Budget and Realistic Goals
Knowing where you stand and where you want to be is key to getting your finances on track. Knowing where you stand is *the single most* important step. It is also the most difficult because you have to be honest with yourself and let’s face it none of us would have credit debt if we were being honest. If, when we were in the store, we had said “I do not have the money for this” we would not have made the purchase in the first place. If you are using a credit card you don’t have the money. Period.
KNOW WHERE YOU STAND
Step 1. Get copies of all of your bills together. ALL OF THEM, even the ones that you hate to admit exist.
Step 2. Write them all down. Payment date, monthly payment amount and balance due on credit debt. You don’t necessarily need balance due on mortgage and/or cars, but they can be a helpful reminder. You can use the BILLS tab of template attached if you’re familiar with Microsoft Excel.
Step 3. List all regular monthly expenses such as groceries, fuel, bus fare… Be specific and give each item its own line.
Step 4. List all incidentals such as haircuts, eating out, savings…
Step 5. Go back through a month or two and really figure out how much you have spent on all of the monthly expenses outside of regular bills and change amounts from Step 3 and 4 if necessary. Example: Haircuts – $20, Groceries – $450…
Step 6. Total all of your bills for one month, include incidentals.
Step 7. List out every pay day of the year and the amount of the paycheck you will get that day. You can use the PAY DATES tab of the attached spreadsheet. Be sure that you are using net income, after tax pay. NOTE: If taxes are not taken out of your check automatically you need to list that as a separate line as you did in step 3. Taxes will be considered a regular monthly expense in this budgeting process.
Step 8. Take your total monthly income and subtract your total monthly expenses. This is the amount of money that you should have left in your bank account AFTER you pay your bills.
Now you know where you stand – If you have money left after step 8, you are in good shape. This is money you can spend paying down debt or buying clothes and what-not. If you have a negative number, we have some work to do! Let’s get to it.
Set REAL goals. They need to be somewhat specific so here are a few good examples:
1. Stop using credit. Period.
2. Save $100 on the grocery bill next month. I will post how to do this at a later date. If you are already a savvy couponer, go forth and save!
3. If you eat out twice a week, eat out once a week. Or something similar. Go check out that expenses list you made and check the incidentals part. Pick one and tackle it!
4. If you love to shop – stay away from the shops! If you don’t go you can’t spend!!! And using a credit card means YOU DON’T HAVE THE MONEY. Using cash instead of paying the bills means YOU DON’T HAVE THE MONEY!
5. Pay one extra house payment this year (for mortgage holders).
6. Pay $100, or even $10, extra on credit card every month.
7. Put $25, or even $10, per paycheck into savings. This is $650 a year! (Imagine what you can do with that $650 next year!)
8. Do not spend a penny, a dime, a quarter… Literally. This is how I save A LOT of money. If I pay with cash I NEVER use my change. If my total is $1.20 I give the cashier $2.00. I will then put the $.80 into a water jug. Take it to the bank after a whole year. You will be shocked at what you’ve saved a nickel at a time.
9. Earn $100 extra per month by having a garage sale, selling old items on ebay, working a few extra hours…
10. Put that extra money earned from #5 toward a credit card, mortgage, car payment… something to which you are paying interest. I will explain what this equates to in Part V.
You can have goals such as be debt free in 5 years but what does that mean, really? It doesn’t give you a plan to get there. When you have a specific and realistic goals that you can reach it feels so incredibly rewarding when you accomplish it.
Another thing, if you have credit debt one of your goals should not be a 2-week vacation in Hawaii or the newest Coach purse. Nuh-huh! If you’re living comfortably then okay, go ahead and make that a goal but if you are completely stressed and living in fear those are NOT realistic goals. Not yet.
You might be feeling exhausted, helpless and beat down at this point but you should feel wonderful and exhilarated because you are taking control. You are taking the steps to GET AHEAD and get rid of the stress. If you are serious about getting rid of the stress I promise that you can feel a world of relief in about two months!
As I go along I think of other ‘Parts’ I need to add to the series. Managing monthly bills, figuring payment amounts…. If you can think of any let me know!
Please share your goals in the comments section of this post!
Now you are ready for Part II – Debt!