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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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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!
As I wrote about in my post detailing the value and awesomeness of podcasts, I’m a big fan of Dave Ramsey. He’s got a great sensibility, he’s brilliantly smart when it comes to tackling and defeating consumer debt, and he’s a Christian man, too. I listen to his podcast every day while I’m at work, and a couple weeks ago, he made a statement that has pushed me forward since I heard it. It was beautiful in its simplicity, while really making you think.
“We are all self-employed.”
Think about that. Doesn’t it just nail it right on the head? We’re all self-employed, each and every one of us.
You work for you. Sure, the boss signs his name on the checks, and he has the power to hire and fire you, so you do what you can to keep him happy. But that’s not why you do it. You do it for you. You do it because of the benefits that come to your life because of it, like financial security and the ability to provide for the people you love, and for yourself. You do it because it gives you the opportunity to advance in the company, down the line. Even if you’re at a dead-end job, you do it because you need a job.
I enjoy throwing on a tie when I go to the office. But when you are just answering emails all day, nobody is going to see you. So a lot of people see that as an excuse to wear whatever they want, despite the dress code. But when I stroll through with a tie on, I get smart comments like: “You’re making us all look bad” or “Oooo, THIS guy was paying attention at orientation! ‘Dressing for the job you want, not the job you have!’” Let ‘em talk.
I take pride in my appearance when I go to work, and what’s more, I take pride in what I do when I work there. I’m surrounded by people that have nothing better to do than whine about how crappy the job is. Hey, it’s not a dream job, but it pays rather decent, and it’s an opportunity. I’m thankful for that.
Self-employment tax is well-known as the crappy side of being self-employed. Full Social Security tax, a straight-up “self-employment” tax, and having to buy your own health benefits are all big chunks out of your income. With a full-time job, you get those things in the paycheck, but you give up the freedom of hours and the control over how you work.
No matter what line of work you are in, there are certain concessions you have to make. It’s just a part of working.
When you are self-employed, you take stock of every client you get – and you use that experience to propel you into your next gig. How is that any different from working in an office? You use your experience to propel you into a better position. It’s the same thing. Successful businessmen and successful office workers understand that each opportunity to work is an opportunity to show what you are made of. Even if you aren’t crazy about that job description, you go in there and you destroy it. Bring it and you will reap the rewards.
I thought my job was quite dead-end. Answering emails. Yee-ha. But I find fulfillment and growth in other areas, too. I find it in my own business-building, I find it in my relationships with my friends and loved ones, and I find it in The Practical Nerd. Don’t let your life be defined by your work. You are more than your job. A job is just 8 hours a day. You are you for all 24 hours.
Just remember your motivation – do you have goals in life? How is this job getting you there? Answering emails doesn’t get me any closer to running a business, but it pays my bills so that I can take the time to build my business properly and let it grow naturally, rather than forcing it out of desperation as I’ve tried in the past.
So who do you work for? Your boss, or you?
Get ready for the first-ever episode of The Practical Nerd Podcast! I’m very excited to begin podcasting, and I welcome any and all feedback so that I can continue to improve on this and make every episode a “must-hear”!
Just hit the play button below to check it out – I hope you enjoy it!
Photo courtesy of the Meitner Family Archives – Christmas 1994
I read some of the angriest emails in the world, just about every day.
Currently, I work in the glamorous world of customer service, answering emails all day. When you go to our store’s website and click “Contact Us”, those emails get sent to my department. On Black Friday this year, we had a huge Early Bird special starting at midnight. I started work at 9:00pm on Thanksgiving night and worked until 5:30am the next morning (like I said, glamorous). At midnight, emails began pouring in by the hundreds.
Our website had gone down. At midnight. On Black Friday.
Here’s just a sample of some of the comments we received over this problem:
Now, I won’t defend the fact that the site had gone down. We absolutely should’ve done a better job there. But look at some of these comments. These are sent between midnight and 5:30am on November 30th. Christmas – the last time I checked, anyway – is usually on December 25th. So I could rant and rave about how they have a whole stinking month to get something else for their kids, but that’s not where I’m going with this. One of my co-workers put it best at around 3:00am:
I don’t know her that well, but she doesn’t strike me as the hippie-“free love”-type. This was an honest comment from a normal person. What has happened to treating your fellow man (or woman) with a little bit of respect around the holidays?
It’s gone the way of the dodo bird. In its place? STUFF. Getting things. Look around – how many kids do you see who sit on their computers while their parents are hanging out in the other room? Are they learning anything about how to treat people? When you see somebody under the age of 20 walking down the street, are they interacting with the people and the environment around them? Nope. They’re listening to their iPods (or their Zunes!).
Never is this more apparent than at Christmastime. Hit the streets and watch people interact with cashiers and with other shoppers. It’s about the Almighty Deal – getting that discount before anybody else. The season of giving is now the season of getting. You can argue that you are getting these things to give to somebody else, but the bottom line is this: you will insult, push, shove, and cut in line to get that toy/TV/computer/whatever. You are perfectly fine cutting throats to get this item.
I hate it. I wish there was a way to stop it. Why can’t we teach children (and adults!) the true meaning of Christmas? Now, that means talking about Christ. If you don’t want to go there, then at least stick with peace and love. Watch those old Christmas movies and smile. The happiness that comes out of Christmas is from the interactions between people and loved ones. The love that they share.
I’ve heard the neverending argument: “But I love watching their faces light up when they open those gifts that I got them!” Does that gift necessarily have to cost an arm and a leg? Does that gift have to be some big-ticket item that you can only get on Black Friday? The gift isn’t what makes that moment special – it’s the person.
This Christmas season, why don’t we all take stock in what really matters? Think about ways you can get a warm smile from that loved one. Instead of blowing all your cash, take them out for a different experience. Stop putting all the weight of the holidays on your pocketbook. Take them to a movie. Take them ice skating or sledding. Give them an experience that will last a lifetime.
I got a lot of cool gifts when I was younger. Heck, I got cool gifts last year! But when I look back on past Christmases, the moments that bring a tear to my eye are the laughs and smiles I’ve shared with the people I care about, not what was inside the box.
Spend your Christmas talking with family and friends. Don’t spend it talking with Customer Service.
