Okay, we’ve made it through Step One: Admitting You Have a Problem. Now it’s time to really get a grasp on what we’re dealing with and start putting things in perspective. This is a time for overall attitude as well as cold hard honest numbers.Both heart and mind need to be on board with the commitment to get out of debt. It’s always helped me to sort of look at budgeting as a game.
First, let’s talk about attitude. Personally, I tend to make a lot of decisions based on how I feel. Warning sirens should go off in your head right now. Making decisions totally based on how you feel is dangerous. Sometimes I feel like spending money! Sometimes I want to give up and just eat a huge bowl of ice cream in my fat-pants on the couch. We can’t make all of life’s decisions based solely on how we feel. It’s time to command your feelings a bit.
Tell yourself how to feel. “I will focus on the positive. I will be patient. Debt will be paid off.”
I am fully convinced that you can’t make decisions solely based on feelings or logic. There must be a combination and that results in attitude. Your attitude is a huge part of success here. It’s not going to happen overnight, but it isn’t going to happen at all if you give up and cry. Think positive, think patient.
Next step is to find good support. You don’t need to do this alone. Yes, this is you vs. debt, but who said you can’t have cheering fans throughout the process? It’s time to think about your support team. If your married, your spouse can and should be your number one support member. More than that, they should be a game-player who is actively involved. If you don’t have that support in a spouse, that doesn’t mean you’re on your own. Family, close friends, or a financial advisor would all be great options. You want a positive support system in people you are comfortable being transparent with. Sharing your struggle doesn’t have to be a Facebook/blog article (although, it’s been done), but you should share it with those you trust.
Remind yourself, “I am not alone in this.”
Okay, we’re thinking positively and we’re set up with a support system, now what? This part gets real, very real, very fast. It’s time to look at numbers. For the beginning of this journey, I totally suggest writing this down on paper. At some point, I’ll share more about budgeting apps and what I use. For starters, it needs to be real and very hands on, so I think paper is best. Grab a pad of paper and let’s go.
First, you need to calculate your net income (assuming your employer removes taxes and retirement plan contributions). If you are self-employed you need to calculate an estimated net income based on your tax bracket. You need to calculate how much pay you take home once deductions are removed.
At the top of your paper, write your net income. This is like your allowance, your monopoly money if you will. Our goal is not only to stay away from overspending, but to end up with EXTRA money each month to go towards debt/savings. This is not a time to round numbers. Be accurate.
Second, you need to write down every expense category you MUST spend money on. It could look something like this.
- Housing (Rent)
- Car Payment
- Cell Phone Bill
- Personal Care Items
- Loan Payments
You may have noticed that the above list did not contain categories like “restaurants,” “entertainment,” “cable…” We’re getting to those types of things, but right now we’re looking at contracted expenses or expenses that you need to pay in order to survive. Everyone has a different situation. Perhaps your utilities are included in your rent or perhaps you don’t have any loans and are just looking to budget. You can adjust accordingly.
Now, the tough part. It’s time to write out next to each category’s monetary expense. This tends to be a wakeup call for people if they’ve never come to grips with their expenses. It’s funny how most people know what they make, but they don’t know what they spend (which is arguably more important).
A few readers have already asked me to share my personal, real life numbers. This is super humbling because we definitely don’t make a lot. However, I really think this will be helpful because you honestly have to track every dollar in the beginning. So, here we go.
Disclaimer: My husband LOVES budget categories, so we have a ton. You may feel like condensing is easier for you. It probably depends on your personality. Also, this is not an example of a “perfect budget.” We are constantly tweaking to make things work for us while trying to spend as little as possible.
I am going to share two budgets with you. One in this post and one in the next. This one was during October, a few months after we were married. At this time, we were both full-time students and working. Because we had very little income and were just starting out, and because our loans didn’t require payment until 6 months after graduation, we were paying nothing on our loans at this time. We didn’t feel that we could (looking back, I would have started paying something, but hindsight is 20/20.)
October was more typical month for us than the summer months because we had both settled into work and school and our jobs. Ryan was working full-time and taking 15 credits. That means that he was going into work early before classes, going between classes, and working until about 7/8pm each evening and some on Saturdays to make it happen. I’m so thankful for his hard work. I also worked between classes and 2 evenings a week 5-10:30pm. To make this somewhat easier to read, I’ve made all the most important numbers red.
