Nothing says ‘Adult’ more than creating and using a spending plan. Learning how to handle your money according to plan will give you peace of mind, a sense of pride, and a good reputation for making wise decisions and informed choices. Don’t let other people make your decisions for you or give in to impulse purchases you can’t afford. How many lottery winners and famous people do you know of that lost everything because they didn’t stay aware of exactly what was happening with their money?
Make a Plan
In Part 1 we talked about setting priorities and goals, really thinking about what matters to you in the long run rather than just thinking about this weekend. In order to reach those long-term goals you will need a plan. ‘Plan’ is a much nicer word than ‘Budget’. Budget is one of those words like ‘diet’, feared and dreaded by most of us. It just screams deprivation and limits. Yikes. A plan on the other hand, that’s positive, progressive, changeable and flexible. Plans are nice. We’re not afraid of plans. They’re a tool to get a job done, something to look forward to.
Where to Start
In part 2 we talked about writing out where your money is going right now. Now let’s see how it all can fit into a plan, and where you might need to cut back. Most of us forget something (like the trash bill that only comes every 3 months). At Consumer.gov there is a nice worksheet to help inventory common expenses so you can get your juices flowing and find a starting point . Start with the big regular bills (rent, phone, internet), then the expenses that happen every other month, quarterly, or annually (In some places power is billed every 2 months and garbage every 3, if it’s not included in your rent. Car insurance is sometimes billed semi-annually, and that can be a real strain). Use a calendar app, a day planner, or a budget app to get a picture of what is due when, and plan which paycheck will cover what bills.
The absolute best way to handle those irregular bills is to divide them up into small monthly bites. Put the money in an envelope or in your savings account or just make a note to yourself to leave it alone in your bank account. However you choose to do it, spread it out so you don’t have to come up with a big lump sum, it’s way easier.
Plan for Personal Expenses
The best thing about worksheets like the one above is that they help remind us that things like food, gas, haircuts and clothes are a part of your expenses. You need these things, they’re not a luxury, especially work clothes. You have to have good shoes in order to work, for instance. Don’t skimp on that. Take these personal expenses into account when you’re considering applying for a line of credit or deciding how much you can afford to pay for rent. It’s easy to run up your bills until you don’t have anything to spend on yourself, and that’s not a fun way to live.
The best of the financial advisers say to “pay yourself first”, or save money.
It changes how you view savings when you see it as paying yourself, doesn’t it? Whether it’s for a rainy day, a vacation, or retirement don’t leave it to chance or ‘if I have some left over’. (Guaranteed to never happen!) Make it part of the plan. Some authors recommend planning to save 10% of your income or more. Retirement sounds like something far far away, but it happens to everyone. If you act wisely now, you’ll be able to retire while you’re still young enough to enjoy it and take the opportunity to do what you love.
For whatever reason, it feels good to have a little something to fall back on, and it’s way cheaper to save for expensive items rather than buying on credit.
Credit is one of those things everyone needs, and you have to use it to get a good credit score, but it can be a lot like snake handling. It’s really cool and looks impressive, but one wrong move and you’re going to be hurting real bad for a long time. We’ll talk about that another time.
What if you don’t make enough to cover your bills?
If the amount of your income is less than your expenses, what can you adjust? Either you need a better paying job, a second job, or (preferably) you need to scale back your expenses, at least for awhile. Some people use the wifi at the local library or a coffee shop to save money on internet short-term. You can also get movies as well as books there for free rather than paying for cable or satellite TV. Monitor your power and water usage to bring those bills down. Negotiate with your cell phone provider, find out if your carrier has a discount available to you because of where you work. Shop sales flyers, cut coupons, download apps like Ibotta or Shopkick, or if window shopping is your hobby just be sure to only carry the amount of money you can afford to spend today.
There will always be another good deal, believe me. Stores pay thousands of dollars to consultants to “maximize product placement” and make deals look irresistible. Keep in mind that they don’t care if you can afford to eat tomorrow, they just want your money. They’re not your friends, and adults aren’t afraid to say no, not now.
What do you think? Is this doable? Tell us your tips!