A negative mind will never give you a positive life.
I think in my case , better late than never….
As part of my programme to change my lifestyle around, I needed to know how much money my family required to live?
Seems a simple question. But one that I could not answer .Now I am not alone in this. Recent polls suggest that only 30% of North Americans actually have a budget. That means the vast majority of people have no idea what they spend their money on and my household definitely fell into this category.
Now in order to change, you first have to establish where you are?
I”m not a financial expert in any way and my aim here is not to become a financial expert.I am finding out what works for me and maybe it would work for you.
My aim here is to change my lifestyle from working in jobs I hated just to make money to pay the bills, to working at things I love to make a living.My trusted method in the past was , ‘We need more money! ” I would go and earn some more money, in a job that I hated, next stage? buy some “crap” I did not need, as a mental reward. ( for example, my house has five televisions of which only two are used ???)
Result? “We need more money!!”……So the cycle continued.
How to break this cycle? I decided to basically record all of our spending habits over a three-month period. I felt this was a good period of time. Long enough to give me a reasonable level of understanding as to where the moola went?
Your Budget should not only contain all the areas that you spend your “miserable” cash, but also include all of your income. I am no computer tech, so decided to record ours the old fashion way and purchased a simple accounts book, in which I wrote my own headings.( long live paper)
1/ Food – simple enough . All groceries but not including take-out or restaurant meals.
2/ Household – Mortgage or Rent and all utility bills.
3/ Insurance- House/ Motor and personal.
4/ Motoring expenses. – Gas , repairs etc.
5/ Debt management.- Interest paid on Loans,Credit cards bank charges etc.( Shocking!!!)
6/ Entertainments_ Coffee, pub, take out, restaurants, pub , pub ,pub ……
7/Clothing- Obvious, no explanations required
8/ One off expenditures.- Every month there”s something. Birthdays, school trips etc
9/ Other – everything else, just write what it was when entering the amount .
Now your budget may look different to this. For example, if you did”t own a vehicle , you are not going to have motoring expenses, however you may have public transport costs or taxi fares instead. Where”s your investments? you may ask. Quite simply at this stage, apart from some Mutual funds for my kids college education, there are no investments!
Keep it simple stupid ( Love this saying, my first boss used it all the time )
It is very easy to get carried away and make your budget way too detailed and complicated. In my case, if I am going to carry it through, I have to make it simple to use and simple to understand. Otherwise, I would get “fed up” with it very quickly and not bother with it . Again, make it personal to you and/or your family. This is the one that worked for us .
The point of this exercise was to clearly identify where our money was being spent and how much we actually spent. I did not want to change anything at this stage, however I did find that after recording our spending in the first few weeks, our spending habits started to change, as the shocking numbers sank in .
After the three-month period was finished, the results were amazing.
Spending money wisely on “needs” rather than “wants” in order to be able to work less and have more time to do things I love.
Its worth while reminding yourself of why you are doing this? Like most things in life, if you don”t have a target or aim that is measurable , in time, you will wonder from your path and not get the results you were looking for.
Again, this was my aim. Yours will be different . Maybe you want to save for a particular trip to the sun or a big box item? Instead of following the modern disease of putting everything on credit.
It is worth noting, American”s credit and store card debt hit over a trillion dollars in March of 2018, according to figures released by the Federal Reserve. An average of over five thousand dollars per card holder.That”s a lot !!Just saying .Not to judge anyone. I don”t want to be like those reformed smokers who don”t shut up about giving up smoking.( used to have to listen to those “muppets” when I smoked).
The important thing here is to be able to recognize your current situation. If you are happy with it the way it is, great! Bully for you and move on . For me, this was not the case and change is required.
By recording our expenditure over the three-month period, the first and most important question was answered .
1/Do you earn more than you spend ?
This has to be the starting point for everyone. You don”t have to be a genius ( luckily for me) to work out that if you spend more than you earn over a period of time then the likely outcome is going to be…….DEBT! . The debt you incur will then cost you money every month and so your expenditure increases etc etc etc. If you are like me you have no idea how much your debt is costing you each month? ( Bet you can”t give me an explanation for APR? ) Surprisingly, we were on the right side and our earnings were more than our spending, which begged the question…..
2/ Where are you spending your Money?
The fact that we earned more than we spent was an encouraging start. However, the answers to where are money went? was, to put it bluntly, bloody scary. Small, regular amounts go un-noticed especially when you pay by debit or credit card, instead of physically handing over the cash. When you see it being spent over a three-month period, then multiply it up to what it is costing you over a whole year, it can be quite shocking.
A good example of this. One of my sons is a competitive swimmer. After each early morning practice, we would get him breakfast from an extremely well-known fast food chain. Not expensive right? Well, when I did the calculations from my three months of records , it worked out to be over eighteen hundred dollars a year. For a lot of people that’s one whole pay check per year! Needles to say , my son now takes breakfast from home. He”s not happy about it , but it teaches him a valuable lesson and I”m happy because he is now having a healthy breakfast and we are saving money. Win, win.
3/ Prioritize which debts to pay off
Finally, the exercise showed which debts cost us the most each month. This automatically gave us the order of which we should reduce our debt . Next stage.
Anyone want to buy a TV ?
To be Continued……..