Where Have I Been?

After a long break (I checked and my last post in this series was on May 29th) we return to how I got my finances in order. So where have a been during this break? I have been working a lot. I spent most of the summer working two sometimes three jobs. I would say I have been busy all the time, but that would be a small lie. After coming home, I would rather sit down and play a video game or watch something on netflix.

So were do I currently stand on my quest to become debt free and financially responsible? I have been following my budget and controlling my spending. I am enjoying watching my debt drop every month. I am just around the corner from the finish line. I should be debt free early next week.

Tips About Setting/Adjusting The Budget

First, It’s very important to understand that the budget is not sent down from on high like the ten commandments. Your budget is not an inviolate set of instructions. You will find that what you HAVE to spend money on will change several times during the life of any budget. The goal for the rest of your life, even if you become independently wealthy, is to have a budget. You will never not have a budget. That budget needs to change and adjust for your life.  Prices go up and down, maybe your commute becomes shorter, all these things need to be reflected in your changing budget. Just make sure that your budget always leaves some money to continue paying off that debt or investing.

One piece of advice you’ll often hear about budgets is to never borrow from one budget category to pay another. So if you have budgeted two hundred dollars for groceries and say 100 for gas, then these amounts are set in stone.  If you have some unintended travel emergencies that use up your budget well just to bad. You won’t be buying any gas from here on out so you can’t go to work and get fired. Or woops, you ran out of grocery budget so know you starve and die. Obviously these examples are absurd. Ultimately you are working toward keeping your expenses below a certain amount.  So feel free to borrow from one category to pay for another.

It took me months to arrive at a budget I have been able to keep in the long term. At one point I had to add a hundred dollars  or so to the overall amount because I could not stay below the previous amount. No point in having a budget you can’t stay within.

Tricks For Staying On Budget

People have come up with several tricks and programs to try and help you stay on your budget. I tried a few of them. Envelops full of cash remains a very popular method online. You may be shocked but you still can pay for pretty much everything with cash. Yes the cashier may start thinking you are a drug dealer 🙂 You get a bunch of envelopes and write the various budget categories on them. Each month you get the total cash amount from the bank and put it in each envelope. When you have an expense you pull out that cash and buy the groceries or whatever. I had some problems with this system. Your envelopes are sitting at home but when you go out you just have a wad of cash you use for everything. You get some gas, then stop by the grocery store, and finally pick up some take out on the way home. You paid that out of the cash you had but how much now should be in each envelope?  Now you gotta pull out  the receipts and calculate how much should be in each category. And of course you don’t have the right change. I tried it for about two months then moved one.

You can use one of those prepaid debit cards that you fill with the budgeted amount each month.  What I do is somewhat similar. I have another bank account with a debit card. Each month I transfer the budgeted amount from my main bank account to this account. I’ve connected the account to Mint so that it automatically deducts amounts from my budget categories. I also have an ATM just down the street if I need some cash.  I’ve used this system for almost two years now.  I find it amazing how much my spending is curtailed when I know I am using “real” money and not credit.

Probably the most advantageous way to spend you budget would be to use a credit card with big cash back bonuses. You have to make sure not to go over budget and pay it off each month. I don’t remotely trust myself enough to not just start pilling up debt again so my credit cards are locked in a cash box.

Emergency Fund

An emergency fund is one of the most important things to have. This will keep you from falling back into debt with those unexpected expenses. Each spring I replenish my emergency fund with my tax return.