I thought I’d continue from the theme of a post from late last month (Money & Consumer Habits to Establish) by focusing the next couple of blog posts on budgeting basics, especially if you’re like I was when I was single or even now that I’m married: have (or want to set) financial goals, want to get the best for as little as possible, want to travel regularly, and reduce whatever size hill of debt in the process. I also realize that some of you popping by here are in your 20s and early 30s and may have little to no financial education prior to now, so any lessons I’ve learned (hard as well as easy) we can pass on, I’m more than glad to share.
Today I’m starting with a few basic concepts for those wanting to know where to start (or needing a refresher) when it comes to budgeting and money management …
Sit down and write out a list of all of your income sources and expenses.
Step 1: Make a list of all your sources of income (this includes your primary work income, any side jobs/hustles, interest on bank accounts, items you have sold that you no longer need/want, etc).
Step 2: Make a list of all of your bills/necessary expenses: loan payments, credit card payments, utilities, insurance, groceries, and vehicle and home-related expenses (beyond the payment/insurance – i.e. gasoline, oil changes, home maintenance items), taxes you have to pay out separately from what’s deducted from your check (property taxes + self-employment), and medical bills/meds you take regularly.
Step 3: See what, if anything, is left after all the necessary expenses are subtracted. Aim to save as much of that as possible to establish an emergency fund and apply the rest to any debt payoff that’s hanging over your head.
Step 4: Bills more than income? Get the red pen out and start slashing – cut out everything completely unnecessary (subscriptions, cable tv, and eating out are a few examples). Get these numbers to break even … and if needed, sell stuff you no longer need/use or pick up a side hustle to pay off debt.
The key is to spend less than you take home.
Debt is no bueno. Just because AMEX, Discover, MasterCard, or Visa gave you a really nice credit limit doesn’t mean you should see how close you can come to maxing it out. It’s not free money — it’s money that comes with extremely high interest rates! Do you really want to pay interest for years on fast food, out-of-style fast fashion, impulse purchases, and more due to making only minimum payments?
[the answer to that is no, no we don’t want to do that!]
Make a list and stick to it when shopping.
Yes, I know that there’s so much tempting you as you stroll the aisles of Target when you’ve gone in for only a single item. Resist, resist! And grocery shop after eating a meal, not before – you’ll make less impulsive food purchases, especially unhealthy ones!
Stick to using cold hard cash when shopping – especially if you find yourself stressed when you log into your credit card or bank accounts.
I assure you, it’s much more emotionally painful to hand over cash or even write a check than it is to swipe a credit or debit card. And speaking of debit cards, if you don’t have checks, that is, make sure to write it in your checkbook register [yes, I realize not everyone maintains one of those anymore] or hang on to the receipts. When I was a cashier in a grocery store as a teen, so many customers would tell me to toss the receipt on their debit card purchases. Then they’d wonder why on the next visit their card was rejected … this was in the days before online banking btw; to this day, I’m old school and still record everything in a checkbook register and compare it to my online banking to make sure there aren’t any errors. This has saved me a few times over the years when the bank showed I had less than I did and I had the paper trail [i.e. receipts] to prove in my favor and get it fixed.
This is a great introduction to the process of establishing a budget with solid advice for getting control over one’s financial life! This will be helpful to so many people.