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Call it what you want: a spending plan, an income/expenses statement, or even… *GASP* a budget!
So many people need it, yet so few people use one. I didn’t for years. I got on a written budget at the start of the year with my fiancé and it has transformed our lives together. Don’t think you need a budget? Neither did I. In fact, I didn’t think I made enough money for a budget! I get paid every week, I used to pay the bills that are due that week, and then I moved on. Sadly, this is how so many people run their finances, and they don’t make full use of the potential of their money.
We were engaged and panicking. I had just moved back in with my parents and owed my former landlord nearly $1,500 in rent and a mind-numbing amount of fees. I was buried under over $8,000 of credit card debt and tens of thousands of dollars in student loans. My weekly paycheck went to a variety of bills every week, and sometimes I would be left with $15-20 to feed myself for the next seven days. My fiancé worked part-time, covering her bills but any extra expense that came up sent her into a dizzying panic. We were stressed and we found ourselves seemingly at each others’ throats when talking about money. We had a feeling of "treading water": we were covering our lifestyles, but we just weren’t making any progress. We literally never went out on dates because we had no money – we spent our time hanging out in each other’s living rooms watching DVDs.
Oh yeah, and we have a giant wedding coming up in October.
Flash forward to today: our bills are covered comfortably. We have $1,000 in cash in a savings account for emergencies. We have a fund set up (and $100 away from being finished) to cover a security deposit and first month of rent whenever we decide to get ourselves an apartment later this year. We have a hall booked, a limo paid for, a photographer hired, a cake lady booked, music equipment scheduled, and about $1,200 in our Wedding Fund to pay for reservation fees and start building for dinner and the honeymoon (the two biggies). And between the wedding and other debts, we’ve paid off over $8,000 in a little over two months.
Our incomes have both grown – not dramatically, but they are picking up momentum and they continue to grow. Our conversations about money are filled with excitement instead of stress and anger. Our unexpected expenses have been covered every time. I’m eating well and consistently have $30 every week to spend on food. Once or twice a month, she and I go out on a date – last month we went out to a nice dinner and in January we drove to Schaumberg, Illinois to spend the day at the IKEA store (and followed that with dinner). Activities like that would have been unheard-of in December.
We’re about as happy as we can be at this stage in our relationship. Our secret to this wild change of events: in the second week of January, she and I sat down and put together a written budget.
Sounds ridiculous, right? Well, personal finance isn’t just about numbers – it’s about behavior. And putting together the budget has a drastic effect on your behavior. Here are just a few of the psychological benefits we’ve enjoyed since writing down a budget:
One of the first things we did was line up all our debts, smallest-to-largest. This is to use Dave Ramsey’s "Debt Snowball" method of paying things off. I’m not going to sit and talk about Dave this whole week, because that would get pretty annoying. But writing down everything that we owe was a giant smack in the face for us. We listed our cars, our student loans, my credit cards, our budgeted wedding expenses, and even our little store credit cards. Whenever we need motivation to keep pushing forward, we look at our Debt Snowball and remind ourselves to keep going. And if you don’t want to do the Debt Snowball, no problem – but line up your debts and take a look at them. It’s imperative that you see exactly where you are financially.
A few months ago, any time spent in a store would involve my brain imagining a chalkboard with numbers like the one in Good Will Hunting. I had to figure out how much I could spend, how much I needed, where the money needed to go, where I could borrow from, etc. It was a nightmare. Then I would wind up back at home, ready to enter in my receipts, only to discover I didn’t factor in one bill that throws my whole week off. All of a sudden, I’m calling my parents and my brothers to borrow money! Today, I know exactly how much I can spend, and I do it without having to think one bit, because I know everything else is covered.
This goes along with motivation, but remember how I said our income has gone up? I’ve started hitting the phones hard, cold calling during the day to drum up some business while I work second shift 40 hours a week. She picks up extra days at the hospital and added babysitting on Mondays. As business grows and she gets picked up full-time, we’re going to keep bringing in more money. As they say, "The world belongs to those who hustle."
Having money to eat is a good thing. Having money to eat something that isn’t Ramen Noodles is even better. We get sick less often, and we can’t afford to go to the doctor all the time, so we make sure we are taking care of ourselves. This means cooking basic meals and exercising at least a few times a week. This results in more energy to keep us going throughout this process and we feel better while we do it.
We spend more time laughing and smiling around each other instead of stressing. Our demeanors towards our families and friends are much more pleasant. In summary: we aren’t freaking out so much.
Now, it’s not just the magic of writing down a budget – you have to stick to it, and that can mean a few other things:
So, all this week, I’ve got secrets to making a budget that’s going to work for you. I’m not going to force a bunch of methodologies on you – these are flexible tips: things you can apply, but in your own way and appropriate for your situation. They’re things everybody needs and can do, regardless of whether or not they think they can. I hope you join me along the way, and heck, bring a few friends or loved ones along with you! If you’ve got some feedback on a tip, drop it in the comments for all of us!
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Today’s episode introduces “Practical Nerd News”, where I review a few headlines from the week, and then I talk about the overdramatic attitudes of people attached to their possessions, i.e., their TVs, gadgets, cable/satellite, etc. If nothing else, tune in for the opening song and the news.
As always, if you can’t see the “play” button at the top of the post, click on the title! Thanks for listening!
Time for another edition of Big Pile o’ Links, where I feature some of my favorite links and groups of articles from all over the wonderful world we call “The Internet”:
Ah, Evernote. It’s one of the most useful and versatile programs/cloud storage ever, and yet so few Cooler People use it. It’s not just for tech bloggers and people with lots of crap to write about – it’s also incredibly useful for normal people in their day-to-day lives. I use mine every day, and I can’t tell you how useful it has been at the office, at home, or even running around. Here are some great links from recent times that list a bunch of great, easy ways you can start using Evernote more often in your life:
Job got you down? Feel like you’re headed the wrong way? Here are a handful of great articles (and one AWESOME documentary!) to help you make some changes:
It makes the world go ‘round. Here’s a quick handful of resources to further your knowledge on the subject:
Phew! There you go! Another Big Pile o’ Links for your pleasure. If you have an article or site or tool or whatever that you want featured in the Big Pile o’ Links, send it my way at tom@thepracticalnerd.com (it doesn’t have to be yours either, just something you like!).
In today’s podcast, I discuss the awesome “Delete Song” button on my new Sansa Clip Plus, and how the simple approach to life flies right in the face of fads like GTD, “debt reduction systems”, and our economy. Have a listen and leave a comment!
(If you can’t see the “play” button, click the title of the post!)
Click the ol’ “Play” button at the top of this post to learn how success in life can be compared to flossing those pearly whites of yours. Also, make sure you click to hear my favorite lead-in song yet, courtesy of Steve Martin. As always, if you can’t see the “Play” button at the top of this post, just click on the post title and it should appear. Thanks for checking in!
