So many people hate a budget! They think it feels restrictive. They think it reminds you that you don’t have enough money. But here’s why you should LOVE a budget…
- It takes the decision fatigue out of telling your money where to go. Spend 1 hour every money planning your budget and simply follow the plan.
- It sets the foundation for your wealth-planning
- A budget= freedom to choose
- It assists you in having your necessities, shows you where you’re bleeding money and tells you where to stop the leak.
By eliminating the mindless spending, you have the freedom to choose what you need first and what you want most.
Budgeting money is so simple when you know these six steps but it’s rarely easy when you have more bills than you can pay for.
Maybe you’re between jobs or the job you have doesn’t pay enough to cover your basic living expenses. Maybe you do make enough money to cover your expenses but you haven’t learned how to manage the money you have.
Wherever you are, it’s important to control where your money goes instead of winging it paycheck to paycheck and suffering the consequences later.
In 2015, I graduated college and left my last job when my 4th baby was born. I was broke… and poor! I knew I couldn’t stay that way so I leaned on my trusty budget to keep me on track with my family’s goals. I used all of these tips and they WORK. They would be worthless to you if they didn’t. And I’ve tested them all multiple times.
These 6 tips will help you manage your money and STOP BEING BROKE:
Don’t wait until collection agencies start calling you. They are relentless and are rarely understanding of financial hardships. They only get paid when you pay them so they do not want to help you work it out.
Call your creditors as soon as you know you won’t be able to make a payment on or before the due date. This isn’t just for credit card companies either! Do this for your mortgage company or landlord, phone service, cable and internet service, electric service, medical care providers. All of these service providers are much more willing to negotiate an extension or alternate payment plan when you plan ahead and call them.
Life is all about priorities, even with your money. When there isn’t enough of it to cover all of your payments, you have to decide which ones are most important and which ones can wait. Look at how much money you have available. List your bills by priority and pay them accordingly. Whatever is left at the bottom gets pushed back to the next payment period. Typically, your housing, food, utilities and insurance will come first. Credit cards are usually last on the list.
Consider the consequences of not paying each bill and make a decision. Do this step after you’ve contacted your creditors. How you list your priorities will depend on which creditors are willing to work with you.
If you find yourself rolling over the same bills to the next pay period over and over, you can’t afford it. now is the time to ruthlessly, shamelessly cut out all unnecessary expenses. Pride has its time and place, this isn’t it.
(P.S. your value is not defined by the things you have or the things you spend money on so there’s no hit to your ego by cutting out unnecessary spending that your can’t afford).
3. Cut back on your savings and spending budget.
This advice is NOT for those of you who are broke, but not poor. If you make enough money but are broke because you spent your money on unnecessary things, you’re broke because you spent your money so cut back on your spending and increase your saving.
Some financial coaches will tell you that savings is the #1 thing you do with your money and it’s non-negotiable in your budget. Normally, I agree 100%. If you can save $5 a week, do it. If you can save $100 a week, do it. But savings doesn’t help you if you’re starving.
This is the ONLY time I recommend cutting back on your savings: if you are literally at a bare-minimum budget, meaning you have just enough for basic bills and food (Nikes and an Iphone is not a basic need).
(Listen, there are food assistance programs in every city. Because of my household income now, I don’t qualify for any of them so #5 was my best option. Let me tell you, when I did qualify, I used it! It’s not shameful. I hustled until I didn’t need or qualify for it anymore. If you do qualify for any of them, USE THEM but don’t let that be an excuse for not managing your money!)
4. Avoid relying on debt.
When cash is short, it’s common to fall back on payday loans and your credit cards to pay bills. The cost of using this money is incredibly high and this debt is difficult to pay back later on if you already don’t have enough cash flow. That may work for a week or 2, but when your credit limit is maxxed out, you’re back to broke with even more debt than before. Don’t fall into the trap of using credit cards as your backup plan.
Consider how much you’re normally able to save, if any, and then project how long it would take to pay off this new debt with interest added weekly, and sometimes daily. You already have more debt than you can handle. It doesn’t help you to add even more.
5. Create more income.
You are not stuck in this life if you don’t want to be! You are not destined to be broke or poor. If you don’t have a job, take anything you can get until you find a better job. If you do have a job, consider adding a second job, asking for overtime or taking side jobs. If you have things around the house that you don’t need, consider selling it. We live in an age of information overload and so much of it is FREE. You can find a way to make more money if you’re really searching for it.
The less you fall behind now, the easier it will be to catch up later.
6. Make a new budget. This might be the last thing you feel like doing. Thinking about money already stresses you. But if you’re broke, there’s a good chance that your current budget isn’t working. Look at your income and expenses and decide where your money should go.
I want you to have everything you need to cut the excuses and make your budget TODAY. Download a free, printable budget worksheet right here.
In stressful times like this, it’s easy to give in to your anxiety and decide to give up or decide that it’s too hard to try. Remember that not trying will only increase your financial challenges. You can do hard things. You can do this. Take a breath and take action. RIGHT NOW.
You’ll be surprised how much you can accomplish when you commit 100% to financial freedom!