My Husband and I were struggling financially for many years. We had credit card debt and car loans and student loans and no savings. It is clear that we had a problem but what exactly was the problem? It wasn't until we started making significantly less money then we had been and were still surviving that we realized that it didn't really matter how much money we had but how we spent it. So we decided that we needed to change the way that we spent and viewed our money. There are a couple of things that really help. And this isn't in past tense because we still have to do this now to stay on top of things.
#1. Stop Spending Money You Don't Have
Cut up the credit cards. Quit frankly we didn't cut them up but we got rid of all of them but one and we resolved not to use it unless we had an emergency. i.e. Stranded with your car somewhere away from home...or medical emergencies. The very cute sweater that there is only one left of and it is on sale, does not count as an emergency. I know a lot of people who use their cards for points and then only spend what they have, however if you are anything like my husband and I and you like to spend more than what you have then this would not work for you so do not be tempted if this has not worked for you it probably won't work for you again.
#2. Track your Spending
For at least two months, if not more, make a very detailed list of everything that you spend. And I am talking everything. NO CHEATING!!! This a very important step, do not skip it. We tried making our budget and sticking to it before we had done this step and it was not successful. So this step is very important. How I did this was I used a small notebook and I kept it in my purse. Every purchase I made and my husband made was written in the notebook. My husband would save and give me any receipts of purchases that he made and I would record them in the book. Especially one or two dollar purchases, you will be surprised how much they add up. It is important to keep a separate book from your checkbook account recorder because there are always cash purchases made and it is also equally important that you record what the money was spent on. So let's say you bought gas but you also went in and got a drink and a snack. So you would write down how much you spent on everything separately.
i.e.
$52.34 Gasoline
$4.50 Snacks
.75 cents on magazine
$150.67 back to school supplies
$20 Soccer
$230.12 Groceries
$45.78 Toiletries
$25.09 Wendy's
$120.45 Power Bill
$112.87 Phone/Internet/TV
...
#3. Figure Out what Categories you Will need for your Budget
After you compile your lists take all the information and group them by items how you would like them to look on you budget. For Instance, if you would like your budget to look something like:
Kids Extras
Groceries
Wants (Or what we call Mad Money)
Etc.
Then you will go through all the information you have gathered. Let's say that at the end of the month you found out that you spend $400 a month on groceries. And you want to group together kids expenses because they are not always the same every month so when you go through the list for example you could combine back to school expenses and Soccer in a kids category etc.
#4. Figure out Where You Can cut Back
Once you figured out how much you spent on each category that you have on your budget you will need to figure out what is a realistic amount to spend on each category. Ask yourself these questions after you have gathered the information...
Am I spending more then what I make?
What categories am I spending too much in?
Where can I cut back?
Is there a bill that I can get rid of? i.e. cable and switch to netflix, can I get a cheaper phone plan, can I ask any loan/credit card companies to decrease my interest rates for being a customer in good standing, can I sell a car with a huge loan or huge taxes/insurance for a car with less,
Call your utility companies and see if they will give you a monthly rate so that you can plan your budget more accurately. All of ours did that and it made making the budget more consistant. (Usually you have had to have service for a year. So they can get an average.)
***Caution*** Make sure that when you make your budget and decide where you need to cut back that you are thinking realistically. If you normally spend $400 a month on groceries then don't say, "oh I could get that down to $100." You need to think specifically how you will reduce it. If you are going to become an extreme couponer then that might be more realistic. However if you do not have 20+ hours a week to committ to that plan then you would not be succesful. An example of a positive change would be:
If you spend part of that grocery money on bread and decide you could cut that in half by making your own bread that would be taking action to change how you spend the money.
By just writing on your budget to spend $50 less on groceries without taking any kind of action probably isn't going to happen and then you will feel frustrated that you are trying to keep a budget that doesn't work for you and you can't make it work and then you will just go back to your old ways and the cycle continues. That is one of the mistakes my husband and I made so take it from me you don't have to do it the hard way. Do not budget yourself so far under what you can practically handle.
