It’s a basic fact: Budgeting sucks. Most would rather concede to countless hours of Celine or sport pegged jeans in public than reign in resources or lend attention to their funds.
But budgeting is basic to life, and in the end it always breaks those who refuse to bend. So get your couch-diving, minimum-paying, 69 cent-eating, loan-owing, economy compact-driving life ready—we’re going there. Welcome to the world of budgets.
I hate to beat a dead horse, but seriously, really, honesty … we need to figure out how much money is actually coming in each month. To beat another dead horse, we need to figure out how much money is going out. And, to beat the deadest horse of them all, we need to spend less than we make. With the poor little pony down for the count, let’s move on.
Keeping receipts works in two annoyingly effective ways: 1) It’s a big-ole pain. The more we’re forced to endure the asking, collecting, and saving that go with stashing receipts, the more aware we’re forced to become about our spending;
2) It’s a running tally right in front of our face. It will only take a few receipts to tell how closely related we’re becoming to Sir Elton; did I mention his bankruptcy problems?
From loans or scholarships allotted in school to quarterly sales commissions, Christmas bonuses, or part-time paychecks the trick here is two-fold: 1) Take the aforementioned advice and figure income versus expense; 2) Apportion big checks over the long run and leave this money A-Lone! The only way to make it when steady pay goes south is to have a firm grasp on day-to-day expenses and a bank account to back this up when things get lean.
Larry Burkett once said on his “Money Matters” radio show, those of us who don’t tithe should really consider whether we’re Christians at all. You guessed it; controversy and call-ins flooded the show.
Instead of calling to complain, I listened to his conviction. After all, even a penny-ante buys us lessons in spiritual development when we choose—first—to give. It’s not about the total here, but the tenacity to tithe with consistency. Give to God first, and you’ll find a way to figure life out on what’s left.
[PAY REGULAR BILLS NEXT]
What’s regular? Here let subjectivity reign as we’re far less likely to be budget-benders if we’re spending on the things that matter for us.
Regardless of what you deem fit to never be done without, always track these expenses over periods of time to figure average monthly costs, and put this average aside. Don’t figure costs month-to-month. Paying this way leaves you high and dry for those fluctuating payments that figure from pennies on the dollar to “please pay how much?!”
[PAY DEBT THIRD]
After God and the bills, the cash that’s left is ours—well, it’s our creditors and ours. We owe them, and it’s time to pay up.
Cut the creditors in now, so you can cut them out later. Unless you own a home or other “tax-break” debt, and/or the money you’re saving in tax breaks exceeds the interest rate on current debt loads, be on the warpath to pay debt down, highest interest rates first.
Decide on a regular amount payable toward debt and do it. In fact, do it over and over, each and every month until you reach a $0 balance. And don’t let the cooing of creditors distract your determined efforts toward pay down. Paying the minimum isn’t any deal in facets of finance—unless, of course, you’re a creditor.
Rare is the Rain Man who actually calculates how their income is committed. The house we live in, the car we drive: these are the biggest culprits of our funds, but we rarely notice what proportion of our income we’ve dedicated to these costs.
One of the best guidelines to be sure we’re not budget busting is to commit 30 percent or less of total monthly take-home for housing, including electricity/gas, trash, water. A good guideline for auto expense is to keep costs below 13 percent.
Of course, if you have few expenses, $0 debt, or pull pro-athlete style paychecks, you’ve got some room to fiddle with figures. Just be sure to let the Rain Man in you rule; count as things compile toward 100% of your income.
[FORGET “LUMP-SUM” LIVING]
Do envelopes, do a money program, do whatever. Just abandon a life lived by the lump-sum balance in your bankbook; it’s too tempting and too vague.
Instead, introduce (dut da da da!) “spending sectors” into your life. From CDs to collectables, from groceries to grande mochaccinos, spending sectors make you a diva of divvying funds, and at the same time set limits on spending. Set sector limits by allocating funds to each.
Spending is fine, but sectors clear up the picture and keep you from capitalizing on the longings only lump-sum living can provide.
If you want more cash for something, steal across sectors. Put the law you know aside and follow this new sheriff around town: Wrong: stealing that exceeds the total amount you’ve allotted across all sectors for the month; Right: stealing for the stretch it takes to ride out the wrinkles of newborn budgets.
[MOVE AWAY FROM THE DAY-TO-DAY]
Learning to coordinate paychecks and payments takes time. Set your goals beyond the day-to-day, and keep the goals clear. If you don’t make it some months—guess what—you’re like the rest of us. Find the cheapest way to cover the expense, consider it a one-time bobble, and get back on that horse.
[START TO SAVE]
Financial advisors say save, and you should. But not without considering this: Those in their 20s and 30s often carry big debt thanks to BAs and other degrees.
Every dollar we put toward saving is a dollar less we subtract from this debt. Every dollar left as debt is a dollar Sallie Mae dings with interest and capitalization. However, paying down debt at the expense of stashing savings leaves us unprepared in times of peril, shortsightedness we’ll probably pay for with double-digit interest rates.
Here then is a sort of catch-22. Pay yourself, and your debt load lingers; don’t save for the rainy day and you’re sunk by credit. It’s a personal wager you’ll have to make.
Though my two-cents say save, consider the facts of your financial fitness before you commit. If you can’t curb the urge to splurge, saving does you no good. When credit balances rise, so does the money it takes to pay them off—guess where your savings will ultimately go? If you haven’t learned how to reign spending in, money saved will be money lost.
If you decide you’re the ideal saver, consider your situation to see what you should squirrel away. If you provide for a small armada, get it crackin’. If you’re more the single + animal + two cereal bowls and a couch type, well, just get there when you get to it. However a good guideline for all is to save for at least two to three months of expenses … just in case.
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