I’m terrible at budgeting. It’s a hard thing to admit, given that I’m supposed to be some sort of expert on financial stuff. I’ve tried apps and books and spreadsheets and everything else you can imagine. And I always struggle. I understand the concepts. I know what I’m supposed to do. I’m supposed to categorize things and track things and spend less than I earn. It’s easy in theory and really hard in practice.
I think my big road block is that it’s a really big thing to tackle. Tools and concepts make it easier, but I still just have to do the work. And I’ve made it my resolution to do it this year. But my plan of attack is different this time around. I’m breaking it down into steps. This month I am focused on one thing only: tracking my expenses to see where my money is going. After that is done I’ll be better able to analyze where I am overspending so I can shave my outgoing cash flow. Then I’ll build the budget spreadsheet from there. Then I’ll focus on paying debt. Then I’ll focus on increasing income. Then I’ll focus on saving more. And so on…
It’s a lot of steps and the whole process is going to take a long time. A very long time. Months. Years. Until retirement, probably. But starting is the hardest part. I’ve always done it wrong. When I tried to do all of the things at the same time it became overwhelming and I either failed or gave up. I have promised myself not to let that happen this time. I’m going to take baby steps. And it’s going to be hard. But now that I’ve put it out there, I’m accountable to you for this project. And I’ll keep you updated on my progress. Hopefully we all can learn some things together.
Money is always a game of juggling your priorities. I became extra aware of it this weekend when I was talking with my father about my aging and ailing Toyota Prius. The trunk doesn’t open on my Prius. The latch broke a couple of months ago and my father asked me why I hadn’t had it fixed yet. And I blathered something about not having time and money. But then I realized that fixing the trunk just wasn’t my priority right now. I find the time and money to go see my favorite bluegrass bands. I always find the time and money to enjoy dinner out at my favorite brewpub on Friday nights. I have the time and money to take a class every semester to work toward an academic goal. It’s just not that important to me to be able to open the trunk on my Prius. I will get it fixed eventually. But it’s pretty easy for me to work around for now, so I just haven’t made it a priority.
I guess the tricky part with money is defining your priorities and making sure they’re not out of balance. Making bluegrass festivals more important than repairing the broken trunk latch on a car that is otherwise fine isn’t a problem. Making dinner out at the brewpub more important than paying the rent is a HUGE problem. It’s a matter of making sure your NEEDS are met before you start throwing money at your WANTS. And then you can decide how you are going to prioritize those wants.
I want to get my trunk repaired. I just don’t want it more than I want concert tickets. At least not this week.
Out of sight is out of mind. Sometimes this is a bad thing (like when you misplace the Mother’s Day card you bought and forget to mail it until Memorial Day). Sometimes this is a good thing (like when you don’t have any junk food in the house and you are forced to eat carrots instead).
Knowing that out of sight is out of mind can be a useful tool. For example, at the beginning of each semester many students receive a large refund of student loan money to use for living expenses for the whole semester. Getting that money out of your normal cash flow will make it easier to make it last the whole semester. One option some students use is to immediately pay rent ahead through the end of the year. Another option (and the one I prefer) is to build a monthly budget (taking into account the amount of money you have) and only allow yourself to use that much each month. Put most of it into a savings account. Preferably a savings account for which you don’t have an ATM card and transferring funds takes a couple of days—making it harder to cheat and withdraw funds early.
You should set up a designated “pay day” when your month’s funds transfer to your more accessible checking account so you have money for rent, food, laundry, and other living expenses. The key to this working is simple: DO NOT PAY YOURSELF EARLY! If you do, you may find yourself subsisting on Ramen and hot dogs during finals. Because money is a finite thing. Unexpected windfalls rarely happen. If you run out of funds and don’t have more coming for several weeks, you’ll be uncomfortable for a while.
Out of sight is out of mind. So put your case books in plain view and stash your money away where it’s harder to get to.
Sometimes you just need to reboot. We’ve all had it happen with our phones and computers. The system just gets so overwhelmed that the only way to fix it is to turn it off and turn it back on again, giving it a fresh, clean start.
I was away from the office last Friday because I needed to reboot myself. Spring is a pretty overwhelming time of year in the Financial Aid Office, and my work and personal worlds both had me feeling a bit out of control. So I took a long weekend to go to a small music festival (one of my favorite things to do) and disconnect from normal life. Today I’m back in the office with the same mounds of undone work surrounding me…but I feel better than I did last week. Because I’ve had a reboot.
Sometimes your finances will feel overwhelming and you won’t be sure how you’ll ever be able to dig out. At those times you may need to reboot your financial plans. Maybe you have a credit card balance that you could save money on by transferring to a different card. Maybe your student loan payment is uncomfortably high, but you can make life more manageable with a different payment plan. Maybe your housing cost is too high and you have to make the difficult choice to move to a less expensive situation. If your money has you feeling like you are sinking rather than swimming, you may need to look at things from a different angle and reboot your plan. You will experience this many times throughout your life. But nothing is hopeless. You just need to reboot.
