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I’m sitting in my cold apartment, eating yet another lunch of Ramen Noodles. I’m 5 pounds lighter than I probably should be, and my jeans have a big hole in the knee. I climb into my car with one burnt-out headlight and pray the gas will hold out until tomorrow. After seeing how much food I can squeeze out of ten dollars, I return home to hop on the computer and I breathe a sigh of relief.
“Oh good,” I think to myself. “My credit card payment cleared on time.”
Anybody else see what’s wrong with this picture?
This isn’t really that much of an exaggeration, either. Last fall and in the beginning of last winter, this was my life. And you know, it’s actually a portrait of a lot of lives. Today, I’m a couple pounds heavier (it takes a while for me to gain weight – sorry, ladies), my gas tank is full, and my cupboards are far from bare. That’s because the first thing my fiancé and I figured out in our budget was The Four Walls.
Dave Ramsey teaches The Four Walls as the basic needs for living – no matter what, these things need to be covered:
Now, you notice he doesn’t say:
Sure, those things are nice, but they’re not basics. For food, you need ingredients for a healthy diet. That means you need to start cooking. Go to Amazon and type in “cooking for beginners” and you’ll get a ton of books that will teach you how to apply heat to food and watch a timer. That’s really all there is to cooking. Heck, my chicken recipe for this week consists of spreading mayo on chicken breast, rolling it in bread crumbs, and putting it in the oven for a little while. And it is some of the tastiest chicken I’ve ever made! Don’t overwhelm yourself at the thought of having to cook. Remember, this is for your health and well-being.
For shelter, find a modest space that you can live in for a while. It may mean having to downgrade a little bit – a smaller space, maybe a place that doesn’t have an on-site gym or pool. Included in there is money to keep the lights and the heat going. This is for the comfort and well-being of you and your family. This could even mean selling your house and renting for a while. It might suck, but it might be necessary if you are struggling to make ends meet. Let’s be realistic about what you can afford. Don’t choose a living space based on emotion.
For clothing, make sure you’re not naked and you’re dressed appropriately for the climate and occasion. Simple stuff.
And for transportation, let’s keep gas in the tank every week and have a modest car that will get you to and from work. Something that runs.
I do listen to Dave Ramsey’s radio show on my Sansa Clip every day, and he gets a lot of calls from hysterical people drowning in debt. To calm them down, he says, “Okay, let’s budget this out – start with the basics” and he walks them through the Four Walls. At the end of it, the person has stopped crying and he says something like, “See? Life seems a little less scary when you know you’re going to eat and keep the lights on, doesn’t it?”
We learned in grade school what the basics to living were. Yet, somehow, in our Spend-Spend-Spend culture, we’ve gotten away from it and forgotten. All of a sudden, we’re buying crap we don’t need and sacrificing dinners to pay for them. It’s stupid, and I’m just as guilty of it as you are.
When you sit down to put together your budget, take care of those things first. Even if that means you can’t pay a credit card bill right now, you need these things. What good is a decent credit score when you’re eating ham sandwiches in the dark because they turned off your electricity? Life takes on a whole different perspective when the basics are covered. Those are the moments when you think, “You know what? We’re going to be okay.”
And what about that bill that you can’t pay? Well, you may just have to tell them you can’t pay right now. Then you go out and you start working harder to bring in more money. But you have to take care of yourself first. Let the collectors stomp their feet and whine. You need to eat.
I have budgeted $30 a week for groceries for myself. It’s a very liberating feeling to go into the grocery store and have an obligation to myself to spend that $30 every week on food to keep my cupboards full. Having that psychological peace keeps your head on straight when you have to deal with the rest of the garbage of your financial situation. That’s a big key in getting out of it!
So remember: before you pay for anything, put dinner on the table, keep you and your family protected and warm, stay covered up, and get yourself to work and back. Build on that, and you’ve got yourself a solid plan. No amount of debt in the world is worth sacrificing those things from your life.
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This is my favorite line in the budget.
Last year, while I struggled financially and professionally, I really didn’t do anything socially. I rarely went out for a drink, I never bought any clothes or anything for myself unless I had to (for example: when my only pair of jeans finally sprouted a hole). As mentioned in the introduction to this series, I rarely took my fiancé out on dates. Sounds pretty miserable, doesn’t it?
I’m not going to tell you to ignore your financial troubles, but you do need to get your mind off of them for the sake of your sanity, right? You need to go see a movie or treat yourself to a new pair of shoes (if you’re into that sort of thing). You need money to blow on stuff. Some people call it “blow money” or “fun money”. We call it “play money”.
Play money is the “no questions asked” line in the budget. It’s the money that my fiancé and I don’t need to explain to each other. As long as we have room in the Play Money budget, we can do whatever we want with it. She can buy more clothes (like she needs them), and I can grab a beer with my Best Man. She can go out to eat with her old friends from high school, and I can buy Bob and Brian albums.
Plus, we can go get a nice dinner together, or spend an off-day at IKEA imagining our future home, or go see a movie. Play money is like a candy bar to a dieter. It’s not something you need in excess, because it will completely derail your diet. But a well-placed candy bar lets you reward yourself for all the hard work you are doing.
It doesn’t have to be a lot, either. My play money is $75 every month. That’s hardly anything that’s going to paint the town red on a regular basis. But I can buy blank DVDs, a good dinner, and a few beers with that money every month.
