I’ve been seeing a lot of people start their ‘debt free journey’ lately, and I applaud them. However, there are a few lessons that can be learned from their past and current mistakes, as well as some tips I’ve used for the last 18 years of my life following a budget.
Create a budget
- First step is always creating a budget. But, you can not cut-off your money from one month to the next, unless your ‘extra’ money is budgeted and one/two of your expenses is a SAVINGS ACCOUNT for short-falls.
- Some of your bills aren’t exactly the same each month, such as utilities, and groceries. You must budget accordingly: over-estimate by at least 10%.
- Have a rolling budget, instead of one-sheet per month/pay-period, to allow your visualization of how your money will factor into your expenditures.
- If your budget has $191 for monthly utilities, but they sometimes come in around $195, you need to adjust ALL of your utility budgets to the highest they possibly could be. I personally round up to the nearest $10, allowing a cushion.
- If you have $7 left for the month that isn’t already allowed to go into savings, add it to your savings budget. This is a necessary ‘expense’ for future emergencies. If you’re unhappy with the money not going toward an expense, think of the times you really could’ve used an extra $5. Now you will have it.
Third Paycheck of the month
- If you get paid every other week, you will get paid 26 times in a year, no matter how many weeks fall into a month.
- When you setup a monthly budget, your third paycheck that month actually pays your expenses for next month.
- This is why I have a rolling budget sheet, to flow the money from week to week instead of cutting it off at the end of the month/pay-period.
- This isn’t extra money, don’t treat it like a bonus.
- If you get a $500 annual bonus, apply it towards your most necessary expense, without adjusting any other money (unless this pays off an expense, then adjust accordingly).
- Always choose to use the money that has the maximum benefit. If you need to haven’t had a vacation of any kind in at least three months, consider doing something fun to rejuvenate yourself with a small portion of that bonus money, make a donation to a charity, and make an extra payment to a debt.
Paying off expenses, for good.
- If you pay off a credit card, and it’s your last credit card: Congratulations! Now, setup your cell phone bill to autopay from this credit card, and setup your credit card to be paid off in full monthly. Keep this dollar amount on your budget sheet to show you’re spending the cell phone bill money once, in the credit card column, and write “CC” or another wording, in your cell phone column so you know what is paying what.
- If you close a credit card, make sure you get written documentation showing it’s closed either via e-mail or USPS. Destroy the card immediately, and unsubscribe from all marketing avenues from that company.
- I don’t use cash envelopes, I feel there is a major disconnect from using a strict managerial system so you’re unaware of what’s really going on with your money. I also think money is dirty (it is covered in germs).
- My only caveat to a cash envelope is for ‘fun money’ for an allowance to spend on fun items however you choose. Choosing to spend cash at a local retailer saves them money (no credit card fees), and allows you to tip their service if you’re spending money at a food/coffee establishment.
- Keep the receipts and budget BETTER. You may not spend all of your budgeted money, so you need a plan for the ‘extra’.
- I can see how the time spent getting specific cash amounts from the bank at the beginning of the budget period, and also spending time at the bank depositing the money at the end of the budget period, is useful for some. To me, it’s a waste of time.
- What happens when you drop a $20 and the 20mph wind blows it away? You’re out $20. Use your debit card, or a reloadable prepaid card, for financial security in case of theft or personal mistakes.
- If you under-budget at the grocery store, how do you pay for them if you don’t have an extra $4.78? Public panic attacks aren’t beneficial.
Revisit your budget at the beginning of each paycheck.
- This allows you to see exactly what your take home money is, where those dollars are going, and gives you an opportunity to adjust dollar amounts as you pay off items.
- Make note of items that will pay off within a reasonable amount, and choose to pay it off earlier than anticipated as long as you still have a contingency fund.
- Perhaps you send an extra $97 to your credit card to pay it off once and for all, but need to send $103 to your savings account instead of $200. As long as you still have money going to your designated savings account, do it!
Sound a little too much for you? No worries, I can help!
- I've created a generic digital budget tracker in Google for you, it's what I've been using for 17 years after I created it.
- If that seems overwhelming, private budgeting services are available, use the link to contact me to start a conversation for budget-friendly help.
Money is an exchange of energy, what kind of energy do you want to have for your finances?
Whenever I’m out and find loose change on the ground, I say thank you as I pick it up. I have a small change area in our vehicle to allow more money to come, as well as have it available for any reason we need a penny/quarter/nickel in a pinch.