I had the flu the first week of spring semester. It’s a rarity for me to miss three days of work in a row for illness. Especially at a busy time. But the flu is the flu. I didn’t want to share it.
While I was recovering I couldn’t help but think how the flu is like an onion. It’s layer after layer of symptoms. As soon as the fever broke, I realized that I was light-headed. When I was finally able to breathe again, I realized that I was achy. It was just layer after layer of symptoms, and the more difficult outer ones were distracting me from the lesser ones hidden underneath.
Money works like an onion too. Big financial challenges make you ignore smaller ones that really deserve your attention. A giant pile of credit card debt distracts you from the fact that you haven’t started saving for retirement. You worry about your student loan balance so much that you fail to pay other bills on time. You’re so concerned about paying the rent for the whole semester that you forget to budget enough money to buy groceries. There’s always another layer.
Luckily money is a little easier to deal with than the flu. If you look at things right it’s possible to see all of the issues. It’s like taking a knife and chopping through the onion so you can see all of the layers at once. You can (should) make a list of all the different money issues that are concerning you and tackle them in an order that makes sense for you. You don’t have to peel away the bigger outer layers first. A budget (or spending plan if the B word scares you) can help you plan your attack. Putting it all out in writing (or spreadsheet) can make a world of difference in seeing where you stand and where it makes sense to start.
So many things in life are layered like an onion. But with your finances, you are able to chop it up and attack it in a way that works.
Time and money are a lot alike. They are both limited resources. Everybody seems to need more of both. You often find yourself swapping one for the other. And both need to be budgeted with care.
The beginning of a new academic year is a great time to look at how you are budgeting both your time and your money. It’s kind of a “clean slate” time of year. You have a brand new schedule of classes that you need to plan your study schedule and other responsibilities around. You may have just received a large refund of student aid funds that you’ll be using to cover your living expenses for the next several months.
It’s easy at a time like this to feel wealthy. You have a lot of money in your bank account. You have months before exams. And that’s when it’s easy to make a lot of poor decisions. If you make poor decisions and squander your time, you’ll find yourself trying to play catch-up at the end of the semester instead of heading into exams less frantically and more prepared. If you make poor decisions and squander your money, you’ll find yourself struggling to pay December rent and wondering how to spruce up your daily ramen noodles at the end of the semester.
The best way to avoid these challenges is to spend your limited resources wisely. Both your money and your time. This is best achieved with a plan.
By now you are likely familiar with the assorted tools used to plan your time. An electronic calendar in your phone. Or perhaps an old fashioned paper calendar. Maybe even a Pinterest-worthy bullet journal. Gather your syllabi from your classes. Mark in important deadlines. Plan where you need to be in your outlining process by what dates. With it all spelled out there for you it is much easier to avoid the last minute rush.
Money always seems to be more challenging. It feels like “budget” really ought to be a four letter word, the way it makes people cringe to think about it. But there are a lot of tools available to help you deal with it. Your first step really should be to make sure that your student aid refund is in a savings account. Then decide how often you are going to “pay yourself” from that savings account by moving money from savings to checking (I like monthly, but many prefer weekly or bi-weekly). Divide the money by that many transfers, and that’s how much you have for each budget period. But then comes the hard part. You still have to decide how much goes to each expense. Some things decide themselves for you—you don’t really have any way to control the amount of your monthly rent once your lease is signed. But groceries, clothing, and fun money are a lot easier to adjust. You may want to try an online budgeting program such as You Need a Budget or Every Dollar. Or you may prefer to just create a spreadsheet using Excel in Office 365 or a Google Sheet.
How you go about your plan is as malleable as the “recreation” line item in your budget. But the important thing is that you do it. If you are failing to plan, you might as well be planning to fail. Just do it.
My best friend had her bank account hacked last week. It was likely a skimmer that got her debit card number. They managed to drain her of over $1,000 before the bank caught it and shut down the card and the account.
On the surface this isn’t a huge deal. Her credit union is going to make it right and restore all of her funds. But in the short term it’s turned into a bit of a nightmare for her. There is a bit of a process involved in getting the funds back and getting a new bank account, new debit card, and new checks. In the meantime, there are bills to be paid. She can’t access cash through an ATM. She can’t write a check. And the money she had in her savings (thank goodness!) is having to cover her for the time being. If that little bit of savings weren’t there she would be in an even bigger mess.
I like to protect myself against situations like this by using a credit card rather than a debit card for everyday purchases. When a credit card is compromised (which has happened to me several times), they shut off the card, refund the fraudulent charges, and send a replacement card. Not a big deal. I just have to use a different card in the meantime. And I do have a backup card, so not a problem.
I asked my friend why she was using debit instead of credit, and she said she doesn’t trust herself not to charge up a credit card. She budgets best by using debit. And it’s great that she knows that about herself. But she left herself with very little protection for this situation. She doesn’t have a backup plan. She has her savings, but no easy way to make payments on bills that are coming due this week. She may have to lean on her friends to make payments for her by check or by card until she is able to get herself restored.