To be honest, for my fiancé, it forces her to limit her shopping. She bonds with people over going for pedicures and grabbing a bite to eat and buying a bunch of clothes. And that’s perfectly fine! But now she just has to make sure that day doesn’t turn into $250 out the window. For me, on the other end of the spectrum, it forces me to have a life. I’ve spent a lot of time sitting around by myself because I’ve been broke. Now I can make sure I get together with friends and enjoy my life a little bit.
Ever go out and swipe your card thinking, “I really shouldn’t be doing this…” That type of night really puts a damper on your mood. The Play Money line in your budget liberates you from that by making sure you know exactly how much you can spend. You may have to limit yourself to more low-key activities like buying a case of beer and hanging out with friends at home, but it sure beats sitting at home alone doing nothing or that feeling in your gut when you know you shouldn’t be paying that much while you’re out.
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!
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!).
Everybody’s million-dollar-question is “How do you make money on Twitter?” Well, I managed to “make” over $60 this month, thanks to one simple tweet. Here’s the backstory (this also answers the OTHER million-dollar-question, “What’s the point of being on Twitter, anyway?”):
I keep my checking account with ING Direct right now, and I love it. While I am moving to a joint checking account with my lovely fiancé, my ING account is all mine and currently, I still pay some bills out of it while I make the switch. But for a period of time, I also had my “emergency” checking account with Guaranty Bank.
The reason for this was simple: ING has no branches, and in case I need to make an emergency transaction, I can deposit cash or checks immediately into my Guaranty Bank checking account, and then pay a bill if I need to. Except the big issue was that, once in a while, I would accidentally pay a bill out of my Guaranty Bank account while all my money was in my ING account.
For example, a few months ago, I accidentally drew my Bank of America credit card payment out of my Guaranty Bank account without realizing it. So, the money for the payment was sitting in my ING account, and Guaranty Bank winds up paying the bill and then charging me $37. That’s fair. It was my mistake.
But I accidentally did it again last month. This time, disaster struck. Guaranty Bank decided not to pay the bill. So when the charge came through, they took it, charged me $37 for a returned check fee, and then sent it back. Bank of America, for some reason, decided to try sending it through again. So Guaranty Bank took it, charged me $37, and sent it back again. Guaranty Bank does not have any type of email alerts or anything – they send a letter. That’s right, a snail mail letter. They might as well have given it along with a flask to a guy on a horse. By the time I got this letter, I was well over $70 in the hole and my credit card payment had not been paid.
Now, at this point, it is my fault. I’m not trying to skirt responsibility here. However, I do take issue with the idea that the bank could suddenly change its mind about how it handles these issues and then literally notify me days after the fact that this happened. If I have ever overdrawn on my ING account, an email pops up on my phone before I get my keys out in the parking lot.
So I closed the account with Guaranty Bank. I was done. If I needed another brick-and-mortar bank, I’d find a different one. I paid off the debt and closed the account after five years (and I used to work there!), because they took away fee reversal privileges from the tellers since I left there. I called Bank of America and the woman said she didn’t know why the payment was sent through twice, and that a cash advance was going to be taken off the credit card to pay the account and I would have to pay the associated fees, along with the late fees and the returned check fees. I asked if I could make the payment over the phone right then and there – after all, I still had the money! She said I could not, because this process had already begun and there was nothing we could do. It didn’t make sense to me, but I accepted it because that’s apparently what they do.
I waited, and the next week, I noticed all the fees hit, but the cash advance was not processed, and I had a double payment due the next month. I called back, and the next woman told me she didn’t know why I was told this, but they don’t take cash advances to pay accounts. She didn’t understand why I wasn’t allowed to make a payment over the phone – and that money was gone at this point. She also reiterated that the payment should not have been attempted twice. She then told me she would reverse the late fees and the returned check fees, and I would owe about $130, much less than the nearly $200 payment I originally owed. I thanked her and went on my way.
The following week, I saw that the fees were reversed but the payment was still almost $200. I called and complained, saying I had already altered my budget twice now for wrong information. The gentleman said there was nothing he could do. I hung up. Angry, I called back once more and spoke to another woman. She attempted to reverse another $40 (which she did), but it did not affect the payment due. She said she couldn’t do anything about it.
Furious at this point, I went to Twitter. I was shocked to see @BofA_Help on Twitter. I decided to publicly send them a message:
Like I said, I was angry. I wasn’t really expecting anything to come out of it, it just was my way of venting.
Next thing I know, I get a response asking for my contact information. I then get a phone call and I explain my situation to the woman. She calls me back later and says she doesn’t know how I got all this incorrect information, and she’s clearly not thrilled about doing this, but she tells me to pay the $130 and then notify her and she will adjust the rest of the payment.
I did. And it was taken care of within a day.
Now, I’m still not exactly a big fan of Bank of America. I think they need better training for their reps, as I received so much wrong information in such a short period of time that severely impacted my budget. However, I have to give them props for being so responsive and having a dedicated team on Twitter to help their customers.
It doesn’t stop there – there are plenty of companies on Twitter, and sometimes it’s easier to get access to REAL people by going the Twitter route. If nothing else, you should be on Twitter to have your voice heard by the customer service reps for the big companies that tend to treat you like dirt. That one tweet above was a throwaway thought, but it wound up finally getting me what I was told I was going to get. All my fees were reversed and I still paid the money that I rightfully owed.
Thanks, @BofA_help.
Do you have any cool Twitter stories to share? Drop them in the comments, we’d love to hear them!
