9/25/2019 1 Comment
Taking Control of Your Finances
Are you someone who has struggled to create or stick to a budget? Are you struggling to get out of debt or live a debt free life? Are you just wanting to manage your money better? If you answered yes to any of these questions, then stick with us because in this blog post we are going to talk about how you can take control of your finances in 8 easy steps!
Step 1 Get the Mindset. You need to make the decision to tackle your finances so that you can live the life you love and love the life you live! This might sound silly to some, but you're not going to get very far if you don't put your mind to it. Are you actually ready to change the current way you're living? It's not going to be easy, but in the end the pay off will be so rewarding!
Step 2 Determine Your Goal. Why are you wanting to take control of your finances in the first place? Are you wanting some extra money to take a trip to Disney, buy a new home or car, or live a complete debt free life? Whatever your reasonings are, its important to set these goals to keep you motivated when times are hard or when it may feel like it's not working.
An added step that I take to help ensure that I stay on track is creating a dream/goal board and keeping it close to my bed. This is the last thing I look at before I go to sleep and the first thing I look at when I wake up. Seeing my goals in front me gives me a reminder throughout the day of what I am working towards.
Find your own niche for what is going to keep you going on the right track. Anything to give you that extra little push when needed.
Step 3 Know Your Debt. Did you know the average American is $38,000+ in debt?! Seems crazy right? Well now is the time to see just how far in debt YOU are. This may seem like an intimidating task, but it is necessary at succeeding your over- all goal.
Grab a pen and a piece of paper and write down each of your debts, their total amounts, their monthly amounts, and when they are due. Once you have them all wrote down, rearrange them in order of smallest overall amount due to largest overall amount due. This will now become your debt snowball, but we will get into that a little later.
Be sure to check out my Family Binder for an easy to use template on breaking down your debt and keeping it organized!
Step 4 Know Your Monthly Expenses. Do you actually know the overall total that you spend on your monthly bills and expenses? If not, you're about to! It's time to grab that pen and paper again, but this time you're going to write out all of your monthly expenses, and how much they are each month.
Step 5 Find Out Where the Rest of Your Money is Going. Get your bank statement, some highlighters, and sit down to find out exactly where your money is going each month. You should break your statement down into multiple categories with each category assigned their own highlighter color. My categories were: food, gas, spending and bills.
Now you know how much money you owe, how much money you spend, and exactly where your money is going! Are you surprised by the results? No worries, we're going to get your finances under control!
Step 6. Talk to Your Spouse/ Significant Other. At this point in the process you should be feeling excited, anxious, and determined to reach your goal and financial freedom. If so, you may have even already talked to your spouse/significant other about the shocking numbers you found from the previous steps. But more importantly you need to speak to your spouse/significant other about them getting on board. If they contribute to your income, expenses, and overall debt you're going to get further not only with their support, but with their contribution as well.
I can't tell you how quickly you'll become frustrated and give up the process if you feel like you're alone.
Step 7 Creating Your Budget. It's time to get down to the good stuff, creating your budget! The best budgeting method I have found is to budget by paycheck. This allows you to evaluate your finances more often and get a better understanding where your money is going. Personally, I use the cash envelope system combined with budgeting by paycheck, which gives me complete control over my income.
First determine what income you'll be using; yours, your spouses, or both. This will also help you determine how many paychecks you'll be getting each month; monthly, bi-weekly, more?
You will then need to get pen and paper, download a template, create a template, or find my Family Binder for an easy to use template I have already created for you! In section one you are going to enter your fixed Monthly bills. These are the bills that you pay every month, they don't change.
In section to you are going to enter your monthly expenses. These expenses include groceries, gas, and spending money. Reference back to your bank statement to get a good idea at how much you should allow for each of these categories. These are also the easiest categories to cut expenses from, however keep your budget realistic. Don't cut more than you can follow through with or each month you will find yourself going over budget and get discouraged. Start small, you can always cut more later if possible.
In the third and final section you are going to enter your sinking funds. Now what are sinking funds, you may ask? Sinking funds are like your little savings accounts. My sinking funds consist of: car maintenance, Christmas, birthdays, toiletries, Disney, House Savings, and Debt Snowball. Each month we set aside a small amount of money for each of our sinking funds so when our car needs an oil change or someone has a birthday coming up we already have funds for those items. It allows us not to stress about how we are going to do/get something as well as not disrupt our budget.
Keep in mind you want to have an emergency fund created before you really start focusing on adding sinking funds to your budget. Ultimately, your emergency fund should be 3 months worth of your living expenses. Personally for us, we did a $500 emergency fund to get started, and once we get some of the debt off of us we plan to get it to the 3 months. The choice is yours to make, but we do recommend you have something set aside for emergencies.
For us, we use strictly my husband's income for everything and he is paid bi-weekly. I receive an unsteady income that changes from month to month. It's not reliable so anything I get we consider "extra". Our budget is broken down monthly and then divided by two for each of his paychecks. On pay periods I go to the bank and pull the money leaving between $50-$100 in the account as a cushion. I then will go home and stuff my cash envelopes. For more information on cash envelopes check back for our next blog post.
Step 8 Extra Money. You've got your bills covered, cut back on your expenses, have created your emergency and sinking funds, and maybe even worked a little overtime. What are you suppose to do with the "extra" money? The answer is not go shopping! Though this may be the fun and exciting thing to do, it's part of the reason why you're reading this blog in the first place.
We're going to put this money into your debt snowball! Go back to your debt sheet you completed in step 3, whatever your lowest bill is we're going to apply this money to it. I always recommend either pulling this money and putting it in a safe place, for us we use our cash envelopes, or going ahead and calling the account and making the payment. Getting the money out of sight and out of mind before you have the chance to "accidentally" spend it is the goal.
Keep applying your extra earnings to your debt snowball each month for a quick and easy way to pay your debt off and live that life you love!
That's it! These were the 8 steps to creating a working budget for you and your family. Check out my other blog post further explaining the debt snowball and our cash envelope system for those who are looking for an even easier and stricter way to stick to your budget!
Let us know if you found this post helpful, and how it has helped you develop a working budget!
Main Street Mommy