there needs to be a method to your savings to make it really work for you.
At this stage of the game, your Savings Goal needs to be planning for emergencies. When you plan for emergencies, it softens the blow of an already challenging time. A true emergency fund is anywhere from 3 to 6 months worth of living expenses, for most people that’s between $15,000-$30,000.
Savings goals will vary from person to person – and the amount that you budget for savings will vary too, an upcoming post will go into more detail about Emergency Fund savings and saving for beyond emergencies.
There is no doubt that this will be the largest part of your budget, at least for now.
The best news, if you followed my advice from Robbing Peter To Pay Paul you’ve already got this part done.
Your “Spending” part of you budget needs to separated into three sections: Necessities, Luxuries, Impulse Spending.
Pay your necessities first – Remember, your necessities are limited to:
Shelter – Your mortgage or rent and your utilities
Food – limit this to your grocery expenses
Clothing – these would be things like your work clothes, shoes, and if you use it, dry cleaning. Not included would be a weekly shopping addiction at the mall (that’s an impulse!)
Transportation – your car payment, your insurance, gas for your vehicle, or if you take public transportation this would include your bus/train passes
Luxuries come second – Cellphone, Internet, Netflix, etc., but this may also include things like haircuts, manicures, and the like.
Then you plan for Impulse Spending. This includes your credit card payments!!
The rules that I mentioned above really apply to this section the most. To Recap:
Rule #1: You’re not in the business of making everyone happy – that includes your best friend who wants you to go out and spend money you don’t have or the credit card company calling you telling you to pay them.
Rule #2: Just say NO! To control your impulse spending, you’re going to need to say no in certain situations. That last minute trip to Vegas – if you didn’t have time to plan for it, you don’t have the resources to take it.
THIS NEXT PART IS VERY IMPORTANT (that’s why I put it in all caps, bold and italics) – It is very important that in your Impulse Spending section of your budget, you make a line item specifically for what I call “Whatever” money. Depending on your budget, it can be a few dollars, it can be $50, it could be a lot more, it just depends on your situation.
WHATEVER money is literally, just that, use it for whatever you want. This is why Rule #3 above is so important. Take a small, but reasonable, portion of your budget to use for whatever you want for those times that you don’t want to say, “No” and allow yourself some guilt-free spending.
The Takeaway: Stop letting your money do the talking, tell it to sit down, shut up, and hang on – because you’re in the driver’s seat now.
Thanks for reading.
Please feel free to send me your questions or thoughts in the comments or by emailing me at firstname.lastname@example.org.