A new year always seems to inspire change and I’m definitely feeling the inspiration. My inspiration for change comes from facing some harsh realities and being honest with myself.
My perception of my financial situation:
Reality: I’m spending too much money and using credit to fill in the gaps.
As I began google searching “how painful is plasma donation” and “how to donate an egg” I realized I was heading down a dark road. When I begin contemplating selling off parts of myself it’s time a serious reality check, which is what I had this morning.
What better time than the first of the year to have a serious conversation with yourself?
I dug through a folder labeled “Mom” (a good place to start when looking for words of wisdom) looking for a simple handmade booklet titled “The Plan” and I found it.
Over a decade ago I went through some very serious financial struggles, bouncing checks, overspending, and basically ignoring the problem. I had a drawer of unpaid bills, maxed out credit cards, an eviction notice, and an insane amount of stress. My mom came to the rescue but going through the drawer with her was like this
After that terrifying reality check my mom gave me The Plan. I’m not hiding bills in a drawer and nothing is overdue. Part of it is moving and starting a new job in a new field left me making half the money but paying twice as much in expenses.
I need to get a serious grasp on my finances and create a budget, so I grab “The Plan”*Typo-give up self-indulgence
“First thing–you have to face your debt…”
“Stop using any credit cards-now”
I grabbed my wallet and pulled out the credit cards. I keep an in case of emergency card and the rest go away.
“Gather all your bills together. From the bills add all minimum payments (don’t focus on the balances now just look at the minimum payment required). Don’t forget to include payments which you might not have statements for, rent, etc.”
This morning I wrote out a list of all the bills I pay each month, the amount of the payment, and when the bill is due. I added everything together to find the amount of my monthly expenses.
“Calculate your monthly income”
“If your income equaled more than monthly expense and yet the bills are still not getting paid-you need the plan.
If your income is less than your monthly expenses-you really need the plan.”
Monthly income-Monthly expenses=Left over money……
…I need the plan.
The next step involves writing down when the bills are due and dividing the list of bills between paychecks. I get paid twice per month so I split my bills between those two checks. If you have to, prioritize what needs paid the full amount right away, basic needs come first, shelter, heat, food.
“If you have to pay less than the minimum make some phone calls and set up payments. Do not skip payments-if all you have is $5 or $10-send it in, a small payment is better than no payment.”
This is important. Most companies are willing to work with you but you have to communicate with them otherwise they think you’re just avoiding paying off your bill.
Now that I’ve figured out my monthly bills and income I know how much money I have “left over” each month. This money goes toward the rest of the expenses I didn’t include with my bills: grocery, cat, car, entertainment. Those are my main expenses.
The “left over” money is not a significant amount but it’s enough. Enough to buy gas, food, cat food, even have some money to go out every once in a while, and for savings.
“Start a savings account as soon as possible-save a little each payday-even if it’s $5-it will over time add up.”
One of the components that made me so successful last time I did this was I used ONLY cash for my weekly budget. I quit carrying my debit card with me all the time and I’m going to do this again for a while until things are back under control. Once the cash was gone I was done spending for the week. If I budgeted $20 and spent $10 eating out, $5 on coffee, then I might only have $5 to buy gas for my car. It significantly cut down on my impulse spending.
A few more tips from the original plan
“Remember what’s important and where you want to be in a few years.”
“Try keeping your spending money in an envelope-write on the outside exactly what the money is for.”
“A dollar spent here and there will destroy your budget.”
The Plan is not overly complicated. It’s nothing new. It’s not a revolutionary expense plan. It’s like my meal plans, simple, easy to follow, something that works for me and might work for other people.
I’ll be sharing more tips and tricks for managing a budget as I move forward with “The Plan”
Reflecting back on last year I had so many major changes and I’m proud of my accomplishments but I also recognize some back slide on some of the progress I made when I wasn’t working so I’ll be having a couple more reality check posts. If I want to be successful in my goals for the next year, read about those here, I have to be honest with myself and make plans.
Happy New Year!! Not to be too cliche but I’m excited to be in 2016 and look forward to making it an amazing year!