*Baisley Budget October 2015*
Income Expected: $1,500
Income Actual: $1,600
Side Jobs Income: $479
Total Income: $2,329
- Auto & Transport Budget: $255
- Auto & Transport Actual: $113
- Auto Insurance $70
- Gas & Fuel $43
- Service & Parts $ 0
- Bills & Utilities Budget: $45
- Mobile Phone $45
- Entertainment Budget: $25
- Entertainment Actual: $11
- Retirement IRA Budget: $150
- Grocery Budget: $200
- Groceries Actual: $221
- Restaurant Budget: $40
- Restaurant Actual: $9
- Church Tithe Budget: $150
- Church Tithe Actual: $239
- Pharmacy Budget: $30
- Rent Budget: $472 (Includes utilities)
- Personal Care Budget: $100
- Personal Care Actual: $60
- Shopping Budget: $50
- Shopping Actual: $25
- Everything Else Budget: $100
- Everything Else Spent: $0
- Total Budgeted: $1,617
- Total Spent: $1,375
Total Income – Total Spent = Leftover
$2,329 – $1,375 = $954 leftover
What We Did Well
We did well to not spend a lot non-necessities like shopping, entertainment, and restaurants. We did this by being so busy with work and school that our free time was spent collapsed on the couch together and by being smart when we did go out. Coupons for restaurants, adding apps for free items, and shopping deals are some great ways to save. Again, we’ll talk about that more later.
We invested a little bit in retirement, even though we weren’t making much. We are huge believers in investing young because you end up with a way better return on your investment in the long run.
We are renting CHEAP! My family can testify that our apartment is small. Having 4 people in it makes it feel tight. (Although we’ve crammed 13.) We live in a one bedroom apartment that is probably less than 400 sq. ft. I miss the ability to entertain more, but we feel like this is worth it for now. We are not home a ton, and at least it’s easy to clean!
We were smart and determined to work odd jobs in order to cover what we weren’t earning at our day jobs. Some of the things Ryan did were freelance IT work advertised online for people in the community (normally older people), lawn mowing, and helping people move. Ryan would charge $15-$20 per hour depending on if he was just doing lawn mowing or if he was heavy lifting. Some of the ways I made extra cash were house cleaning on Saturday mornings and selling unwanted items/used clothing from my closets on Facebook swap and sell websites. I would charge $12-$15 per hour for house cleaning. Selling items was only a few dollars here and there, but every little bit helps! This also made my apartment less cluttered – added perk.
We saved $30 a month for pharmacy even when we weren’t buying any prescriptions. This allowed us to have a buildup when I got mono in the end of the month. Fantastically gross. Good times there.
We didn’t have any big car issues or extra expenses come up in this month, but not every month is like that.
We also had saved enough money before we got married to pay for the tuition not covered by scholarships we had received. We were not making tuition payments during October. Our only school expenses for that fall were fees and textbooks.
What We Shouldn’t Have Done
We budgeted $117 more than we anticipated earning at our day jobs. Not wise. However, we knew that Sept-Dec would be tight due to me only working 15 hours a week for my day job and Ryan having to squeeze hours in early and late. We had done extra house cleaning and lawn care in the summer to save up $800 to balance this out. Our summer was busy, but it was worth it to have the cushion. All that to say, you really shouldn’t budget more than you’re taking home from your day job. Side jobs are not reliable.
We shouldn’t have budgeted so much for gas. We live in Greenville, SC which tends to have pretty low gas prices, and we were both walking to school and work 90% of the time. We way over-budgeted for gas.
We shouldn’t have gone over budget on groceries. I was still learning how to balance grocery budgeting having only been married for 4 months.
We shouldn’t have ignored loans. It would have been wise to take some of our surplus and put it toward loans. Instead we saved it because we wanted a cushion for the holidays.
We worked side jobs. We had date nights, but we spent probably 2-3 nights a week and Saturday mornings taking on extra jobs to make things work. You can’t go overkill and never see each other, but we don’t regret the hard work.
Budgeting doesn’t mean you’re poor, necessarily. Let’s not kid ourselves, Ryan and I aren’t in a very high tax bracket right now, but some of the wealthiest people in the world are where they are because they budget. They know where their money is going and they are actively involved in that process. Don’t be ashamed of budgeting. Don’t be a “closet budgeter.” It’s okay. We’re proud of you.
How about you?
In the next post, I’m going to share with you a month containing loan payments, because I know that’s what you’re all dying to see anyway – how we are paying things off. Now’s the time for you to grab that pad of paper and start writing out your first little budget. You need to know where your dollars go! You might be surprised at how much you spend on some non-necessity categories. Even if you have no debt at all, it is so important to know where your hard-earned cash is going!
If this post impacted you or helped you at all, please leave a comment to let me know!