The last 2 blog posts were about time and space, so that brings us to? You guessed it! Money. Que that song in everyone's head*** I'm not singing it right now if you're wondering. Ok ya I am. But you can't see me so idc. But for real we have to talk about money. Or more specifically budgets. It's a tough one for sure, but I feel like we are friends by now so we can talk about the hard stuff.
It's a super personal and individual subject isn't it? Since we're internet friends and I can't speak on any individual circumstances this topic will be pretty general. But still good reading imho with my thoughts and experience.
Everyone needs a budget. I don't care if it's scribbled in crayon on the back of a paper towel or a color coded spreadsheet. You need a budget. You also need to stick to it. It's tough. No-one wants to do it, but you will thank me in a couple of months. I promise.
One hour. Once a month. That's all it takes to get your first budget written or plugged in to a free app. If your circumstances don't change dramatically it'll take even less time in the following months. Just basically copy and paste, adjust where you need to and go on with your life. We use a zero based budget in our family. That means ever dollar has a place or a goal. But there's a bunch of different ways to do it. Find the one that works for you and stick with it. Be honest! You will only be lying to yourself. And remember, no excuses.
So a zero based budget is very simple. Everything we earn (or expect to earn) goes into a category. Our categories are:( in no particular order) mortgage (or rent), utilities,(cable, internet, light, water, electric, phone bills), groceries, "fun", savings(including retirement), insurance, gifts, clothes/shoes and pocket money( discretionary income), and if you have debt then debt payments. So most of those are self explanatory. Some are fixed and some are variable. If you're on a really tight budget obviously you have to prioritize. We'll talk about how to prioritize in a bit. In another post I'll go over a bunch of ways my family and I saved money when we were really broke(read poor), but that's definitely it's own post.
Prioritize! If you have just enough, or not enough, to pay your expenses this is the priority order
1. Groceries- not extravagant, basics you can cook, so think ingredients, not ready made meals. I'll do a post on saving money on food soon.
2. Basic utilities- water and electric, the rest will be lower on the list-or not included at all.
3. Rent or mortgage- why is this 3 and not 1? Because we have to eat and they'll shut off your utilities faster than they'll evict you. Hopefully you'll find some extra money way before it gets to that point though.
We've been here. Believe me. It was tough to figure this out. I mean really tough. But we made it. And so can you. Get out there and hustle. Make some money - there's all kinds of jobs, even during a pandemic. I'll do a blog post on making extra money soon. It'll get better. I promise.
If you're in a position where you can pay all your expenses comfortably then the "priorities" become percentages or dollar amounts. You don't want to spend more than 35-40% on rent, less is better. If you have too much house it's time to downsize. I don't mean break your lease or go into foreclosure but find a less expensive living situation. Get creative. Rent out that extra bedroom, do airbnb. Something to get that percentage down. I realize there's cities that this is impossible. If that's my situation I'd really think about moving, but that's just me. Next is savings, 10% of your income should go into saving and investing off the top-after taxes, company sponsored retirement plans definitely count, but, you should be saving on top of that as well. At least to get a good emergency fund. All the other necessary groups like the rest of the utilities, insurance and debt payments come next. Utilities can be variable but it shouldn't be a huge % variation. Electric may be a little higher in the summer but not enormously. If your bills fluctuate hugely then it's time to research some electricity and water saving tips. Everything else should be pretty fixed. Fun and discretionary income/pocket money can be one category, you could even include your clothes and gifts in this category as well, these are the last priority and shouldn't be a big percentage. The amounts are up to you. Just remember to be honest!
A little note about debt. GET OUT!! You don't need a 200 dollar t-shirt if you have to put it on a credit card! You also don't need to drive a brand new Mercedes when a 3 year old Honda will get you around! I've heard the arguments about good vs bad debt. It's all bad. Yes, even the mortgage. It's just less bad. I get a house at the end of it at least. Not some out of style t-shirt that cost me double because it took me 5 years to pay off my credit card balance. There's a bunch of different debt repayment strategies I've seen. Investigate. Then pick one that seems best for you and your family. Go at it. Hard. Throw everything you have above what it takes you to live. Don't even save more than a couple grand, just pay off that "bad" debt. Go get a part time job-and throw that at it to. I mean everything you can. And then- stay out of debt! Like forever. A mortgage is OK. But that's the only acceptable debt. We can argue about student loans here to. I go back and forth. It's scary. I'll have entire conversations with myself about why student loans are the less bad debt or the really bad debt. That's like one of the diagnostic criteria for some really bad kind of crazy right? Oh well. I might be blogging from the inside of the mental institution one day. I bet I'd have some great stories to tell though. So student loans are an honest conversation you have to have with yourself. Then look at the reason you need the loan. Is it an excuse? Or a real reason. Be honest! That degree in Nursing from an expensive school may be pretty on your wall, but I make as much money with my cheap community college degree. Is it truly the only way to get your degree of choice? Can you go to community college for 1500 a semester then transfer to the big school in 2 years? Probably. If you do take out loans don't use the money for stupid crap! My daughter has friends that go out to bars and eat at restaurants with student loan money. You don't want to be paying off that beer or cheese burger for the next 10 years. Also apply for scholarships. All of them. Even if you think you'll never get it. Do it anyway. There's websites now with pages and pages of scholarships. If there's even a little overlap in your life or degree, apply. Worst they can say is no. And that little $250 dollar scholarship might cover your book. It's a start and less that you have to pay back in loans. I hope everyone gets an education. Just seems like 100k in student loans for a 35k a year jobs ridiculous. Just like I always tell my kids- there's always a way we just have to find it.
So we made it! And we're(hopefully) still friends! Money and budgets are a very personal subject. But we all need it. If you stick to your budget you'll feel like you have more money. Even if it's the exact same amount. I have no idea why. It just works that way! In the next few blog's I'm going to talk about some ways we saved, how we earned more, what had to go and how we made what we have stretch. When I said we were broke I absolutely wasn't exaggerating. But we made it! And kept making it until we got to the point where we're comfortable. This is where I hope all of you, my internet friends, get to. Or even better! For now that's it! But remember! There's a solution to every problem, you just have to find it.
-C-
