Living paycheck to paycheck. It’s not for everyone. Hell, it shouldn’t be for ANYONE.
Picture this – its Friday – payday Friday! You’ve watched your spending like a hawk for the past few days because you know that one tiny mistake could very well send your bank account into the dark abyss of overdraft charges, ugly red fonts online, and those super annoying emails/texts saying your “account has reached zero dollars”. But now, hallelujah, it’s finally payday – you just received a big shot in the arm (or checking account rather) and everything is awesome! Time to have some fun and let of some steam, maybe treat yourself to a night out at the bar or eating tacos like there’s no tomorrow! Ah yes, life is good.
But wait just a second – before we head out for tequila shots and tacos, let’s look at our “budget” for the next two weeks. You know that budget that solely resides in the empty spaces between your eardrums? Yeah that one….
So, we just got paid $1,600. Great! Let’s try to think of everything coming due in the next 14 days…
Car payment: $250
Probably gonna need gas in the car a couple of times: $50
Probably gonna be hungry at least once or twice – need some groceries – $150
Well, crap. Just got paid and already the money is gone and we’re scrambling to figure out (yet again) how to survive for another two weeks with basically nothing in our pockets. And that’s assuming that you actually remembered everything that’s due and aren’t overlooking something. Seems like we’ve once again punched our ticket for another two weeks on the paycheck roller coaster!
Stressful, right? I know it is for me. And unless you’re just some sadomasochistic weirdo, I know it is for you too. Personally, I’ll end up checking my bank account multiple times per day to make sure nothing else clears my account that I’ve forgotten (and trust me, it will always happen at the worst possible time). Trying to play the games of “I’ll pay this bill a day or two late” or “I can float this payment to next month” so I can survive. Just make it to that next payday again and we’ll do better next time, right?
WRONG. This cycle does not end without some serious dedication to change. You aren’t going to find a magic potion to make your situation instantly better overnight. I know I haven’t… I cannot tell you how many times I’ve thought I could see the light at the end of the tunnel only to realize within a few days that nope, that’s no light – it’s the debt train getting ready to smash me squarely in the face again. And God forbid some emergency comes for which you aren’t prepared in the least. What happens then? Trust me, you don’t want to walk outside in the morning and find a flat tire on your car or your kid decides to ski off the roof and now has to visit the ER and you have nothing in your bank account to cover it.
So – what’s the solution? How do we end this vicious cycle and actually pay down debt and start saving for the future (and eventually, tacos)?
Well, to be perfectly honest with you – I don’t know the answer. I’m never going to claim to be an expert in any aspect of handling money (obviously, otherwise I wouldn’t be writing this), but I am going to make some changes and do everything that I can to get my family’s finances heading consistently in the right direction. I do know this much with absolute certainty – riding this stressful financial roller coaster HAS to end. It isn’t good for your mental state, let alone your banks account balances or FICO score.
Here’s what I’m thinking:
- Get serious about finances. I’m not gonna lie – I’m old. Old enough to know better, and old enough to have done something about this situation much earlier in life. I’m certainly not getting ready to retire or anything, but at this point in my life I can 100% tell you that if I don’t get serious now then “retirement” will be roughly 30 minutes before I drop dead.
- Have a budget and STICK TO IT. Remember earlier when we were talking about our budget that lives only in our minds? That’s NOT going to be an option anymore. I already for quite some time have maintained an electronic checkbook register in Excel. I like this for quite a few reasons – firstly I’m a nerd and like playing in Excel and have always been horrible about maintaining a hand-written register. But even more so it makes it very easy to track what you’re spending your money on every month. Pivot tables are your friend – they may be scary when you see exactly how much you’ve spent on eating out or buying things you don’t need, but they are powerful. I’m sure my electronic register is very basic and a true Excel wizard would laugh at it, but I like it. I can share a basic version of it here if you’d like to give it a look. Just spending a couple of minutes at the end of every day to enter and categorize transactions is a great starting point on the journey to taco town. And the most important (in my opinion) aspect of having a concrete budget in place is holding yourself ACCOUNTABLE to staying within that budget.
- Ditch the credit cards. It becomes so easy to just whip one of those out of the old wallet when you’re paying for a meal or browsing the racks at the mall. But this is just setting us further and further behind. How in the world do you plan to get out of debt when you’re stacking more and more on and not giving it a second thought until you realize, whoops – credit limit reached. Now I’m not advocating closing accounts or anything like that (right away), because from what I can gather from research getting that credit utilization percentage down will have a positive impact on credit scores in the long run. I’m tracking that as well starting today. BUT, no cards in the wallet whatsoever anymore. They’ve been locked in the safe at home and won’t see the light of day anytime soon. If all goes to plan, they’ll never see the light of day again.
- Ah that Dave Ramsey guy – I’ve listened to his podcasts, watched him on YouTube and read countless reviews of people that claim they have been able to turn their lives around using his “baby steps to financial freedom”. If I were to call in to his show I’m certain that I would be one of those people that he flat out calls stupid, and I’d deserve it. Ramsey’s methods seem to make so much sense, especially the Debt Snowball approach to paying down debt. So much sense in fact, that I have on multiple occasions downloaded nifty Excel spreadsheets to get the (snow)ball rolling. The problem I’ve had with it? Starting and sticking to the plan. Something ALWAYS comes up and that extra bit to get the snowball rolling melts away into another expense, whether necessary or frivolous. That changes right here and right now.
And that’s basically it. Or the start of it…. I’m going to maintain this blog and update it a twice per week (that’s my hope, anyways) and let everyone know how things are progressing. I’ll let you know what I’ve found that works for me and my family and share any tips I find along the way. I’m going to look for awesomely slick spreadsheets to track and manage my balances/spending. I’m going to see what apps I can find that could offer some assistance in the quest for financial independence. I would also love to hear your suggestions on the plan or what’s worked for your situation.
Why should you care? Well, if you’re this far into the read then my guess is that you’re facing similar circumstances. I want this blog to serve as an example that being committed to making even small changes can have major impacts over time. The biggest thing to remember is that this is not an impossible task – financial security isn’t reserved for only those with 6 figure incomes and trust funds. Depending on the situation you’re in being debt free could happen in a matter of months, or it could take a few years. Just remember the key to it all is DEDICATION and ACCOUNTABILITY.
Check back in a few days and I’ll provide some detail around the starting point we’re going to be working with. And I’ll tell you this in advance – it ain’t a pretty picture.