If you were raised, as I was, in a family that lived from payday to payday, you might not have the least idea of how to budget your finances. If you think a budget might be a good idea, you might begin by looking for information on how to make a budget. There are a lot of books, programs, classes and friends willing to take your time and money to tell you how they plan and follow a budget.
The big problem with other people’s budgets is that they suit them, not you. You need to plan a budget that works for you. In order to do so you must first know how you spend your money; which isn’t as simple as one might think. Do you keep track of every cent you spend whether cash, check, check card or credit card? I’ll let you in on a big secret here. Most of us do not keep that close track of our money. Yet, in order to develop a working budget for yourself, you need to do just this; at least for a little while. The while will depend on how much financial trouble you are in.
I’m assuming you are in some sort of financial discomfort if you are reading this article. It may be as mild as not having any money for the last few days before you get your next paycheck or as severe as bankruptcy court is imminent. If the latter is your problem the very best advice I can give you right now is consult a reputable attorney.
In this particular instance the American Bar Association will not be your best source of contact. You need an attorney that knows the local laws and to find her you need to consult the local Bar Associations. To find that reputable attorney call or email your local Bar Association. If you live in a large city there will be a City Bar Association. If you reside in a small town or the country then you need to contact your State Bar Association.
As for creditors; Call your creditors RIGHT NOW and talk to them about your problem. Do not let things go on so long collections agencies get involved. Evading your creditors will only make things worse. If you are all ready in the hands of collection agencies and can’t pay them you really do need to contact that lawyer.
I repeat, if you are in such dire financial straights you are facing foreclosure and/or bankruptcy, do not waste any more time reading this article. Go find an attorney. You also need to find a Credit Counselor as well. Come back here after you’ve put your affairs in the hands of the experts and begin teaching yourself how to stay out of such trouble in the future.
For the rest of you, as I said at the beginning of this article, the first thing you need to do is find out exactly were all your money is going. If you already have a PDA you have a good tool right there to use in keeping track of your spending. You probably have access to a nice spreadsheet that you can set up to enter your data into.
If you don’t have a PDA there is no need to rush right out and buy one, though eventually you may decide to do so. An old check register can serve the purpose at first or, if you no longer have one, you can buy a small notebook for about a dollar that will easily fit in your pocket or purse. I like the marble back ones because they are sturdier than the spiral ones. The reason you need one of these is to enter every cent you spend. And I do mean every cent. If you drop a penny or two in the dish at the local convenience store enter those pennies and where they went in your log.
The next thing you need to do is set up a pocket in your purse, briefcase, jacket or pants to put receipts in. Put EVERY receipt you get in that pocket. Then, daily if you are using a shirt or pant pocket, weekly if you are using a purse or briefcase, transfer them to a folder at home.
At this point you are not trying to control your spending or make a budget. Frankly, that would be self-defeating at this point. What you are doing is learning where your money really goes. If you don’t know this then you don’t know where your leaks are that can be plugged. You also may not realize what is of absolute importance to your sense of well-being. This is different for everyone. For you it may be that having a cup of coffee from Starbucks every morning is so vital that you’ll give up any number of other things to be able to buy your cup o’ java. For someone else it may be a candy bar or the daily newspaper. You need to find your absolute, can’t do without it, perk and budget for it.
Very simply, for the next four to six weeks, enter every penny you spend in your log and check those entries against the receipts you accumulate. And, please, don’t even consider blocking a line at the gas pumps or supermarket while you make your entry. Move out of the way, then stop and enter your information, but do so before you leave the store and completely forget about the thirty-nine cents you spent on a candy bar.
The first day check your entries and make sure you entered everything. If you are shocked by how much you spent-welcome to the club. I said you aren’t trying to control your spending, but I’ve found that with money or calories once you start keeping a log book you begin asking yourself “Do I really need this?” Putting our expenditures down in writing and looking at them has an effect in and of itself.
Sometimes the first day results of keeping a log book can be so shocking you don’t want to continue entering data. Take a deep breath and remind yourself you are doing this for a good cause. Then continue to maintain the log.
For the first week, at least, check your log book at the end of each day. Once the habit of putting all expenditures in it is set you can back off to checking your entries every few days. This is an important step because of the tendency to alter your spending habits because of having to enter them in the book. Once you are only checking every few days you will slip back into your old spending habits, which is what you want to do for awhile. It is critical to really know where your money is going all the time, not just when you are keeping a close eye on day-to-day expenses.
Once you do have your information about where your money is going you can determine what is important to you and what isn’t when it comes to spending money. A quick example here is; does your morning cup of coffee HAVE to come from Starbucks or would you be just as happy with a cup from home if you had a coffee pot set up to have the coffee ready just as you leave the house? Of course you might not want to buy the coffee pot and coffee, but how about getting your cup of caffeine at a convenience store? If you aren’t a coffee drinker this example may seem pointless, but there is something similar in your life for certain. You just don’t know what these little somethings’ are until you see them written out. If it is a soda then consider buying cartons of cola when it is on sale rather than a Big Gulp. The can may only cost twenty-five cents as opposed to whatever the sale of the day cost of your big drink is. The savings in calories can be pretty impressive as well.
There are a lot of things you can moderate, rather than give up entirely, and have a profound effect on your cash flow. Unfortunately, if you’ve really gotten yourself in a financial bind, you may discover you are going to have to give up some very significant spending for awhile. For some it may be buying shoes, for someone else it may be buying the latest game as soon as it comes out. Each person has different “needs” to consider which is why you need to learn just what yours are rather than try to use a one-size-fits-all budget.
One final example from my budget; two things that are critically important to me are books and occasionally eating out. I will give up a lot of things, but these two I have to figure out how to keep in my life. For you it may be movies or clothes or shoes or the opera, but there is bound to be something you need to keep in your life to make it a happy life. This business of learning where you spend your money will enable you to make decisions about which money leaks can be stopped entirely, which ones can be slowed, and which ones you can only give up if there is absolutely no other option.
I have put myself on a book diet for the nonce. I use the library a lot. Since I live in the country I have to pay for a card, but it only costs me the price of one hardback book and I have a year’s access to a lot of books. Since I actually like to cook, eating out can be managed by reducing the number of times per week I indulge and, occasionally, taking advantage of coupons or specials.
A leak I plugged entirely was giving up my gym membership. I didn’t go much anyway and making a date to walk with friends several times a week has proved to be more fun anyway, as well as harder to skip since they will call and ask where I am if I don’t show up. I also gave up my audio book rental membership. That hurt, but I still have access to some audio books from the library so it isn’t a cut to the bone hurt.
Remember, regardless of how appalling the initial results are, you have to have this information before you can even think about creating a budget for yourself. So, get your PDA, check register or notebook and start entering every penny spent right now.
My next article in this series will be about how to make the best use of this information.