#5. Make and fill in your Budget
So once you have figured out how much you are going to spend on what you need a template and someway to track it. You could use a print out and just print it out and write out how much you plan to spend. You could keep track on the computer on a spread sheet tracker or money software. I tried all of those though and failed. I have my little notebook and I write the budget in it then when we get paid I make sure that what we made that paycheck matches the budget because we don't get salary our paycheck changes so sometimes I will have to do a mini switch of something and think okay I can't buy a new shirt this month I will have to wait etc. My Budget looks like this:
May 1st Paycheck 2nd Paycheck
Tithing Tithing
Power Bill Insurance
Gas Bill Phone
Internet/Tv Rent
Grocery/food Water
Gasoline Grocery
Extra Needs Gasoline
Mad Money Extra Needs
Medical Mad Money
Savings Medical
Savings
(Here I put anything extra for the month i.e. vacation, gifts, house expenses, I usually wait for a paycheck with overtime in order to pay for these things or if we don't have any of these planned I will put more money into savings.)
I write how much I am going to spend in each category, by now I have pretty well figured out the magic number in each category but it took some time. A lot of time. I had to practice and we had to make a lot of mistakes. The point is, is that we did not let failure get us down, we kept going and we kept trying and we kept making mistakes and we kept learning and getting better at it. You will also notice that I have no debt payments right now however if you have credit cards or loans to pay off you will need to add that to the budget also. I will post next about how we paid off our debt.
#6. Seperate Your Money to help manage your spenging.
I do not put all of this money in the bank. After I write the amount after the category I will write an A or a C. A is for Account and C is for Cash. i.e.
Power Bill $120 A
Grocery $200 C
I take out cash for many categories that it is easy for my husband and I to over spend in. Like Gas and Groceries and extra "needs" and Kids activities etc. This ensures that I will not over spend. The money that I put in the account is for things like accuring bills that do not change much and savings. Like the water bill and insurance etc. Also, things I will be using online bill pay for (which is awesome by the way if your bank has it it would be worth checking into.) And things that I need to write a check for. After I have got the cash out or payed the bill I will cross it out and write the acctual amount next to it. So I thought that the Water Bill was supposed to be $80 and it was more this month I will write $85 next to it and then cross it off. If there is a month that you made more start hiding some money in your checking account incase you have a situation like this where you spend slightly more then planned for but don't make it an excuse to buy something extra.
Mad Money is very important. We tried cutting out wants all together when we first did the budgeting and we ended up over spending in that area because it was too resritcted and we were unable to follow it. But if you think you've got the will power then go for it. ;) It's kind of like when you go on a diet and you cut out all sweets. In the end you end up purging on sweets and junk because you didn't get any of it. So moderation is key.
My husband and I both get $20 a check to spend/save on anything we want. I usually save mine for clothes or other. My husband usually spends his or saves for guns, which was one of the things we noticed we were over spending on when we did our months of checking out our expenses, now we have a set amount and it always seems to be enough. It was hard, very hard at first, but I no longer have the urge to spend frivolously when I don't have the money. Our money freedom has been a much better feeling then the thrill of a fun purchase and the guilt after. I actually enjoy spending that money I have saved and I have no guilt or regret afterwards. Mad Money is a Must. Infact, I give the kids $20 a check too, my kids are still too young to give it to them but I use this to pay for activities they want to do or things they need for school or rewards for good behavior.
#7.) Keeping the Cash Organized
I have colored paper clips in my Wallet. Yellow means food, blue means Gas, Pink means extra needs, and silver means kids Mad Money. Then when I go to pay for something I know where to get the money and I know that I can't spend any more in that category until the next paycheck when the money is gone. Even if it's a need. Groceries are a need but if I'm out of money in the Yellow paperclip (unless I don't think I'll need any more extra money for the pay period and I have some left of that) I will not buy more groceries untill we get paid. We usually don't have to wait very long. And the left overs in the fridge or the can of soup left in the cupboard will do.
It is fast easy and it works. The cash system has been nothing but postitive for us we are staying within our means and spending less then we make. We have paid off our debt and we are saving money.
****Check out the Privident Living Website for more Advice. https://www.lds.org/topics/finances?lang=eng There is also a budget template so check it out if you need some more ideas for your budget.
This was my personnel experience you may have to tweek it somewhat for your needs. But it is worth the journey. Just remember that on your journey you will have to make changes and make mistakes and keep going and it is a good idea after to do your detailed recording every once and a while to make sure you are sitll on track. It can be easy to fall back into old habits. The more you do it the better you feel and the better you get at it. In the beginning it was hard to see an end in sight but now that I'm where I am, I am glad we did all the work to make it happen and you will be too.
