Struggling with finances

Updated: May 6, 2020

We have all been there.

I’m sure most of us struggle with finances, I know I do. It is normally not the fact of make enough or not making enough money. It is the fact of setting priorities on how we spend our money. When you prioritize you are able to budget properly for your own goals and life. When you don’t prioritize it is too easy to spend without knowing what you’re truly spending your money on. I’m not saying we are all irresponsible. I am not saying we don’t have priorities or budgets. But this hard to speak of topic is a very real deal to us all.

In such, you must be honest with yourselves and really see what you spend your money on. For me, I plan out my debts and expenses and give buffer for extra that I don’t plan for. Of course it is easy for me as I am on a fixed income, not so easy for those on hourly wages, not knowing how much your next paycheck will be. This is why budgeting and prioritizing is very important. For those that have a variable income due to hourly wages what you can prioritize is necessary bills and expense. If possible leave extra in your budget for “what if’s”. In a second I will explain this.

If you break down your bills per biweekly, because you get paid every two weeks, let’s say your expenses are $700 for 2 weeks and you make $750 at the very least but make $900 at the very most, what you could do is budget for the $750. Any extra can go into savings. The responsible thing to do is to have 120 days’ worth of expenses in your savings account. Yes, this is easier said than done. I myself do not have this savings yet. But for those that do not have a guaranteed income and could possibly lose their paycheck if the company goes under or they choose to let you go, this is very important.

The easiest way to budget that I have found is to use an excel spreadsheet with your income from all sources summed up and then list all your debts and expenses with the dollar amount. Add those up also and then subtract from your pay so you know what you have left and what needs to be cut if you have no money for savings. Yes I get that we all want to have a nice luxurious life where we don’t have to worry about our next paycheck or a roof over our heads or food on the table. Not everyone in the world has that ability.

How many of you spend hundreds a month on Starbucks coffee drinks and food? Is this necessary? I think not, you can make a pot of Folgers at home and save a ton of money. No, it doesn’t taste the same but there are coffee machines you can buy and ways to make coffee taste similar or at least how you like it. I use this example because I myself am also at fault of going to Starbucks more than I should. Luckily I actually budget for a Starbucks allowance each month.

The famous Christian, Dave Ramsey, (even non-Christians can use his system) is known for being one of America's most trusted sources for financial advice. He went from having debt and being homeless to becoming wealthy off his system he created. It sure is not anything new, nor something that the average person cannot do. It is as simple as paying for stuff in cash and not buying what you do not need.

When people use credit for everything we are in a continual repetitive loop of being in debt and having no money. You borrow $500 and owe $700; you borrow $20,000 and owe $27,000. Credit cards are just as bad if not worse because the interest (APR or annual percentage rate) is higher. Being debt free makes it much easier to budget and save money. Saving up several thousand when you owe only the basics becomes easier. No I am not saying it is easy as pie. We all have different situations. I am just trying to give some help if you would like it. If not there is no harm in not taking it.

As you budget and start paying off debt and/or saving money you can use the money from paying off one debt to pay off another debt. For example; I pay $300 for 3 credit cards, $100 to each. Once I pay one off, I now have $300 to use on 2 credit cards. So I take the $100 from the credit card I just paid off and put it with the $100 from a second one, now giving me 1 card I pay $100 and 1 card I pay $200. Once I pay that one off I now take the full $300 to pay off the last credit card. This is called the “snowball effect”. This is how I have paid off most of my debt. I will keep going until I have only my car.

Another method I use to pay stuff off faster is to pay a few dollars extra with each payment. If you have good creditors you can apply that extra beyond the minimum to the principal of the loan so that it cuts the overall debt down faster instead of it going to the interest forcing you to make a balloon payment at the end. A balloon payment is at the end of a loan which is pure principle after all the interest is already paid off.

The spread sheet I was speaking of earlier that I use for my own budget and income, you can get a free copy emailed to you if you would like. All you have to do is message me and I will send it to you. As a disclaimer, my budget set up nor Dave Ramsey’s system can bring you out of debt or make you rich if you don’t want it to work and don’t try it. Even if you do want to have a better financial situation and use the advice, there is no guarantee it will work. Like I said earlier we are all in different situations. I just want to give a little help on how I became a little more financially free, not rich, just free from being under so much debt.

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