How Scary Are Your Finances?
Goblins and ghosts, witches and wizards, vampires and villains… Do creatures of the dark scare you? Or have you been wicked all on your own?
What's more scary; walking a graveyard alone during the zombie Apocalypse or looking at your checking account balance?
If you're ready to suit up for some graveyard walking, then it's time you and I had a little chat called 'let’s get our shit together’. Between just you and I; I’m sure you’ll agree.
First of all, I want to say, "I got you. I've been there!” Like, really, really, hottest of all messes, been there. I've checked my account balance in the bathroom and then ordered water. I've maxed all all my credit cards then opened another credit card just to pay the minimum on my other credit cards. I've over-drafted my overdraft. So,I'm no stranger to the guilt, unfairness and denial of living paycheck to paycheck; though in my case it was more like last paycheck to last paycheck; if you get me.
The truth is, overspending is not something you dig yourself out of over-night. And like all good horror shows, there's a formula for getting ‘killed’ and ‘staying out of harms’ way.
And that formula for ‘digging out’ doesn’t take any witchcraft of wizardry. It just takes the willingness to get started. That’s all.
Step 1 - Take Accountability
When you're afraid, taking accountability or literally counting exactly where you are, is the hardest but most crucial step of financial recovery. It takes honesty and a bit of putting your ego in check. So, put on some hip hop, grab your laptop, fav notebook, pen and start writing down all the money truths in your life. How much to you make each month? How much do you owe on each credit card? What are the minimum payments? Car payment? Insurance? Rent? Mortgage? … Write it ALL down.
Next, what are you currently spending each month on food, hair, nails, drinks with friends, clothes, lunches, groceries, gym memberships, eating out.... Rather than guess, pull up last 3 month’s statements and write it all down. Don't cheat, don't round down, don't worry how they add up on this first step. Just get the honest raw real numbers down. Take a minute right now to do it.
Not Yet? Do it!
Good! Moving on...
2 - Categorize Your Spending
The next step is pretty simple. Make 3 columns: Categorized: A | B | C.
A - Need
B - Must
C - Want
Sort these by category. Examples:
A - Needs - home (rent/mortgage), food (groceries).
B - Must - Insurance, credit cards, transportation (metro/car/gas), basic clothes and toiletries.
C - Want - (Basically everything else goes here).
Once every expense has been sorted, add the dollar amounts from Step 1 and total the dollar amount for each column.
Good! Moving on...
3 - Balance Your Budget
Still jamming out to your hip hop? Good. Take your monthly income and subtract all of column A and column B. What's left should be divided in half: half goes into savings and half goes towards your discretionary of “fun money”.
Before you panic and say, “HALF!!!!” What?! Ackkkkk!!!!
Let’s take a moment to ask ourselves about column C. Do you really need your hair done each month? Lashes? Nails? Would your girlfriends love to come over to your house for a wine & dine potluck or brunch instead of costly restaurants? (I bet they would!) DId you really need to spend $600 on lunches last month? … Instead of just trying to cross off unnecessary spending from column C, let's try a fun exercise called 'brainstorm new spending'! Wait, what? Did I say, "new spending?!" Heck yes I did! (Best budget ever, right!?) Yup seriously....
4 - Brainstorm Alternatives aka Brainstorming New Spending!
The hardest part of keeping a budget is feeling restricted! We're NOT going to do that. We're going to spend, but spend smart & still have fun along the way! (Novel idea, right?)
Back to column C . We’re going to go down the list of current spending and brainstorm a 'less spendy' but equally fun activities. For example; 'Get your Nails done' & 'Happy Hour' can be replaced by 'Invite my girlfriends over for a Nail Polish Swap & Chick Flick' night. Have you girls BYO wine and manicure kits, while you provide the cushions, glasses and warm towels! 'Monthly shopping' becomes 'closet swap' with friends or 'go thrift-ing for that new fall jacket'.
Once you have an alternative for each activity, cross your old column C items off and add an estimated new dollar amount to your newly brainstormed activities. Once you're done, your column C spending should easily be half the number it was before or less!
5 - Start Saving!
If you’ve completed the above exercise and you're still spending too much, brainstorm new spending ideas for columns A & B. Can you rent out a room in your apartment? Take the bus to work? Buy generic brand shampoo and conditioner? There are so many inventive ways to balance your budget that involve trying new things! Who knows, you may end loving bus rides as it gives you an opportunity to read more library books!
Once you’ve balanced your budget and you’re starting to save your money, take a moment to give yourself some credit! Congratulations are in order! After all, saving isn't a sacrifice; it's an opportunity!. It’s also an amazing gateway to big fat juicy goals like home ownership, saving for a baby or to start your own business! It really is exciting and rewarding; so make it the big deal it is!
There are million difference ways to save! (& pay down debts)! We’ll have plenty of resources on both as we blog along. But hey! ….. You've started! That's a huge deal!
Congratulations!!! You’re on your way to big, sexy, amazing goals!
You've got this!
- The Wealth Babe