May 30, 2015
A recent poll by the American Psychological association indicates, the #1 stress inducer for Americans is money. It's not an abundance of money causing the problems, either. It's a lack of it.
This might hurt, but, the truth is, for most people, money issues are caused by spending more than you make.
Yes, I know, you may have lost your job prematurely
Yes, you may have had some surprise medical bills
Yes, there are a number of items which may have hurt you financially
Most of us are struggling financially because we’re spending more than we make. That's always been the case for me, when I've been struggling with money. Honestly, you'll have to answer this for yourself, but I have yet to meet someone, who was completely honest with themselves, who didn't have a major part in their money problems.
Even if you’ve been hit with a surprise bill, the truth is, we (myself included) didn’t have the money to pay it because we spent more than we made and didn’t have the money to save for those unexpected expenses.
So let’s talk about spending less than we make.
There are a lot of budgets out there. From a standard spreadsheet to a specialty app for our phone or computer. The Mint app is available in the iTunes App store and in Google Play. But, it's great for seeing where you money went, but it won't do much to keep it going where you've told it to go.
But, I’m going to give you the absolute easiest system available.
The envelope system
Before we talk about this, I want to stress with you, involve those who will be impacted. Your spouse and kids will need to be on board from the very beginning if you want to make this budget work.
The biggest reason a budget won’t work… You underestimate what you’re going to spend. So, take a moment and look at your previous bank statements to see what’s been going out. But, remember, this doesn’t set the number but it tells you where you’re at right now. It gives you a ballpark number.
From this ballpark number, you'll be able to look at where you need to tighten your belt and were you need to possibly loosen it and budget for more.
If you’ve been spending $800 a month in groceries, but when you set up your budget, you write down $500, you're probably setting yourself up for failure. That’s pretty unrealistic
Here’s what you do:
Pay the fixed costs
Rent or Mortgage
Utilities
Car Payments
Other debt with a minimum payment.
Get all of those figured out and pay them immediately.
Put something away into savings. Do it NOW. You can’t avoid the fixed costs, but you CAN adjust the variables we’re about to go into. Make sure you take BABY STEPS in your effort to get yourself where you WANT to be.
The balance will be taken out of the bank in cash and distributed among some envelopes
You will have to evaluate frequently. For example:
Groceries (this may have to adjust)
Gas Money (this may have to adjust)
Clothing (don’t spent it ALL… remember Back-to-School)
Dining
Gifts
Annual Expenses (Vehicle Registration, Maintenance, Holiday Gifts)
Travel or Vacation
Fun money
Hopefully this all helps you get to the point where you have a basic budget that allows you to tell your money what to do, rather than it telling you what you can or can't do.
Budgets work if you make them realistic.