How to Stop Living Paycheck to Paycheck

 You'll notice that I don't have a category in the budget called "Emergencies". Why is that? Because personally, I think that real, true emergencies are more rare than we think. And we need to gain control of what's happening right now . For example - "The transmission went out and now we have to spend $2400 on a new one!" - is that really an emergency? We know automotive maintenance and repair is part of owning a car - and we know that eventually we'll need to replace the tires, or get an oil change, or pay for an unplanned transmission repair. That's what the "Automotive" category is for: You'll notice it wasn't in the budget originally. I did have to adjust some other categories downward to accommodate the additional expense, but I want to stress that the budget is a living document. It is going to change, shift, and adapt as our lives and priorities change.  So we allocate $50 every month to "Automotive" - what do ...

 I hate debt. It keeps our cash tied up. It prevents us from being able to spend for our future, because we're paying for the past. So, how do we get rid of it? We pay it off. But with a plan. And that plan is called the "Debt Snowball". You may have noticed that there was a category in the budget, under debt, called "Snowball". What's it for? It's for getting ride of debt. I set our Snowball amount to $100 - I'm pretty aggressive that way - but whatever you can allocate extra to throw towards debt, is good. Here's why - Let's look at those credit cards -  I have a $30 payment for my Macy's card - that card has an interest rate of 29% (ouch!), and I'm carrying a balance of $640. With my minimum payment of $30/month, it will take me 57 months to pay that balance off, and I'll have also paid over $430 in interest. My Citicard is a bit better with interest - it's 17%. But I have a balance of $1000. It will take me 60 months to pa...

 Our budget, how to spend, and the day-to-day of Zero-Based-Budgeting - you've heard me mention Zero-Based-Budgeting before - but what is it exactly, and how is it different than regular "budgeting"? Well, get ready for a deep dive, grab your favorite relaxing beverage, and read on. Traditional Budgeting is more accurately called "Forecasting". What were we taught to do? Write down our income, and then list our expenses, make sure our expenses aren't bigger than our income, and then spend accordingly. Easy, right? Then why do we fail at it? Because our standard budget might be a good blueprint, but it doesn't guide our day to day spending decisions. Me know our rent is due in two weeks, and we've got $1900 in the bank. I can afford that plate of BBQ and a few beers right now. $300 later, and then some gas to get to work, and some groceries for the week, and we're below our $1200 that we need. And payday isn't until after the 1st! What's t...

By now, we should have a complete, or near complete list of everything we spend our money on, including not only monthly, but also semi-annual, annual, and infrequent expenses we need to save up for. Let's take a look: Well, there's everything, and we can see that we're spending more than we take in - our monthly income that we established back in "Getting a Grip on Finances" was $2946. We're $169 over our budget. How do we handle that? This is where you think long and hard about what matters most to you, and you design your budget around those priorities. We have our necessities - Rent, food, etc - those are pretty much non-negotiables. But, can you refinance your house at a lower interest rate? Can you be more aggressive at couponing, meal planning, and strategic shopping to reduce the grocery bill? What about insurance, can you negotiate a lower rate? Can you reduce your gift spending, and maybe hand-make something, or offer to spend time or cook a meal in ...

 What's Fun Money? It's what we call money you give to yourself, to spend on whatever you want, no questions asked. It is absolutely up to you. Because everyone's situation and priorities are different, that amount is going to vary between person to person. For my own situation, my wife and I get $100/month to do with what we will. Some months it's all spent, other months anything left over will carry to the next month - sometimes I'll want something that's more than $100 - in that case I wait, safe up some money, and then buy it when I can afford it - I don't use credit anymore. I avoid it at all costs. So here's what our fun money and etc looks like: I've also Included subscriptions, and listed each as a separate category. You could lump them all in to one category called "streaming", or even include that gym membership and the Amazon Prime Category we had in "True Expenses", but I like to be able so see exactly where the money ...

