Live Broke or Die Budgeting: A Financial Story

I’ve never had a ton of cash growing up and in my college years that remained the same. Whatever earnings I had were gobbled up by the high price of my education. Post-graduation, I found myself a full-time job and a financial freedom like I never had before. With freedom, of course, comes responsibility. I was faced with bills and managing a larger paycheck than I was used to. Thing didn’t start off well. I spent blindly, shopping and not looking at my bank statements until I found I was below my set balance. I would get paid on the first of the month and be broke by the fifth. I was making a decent amount of money, yet it was seemingly going nowhere. Once I obtained my first credit card, things got worse. I treated it with the same carelessness as I did with my checking account, and my savings account was nonexistent. My wake-up call arrived when I reached the maximum on my credit card. It was the holiday season and I got caught up in running from store to store, buying things and digging my debt a little further. It was like I had been hit with a ton of bricks. I was living above my means and needed an intervention. The intervention may have come with an emotional breakdown and shock over how much was being spent on frivolous things, but it was necessary nonetheless. So, now that you know my typical young adult sob story, I’d like to give you some tips on how to not blow your cash from your first real job and how to spend and save wisely. The best way to learn is through error, but hopefully this will decrease the severity of your errors due to this insight from my serious slip-up. Here’s how to effectively manage your money:

1. Know your income. Have an idea of what your income is like per month. If you get paid bi-monthly, I do recommend doing a 2-week budget since your income may fluctuate. Make sure you include any employment income and also any extra cash coming in for any side gigs or even property rentals. Everything must be accounted for.

2. Map out your expenses. It is essential to know what fixed expenses you do have. Account for everything. Your phone bills, rent, and even gas money should be included. These are the essentials, so be as accurate as you can be because you don’t want to come up short on them. It’s better to overestimate than underestimate when it comes to the necessities.

3. Map out your recreational spending. Now that you’ve gotten past your fixed expenses per month, it is time to manage your spending that has a little bit of flexibility. This includes your budget for clothing, entertainment, and any other things that are optional. Be realistic, but put what you usually spend on here. Check your bank statements if you’re unsure, you may be in for a surprise.

4. Make a budget chart. I highly recommend Microsoft Excel for this since it is something you can save and update every budget period, but writing it out or making a chart also works. Any way you can visually plug in your income and expenses will do. Make sure you have two columns for tallying up the money: one for estimated expenses and the other for actual expenses. This ensures you can visually see where your money is supposed to go to, and where it is going.

5. Adjust your budget. Now that you have all your numbers laid out, make sure that you aren’t spending more than you’re earning. If your income is $2,000 a month and your budget totals to $2,500, it may be time to rethink some choices. Be realistic in your cutbacks. Limit your clothing allotment before you limit your groceries. Just remember, getting that new item you’ve been eyeing isn’t worth scraping by on ramen or falling behind on bills.

6. Monitor your spending. With the creation of your new budget, there comes responsibility. You are accountable for following it, and it is a good idea to track your spending as the time period progresses to make sure you’re not stepping out of your budget line. Online mobile applications are good for this, but you can also track your purchases in a book too if you’d prefer to have a tangible carry-along. However you do it, just make sure that you check in with yourself to see that all is going well. It won’t be easy to follow, but transparency is essential for a budget to work. You have to be honest with yourself on where your money is going.

7. Set goals and stay on track. Having mastered the budget and monitoring of your spending, it is time to keep things going! What better motivation is there than rewards? To reach these rewards, set yourself reachable goals. Want to move out of your current living situation? Make a goal to save up a certain amount and once you reach it, make the move! Want to do that marathon in the fall? Adjust your budget to focus on training and save money for the event itself, and then reward yourself by having fun! Find what motivates you and use it as motivation to keep your finances in order.

By no means am I a CPA or some financial adviser of sorts, but the above steps for a budget worked for me. I am still recovering from my sloppiness in spending, but my budget allows me to allocate my money to the things I need and save for the things I want. You can do the same thing for yourself. The hardest part is seeing where your money is going at first and then having to change your spending habits, but it is worth it to still have money in the bank at the end of the day and not a sinking feeling in your stomach because you’re wondering where the money all went. My awakening came when I was first entered young adulthood, and even though it hit me hard I am glad I am now on the right track. It doesn’t matter what stage in life you’re at, it’s never too late to turn things around with your finances. Hopefully these tips will get you starting on a new financial path, which in turn will benefit your life greatly. Getting a budget going sure beats being broke for seemingly no reason. Saving to spend on the things that matter will having a positive lasting impact, so let’s get budgeting!



Photo Source: THINKSTOCK 

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