What would you do if you didn’t have access to your checking account and bills were coming due? Do you have a backup plan? A second checking account? (Yes…I have one of those, too). A credit card you can turn to in emergencies? It’s worth thinking about. Hacks and fraudulent charges happen. And banks protect you from them. But you should always be prepared just in case.
Sometimes you just get stuck. You’re trying to drive in snow and you get stuck. You’re trying to lose weight and you plateau and get stuck. You’re trying to write a paper and you get stuck. You’re trying to get through Couch to 5K and you get to week 6 and get stuck (maybe this is just me…but it has happened to me multiple times). You try to write a Moneywise Tip and get stuck so end up sending it out on Tuesday rather than Monday (ok…this is definitely just me).
Sometimes you just get stuck. It happens with money more often than anyone would like. You put together a budget and you’re saving for bar expenses when your best friend announces a wedding you will have to be in. You have your budget on track and even accounted for winter heat bills when a polar vortex knocks the temperature below ten degrees for two weeks straight, making the big heat bill you expected larger than you were prepared for.
Getting stuck financially is never fun. But it must be dealt with. In a perfect world, you have an emergency fund set aside for such situations. But the world is not perfect. So you may need to adjust other areas of your budget to make ends meet (Ramen, anyone?). Or you may need to use a credit card to get yourself past the “stuck” and then budget to get that paid off as quickly as possible. You may need to reach out to friends or family for some bridge funds. You may need to dig a bit further into the student loan pot. You may need to pick up a few more hours per week at work. You may need to explore “side gigs” such as online surveys or ride share driving. You may need to sell some belongings. But you need to do something to get yourself unstuck.
Being stuck isn’t fun. But there’s always a way to break yourself free from it. You just need to find it and keep moving forward.
I’m usually the kind of person that wants to see how something works for other people before trying it myself. So I’ve been dragging my feet on the whole Apple Pay/Google Pay thing. But if there’s one thing that can drag me into a new technology, it’s the opportunity to save money. So when one of my credit cards started offering 5% cash back for using their card with these services this quarter, I jumped on board.
Most major retailers are equipped to accept electronic payments now. So I set up my Google Pay account and attached the credit card with the 5% cash back. And off to the grocery store I went. Instead of pulling out my credit card at the register, I just tapped my smartphone to the signature pad. And boom….I was done. No signature. No waiting. No exchange of cash. Just tap and done.
This is a whole new world. Very quick payment. No need to have credit cards on my person. I can see this as being very useful when I go out for a longer run or bike ride and might want to stop to buy myself a beverage or snack. And if the vendors at music festivals start accepting Google Pay, I’ll certainly be in my glory.
But on the flip side, I can see this new technology as a bit dangerous to the budget. As we’ve moved from a cash society into the world of plastic, it has become a bit harder to keep track of how much money you actually have available to you. You no longer have to consciously make a trip to the ATM to spend more than you have planned. And the ability to pay by tapping your phone without even digging out a card makes it seem even less like real money.
Additionally, you’ll want to make sure you keep your phone screen locked if you are using this. If your screen is unlocked and you lose your phone, the finder would be able to run around charging up a storm on your account. You should be keeping your screen locked anyway, but this is just another reason to do so.
Electronic payment technology is definitely easy and fast. But it has a down side as well. For now I’m going to give it a thumbs up, but with the caveat to proceed with caution.
Sometimes when I’m driving, the road rage words that jump from my mouth, aimed at the car in front of me, will be, “Do something, even if it’s wrong!” (Full credit for this gem goes to my husband’s grandfather, who spouted an abundance of what we call “Wilbertisms.”) But there’s a lot of wisdom in this particular phrase that goes way beyond the driver who can’t figure out what he or she wants to do.
This is still the season of New Year’s resolutions. I made a couple of them this year. One is to make healthier food choices and to run more, with the goal of running a half-marathon in the fall (which I’ll now be held accountable for, since it’s out there in the blogosphere). The other is to create and live by a budget in an effort to pay down some debt I’ve been lugging around with me.
Right now you are likely thinking in wonder about the money lady who doesn’t have a budget and has a bunch of debt. I know….I know. It’s one thing to understand the principle. It’s quite a different challenge to put it into practice. I know that the secret to weight loss is to burn more calories than you consume. But I like cheese! And chocolate! And pizza! And I know the secret to budgeting is to spend less than you earn. But I like restaurants! And music festivals!
So here we are at the start of a new year. And I’m going to do something. Even if it’s wrong. Because doing nothing will not change anything. If I do something, it may lead to a positive change in my life. Or it may be wrong and lead to a learning experience. But either way, doing something is better than doing nothing.
My “healthier choices” plan includes using my fitness tracker’s app to monitor my food intake and calorie burn. My half-marathon dream is right now in week 3 of Couch to 5K. And I’m currently in my free 34-day trial of You Need a Budget, as well as reading the accompanying book by the guy who created it. I’m not sure how this will go (though I’m sure I’ll keep you posted as I progress). But I know that I’m doing something. And doing something (even if it’s wrong) is better than doing nothing.