 If you have any debt, such as Credit cards, Student Loans, Store Cards or other revolving lines of credit, I highly recommend attacking it as strongly as possible. Debt is borrowing against the future for something you've used yesterday. Unless it's for something of appreciable value, such as real estate, the value of that expense is almost immediately lost after you've purchased it. Homes can, an usually go up in value. Some cars can appreciate in value, but most drop by thousands immediately after you've driven it off the lot. That fancy dinner, those groceries you bought, or that gas you filled the car with? You can't resell that at all. I understand having to use a credit card in an emergency to buy groceries or gas. But we're going to break out of that hand-to-mouth, paycheck-to-paycheck cycle, so we don't have to use our credit cards any more. First, we have to get a handle on our debt situation - for a mortgage, I include that in my True Expenses, ra...

 In the last post, we took a look at what was coming in, vs what was going out. You may have seen expenses you didn't realize or think about. You might have seen unexpected emergencies such as a vet visit, or new tires for the car. In this post we'll take a detailed look at what our true expenses are, and how to incorporate them into a plan to make our money work for us, rather than the other way around. When we looked at our monthly expenditures, we knew pretty quickly what we needed to survive. Our rent/mortgage, utilities, food, transportation. But we also realized there are other monthly expenses such as gym memberships, subscription services, association fees, entertainment expenses, clothing, pet costs, insurance etc. We not only need to allocate money towards what we need to survive, bur also what we need to fund our lifestyle. On top of all that, we know there are going to be larger, more infrequent expenses. Annual car registration, occasional Dr or Vet visits, care re...

 Simply put, we need to have an accurate picture of money coming in, and money going out. We need to get a good assessment of what we earn, and what we spend. Knowing what we earn is generally easier - we know our hourly wage, our salary, or have an average of our income if it fluctuates. Get a piece of paper and write down all of your monthly income sources, and label that "Income": This is based on a biweekly paycheck, earning $17/hr after taxes. Your amounts and situation will vary, but you want to get a good idea of how much you earn in a given month. Next, on the other side, list your expenses I start with the "4 walls" - basically everything you need to survive. Housing, electricity, food, transportation, etc: Not bad, right? We have a $741 dollar difference! Well, not quite. Now we have to think about are "True Expenses". True expenses are basically *everything* we spend money on. Insurance, dining out, movie tickets, Dr Visit co-pays, vet fees, sub...

 Zero Based Budgeting is defined as: "Zero-based budgeting is a method that has you allocate all of your money to expenses, savings and debt payments. The goal is that your income minus your expenditures equals zero by the end of the month." In essence, as you earn money, you take that money and allocate it to your expenses. When you spend money, you check that purchase's category, and make sure you have enough money allocated before you make the purchase. If you don't have enough money to fund the purchase, you wait until you do, then you spend it. Another format people use is "Envelope Budgeting" - you take all the spending categories you have - Rent, food, clothing, power, etc - and give each category an envelope. You write the dollar amount needed for the month on the envelope, then you stuff them with cash until they are full with the dollar amounts necessary, and then you spend it on that particular envelope's category. YNAB is a software version o...

 For my entire life, up until August 2019, I've had a poor relationship with money. I got my very first credit card at age 18, and maxxed out the $300 limit in about 3 weeks. That was in 1984 dollars! For the next few decades, I'd hit highs and lows, but was always living paycheck-to-paycheck. I could never seem to save any money, and with any unexpected expense I'd be sent into a tailspin trying to cover it, and usually ended up using a credit card, or using a credit card for a cash advance. I was constantly struggling with managing the max balances on dozens of credit cards. I was constantly struggling to buy groceries. I was constantly struggling to buy gas, or bus fare. I changed jobs occasionally, and with every increase in pay, there was a short lull, and then I'd be back into the fray. I would think that with more money would come change, and the struggle would subside, but it didn't. My expenses seemed to grow with my income, even though the reality was ther...

What is this all about? I have struggled with money all of my life. It took until reaching my mid-50's to finally take control, and stop living paycheck to paycheck. I am creating this blog, and offering my help to anyone that needs it, so they can free themselves of all the stress that comes with money, or the lack thereof. Let's get this out of the way: 1) I am not selling anything, nor will I be asking you for money. 2) This is not a "get rich quick" scheme, no will I be asking  you to do anything illegal, or "sketchy". 3) You will be required to do the work; I am only offering advice, and am not a finance professional. 4) I do recommend a product/methodology called "YNAB", but you can take control of your finances without using it; YNAB just makes it a bit easier. You can do the method, which is called "Zero Based Budgeting" with Google Sheets, Excel, if you have it, or even pencil and paper. The Method is what's most important, n...