This post is intended to follow Debt Recovery Step Two: Perspective and Budgeting. If you haven’t read that yet, be sure to check it out!
Hopefully, by now, you’ve sat down and written out your necessary expenses on paper. It’s tough, but don’t cry. We can figure this out. When Ryan and I first sat down to make a budget, we weren’t even married yet, but we knew it would be tight when we realized how little we would be able to work and be in school. Out came the spreadsheets though and we made cuts and crunched numbers to figure out how to make ends meet. Honestly, I look back at those times with fondness remembering how determined we were that being married was more important than having any luxuries (and by luxury I mean shampoo or pop).
Disclaimer: You may occasionally read the word “pop” in my writing. If you aren’t from a section of the world that uses this term, “pop” refers to soda.
Where were we… Okay, you’ve written out your needs. What’s your total? Do you make more than that? If not, we’re in trouble. Here’s the thing, when a budget doesn’t work with what you make, you really only have two options: increase income and/or decrease spending. I recommend a little of both. First, let’s talk about decreasing spending as that will probably be the quickest way to see a difference in what you have leftover month to month.
I’d like you to go ahead and write down the categories of expenses that are not necessary to life, but are things you don’t really care to live without. I’d put some kind of asterisk by each of these to remind you that they can be skimped on or cut if dire circumstances arise.
Now you should have basically, a month’s budget in front of you. Evaluate your categories. Do any seem off? In the last example I showed you, our gas budget was way too high. Those are the kind of things you should adjust. This takes thinking about what you spend. If you’re completely clueless, it’s okay. Take 30 days and keep track of every expense. Write it down. Then at least you’ll have a realistic idea of your current spending.
Depending on where you’re at in life and how serious you are about your next financial goal, you need to take a hard look at your “fun” categories (non-necessities). You may have to commit to cooking more from home (my goal is to share budget recipes asap) or driving less. You may have to really cut back on shopping or movie theatre tickets or hobby expenses. Remember, these are temporary sacrifices helping you achieve great goals. Dave Ramsey always says, “Live like nobody else does now, so you can live like nobody else does later.” That’s what we’re doing here, friends.
When Ryan and I first got married we tried essentially not eating out at all, not buying any clothing or “extras,” and not doing anything fun that costs money (plays, Netflix, baseball games, etc). We got a little frustrated. We kept disagreeing about whether or not to make exceptions to the budget rules to allow us to do things with friends. I had started reading budgeting books and realized that a lot of knowledgeable financial advisors encourage some fun spending. Why? Well, it’s sort of like a diet. You can go from your fast food and homemade pasta dishes to kale and grilled chicken day after day cold turkey, but eventually, you’re going to binge. You’re probably going to cave to cravings and make way worse mistakes than if you had just let yourself have a cheat meal here or there or a dessert once in a while. With budgeting, it’s the same way. If you let yourself have a little free money here and there, you won’t get frustrated, give up, and go on a shopping/spending spree.
However, let’s be real. Do you need to eat out three times a week? No, there are plenty of convenient and healthy options to be consumed for less at home. Do you need to see every new movie that comes out? No. I’m
not saying cut it all. I’m saying pick what matters. Have a little fun money, but keep it in check. Remember, you have a goal.
Now another thing that is so very important is planning ahead. When people start out budgeting, they tend to plan for every dollar of what they spend to go towards a category in their budget without realizing that unexpected expenses come up. This is where a cushion is good. If you’re familiar with Dave Ramsey’s emergency fund, that is sort of what I’m suggesting. I suggest skimping on things enough to have $500-$1000 emergency fund built up for things like car trouble or medical bills before you start chucking every last extra dollar at debt. The reason is that you might be so thrilled that you just made a $500 debt payment, but then have car trouble and end up putting something on a credit card to cover it, thus creating more debt. It’s a vicious cycle at that point. Planning ahead is better.
My husband and I are to the point where he sets aside a little each month in a few different categories, so that we don’t just have one umbrella emergency fund, but rather several little ones with designated categories. Again, that’s a personal preference thing
Evaluating where you can cut back is super important with achieving financial goals. I promise, you won’t regret doing without the “extras.”