I’ve Paid For This Twice Already…

Archive for the ‘debt reduction’ Category

In uncertain economic times, we all want to be in the most prepared position possible.  Today is not too late to start improving your financial future.  Even if you have to trick yourself into doing it.  For the 1000th published post on I’ve Paid For This Twice Already… , I’m sharing my favorite five mental money hacks all in one place.

1. Every time you spend money frivolously, put the same amount towards your financial goal.  Be it paying down debt, building an emergency fund or other savings, investing for the future – whatever it is, make it as important as those purchases you just “have to have”.
2.  Make it a habit.  Move money every day at the same time.  Maybe only a dollar.  But for thirty days, every day move money from checking to savings, or to whatever the financial goal.
3. Write it down.  Writing has power.  What is it you’re looking for?  What do you want to accomplish?  Make it concrete and put it in writing.
4. Paint yourself a picture.  Maybe you’re a visual person.  Put a picture of your goal somewhere you can see it every day.  Maybe it’s a zero debt balance.  Maybe it is a spectacular retirement home.  Maybe just a wad of cash.  Whatever it is, picture it.
5. Share your story with someone else.  Talking about what you want and how to get there makes it real.  Thinking through how to share it with others makes it a part of your life.

Thanks for being a part of my journey and I can’t wait until we go from the “debt elimination” phase to the “hoarding a wad of cash” phase!

Our family as a unit has never truly had completely irregular income.  Meaning, although I personally have had irregular income for the past 8 years, my spouse has always had a specific income at regular intervals.  So we basically have a regular income with an aspect of irregularity to it.  The part that makes me experienced in dealing with irregular income is that we haven’t yet, as a family, gotten to the point that all of our expenses are met by my spouse’s income.  That’s the goal – well the goal is that they are all met and more by my spouse’s income – but we have a ways to go for that to happen.  My income is pretty diversified now, and we only rely on a small amount of it per month to meet our budget, so it acts more regular than irregular, but that wasn’t always the case.

Even if you don’t think you can create a budget around an irregular income – you already are.   You are spending money each month, which means it has to come from somewhere.  The goal is to not be like the government and spend money you created out of thin air (sorry, couldn’t resist) but money that you’ve earned in the past.  Paycheck to paycheck budgeting isn’t ideal for anyone, but it is basically impossible for those with irregular income.  We have to find another way.

A while back I wrote about how to deal with budgeting around an irregular income – the general take home point is that with irregular income, you need to figure out a way to create an artificially regular one.  This can be through a savings account you pay yourself out of each month, or specifically earmarking money in your checking account for specific months.  For specific ideas about how to create that budget, you can look to that post.  The key point I want to drive home today is that to successfully survive, and flourish, on irregular income, you need to expand your thinking about income and what it does.  But how?  How to escape the idea of spending money when you get money – the idea that so many people have been brainwashed into believing is the only way to exist?

If you still have income coming in,  you can start right now.  Move it to that savings account.  Only take it out as you need it.  Resist the temptation to spend more when you have more.  Live as close to the bone as possible and spend as little as possible.  Hoard.  Hoard like you have never hoarded before.  Eventually you’ll be ahead and not dependent to meet current bills with income you haven’t earned yet.

If you’re not sure when the next money is coming in, in my opinion I’d start diversifying that income.  Find something you can do part time to bring in something.  Having diverse sources of income takes the sting away from its irregularity.  An additional source of income could be just long enough to get back on track, but long-term diversification is still a good idea.

Whatever you do, the key is to think outside the box.  Break free from the traditional thought of spending money as it comes in.  Don’t budget your expenses from your projected income.  Budget them from your past income.  It won’t happen overnight – and you may go more into the hole before you start the upward climb – but keep your eyes focused on the end result.  Surviving and thriving in both lean times and abundant ones.

As I’ve discussed in the past, sometimes it isn’t your expenses that are completely to blame, your income factors in as well.  You can only go so far with so much.

Maybe you’ve done the budgeting exercise and you’ve realized that no matter which way you cut it, you spend more than you make.  It might have seemed just a little bit here and a little bit there, but in the end, the debt climbs instead of being reduced.  Hopefully, you’re able to bring it into line with some selective sacrifice, and bring your spending enough under your income to start making some forward progress.  But what if you’ve cut everything you can cut and you’re still in the red?

Then really, there are only two solutions – spend less or make more.

Spend less?  But didn’t we already say that everything that could be cut has been cut? That may be true, or there may be some more things that can be shaved down or cut some more.  Can you move to a less expensive place to live?  Do you still have cable television or internet in your home?  Do you have two cars, and are you paying car payments on them?  It may not be possible to alter these things, but the possibility is worth considering before immediately rejecting them.

So you can’t spend less, and you still can’t make ends meet.  The harsh reality is that if you can’t make ends meet, and your expenses are at a minimum, there has to be more coming in.  With the holiday season upon us, consider a second job in retail.  If you need flexible hours, consider finding a part time online job.  There are a lot of ideas for alternative income in this post at Moolanomy that might get you started on the right track.

The answers aren’t easy.  There isn’t anything simple about living on the edge.  If you can’t bring your expenses down or your income up, the situation will continue to deteriorate.  But even if you don’t think so, the ball is in your court.  It may seem daunting, or even impossible, to make a change.  But change starts with just accepting it needs to happen.

Next in my “You can get out of debt – give yourself some peace of mind in this crazy economy” series this week is the idea of budgeting.  I’ve written about budgeting and how I budget in the past, and you can get caught up here:

• Basic Budgeting Overview Part 1, Part 2, and Part 3
• How I Budget
• Budgeting on an Irregular Income (more on that later too)
• A Good Budget Is Not An Iron-Clad Contract

Today I don’t want to talk about the specifics of budgeting as much as I do the specifics of the budgeting software I use, and some tips and tricks for using it most efficiently.  This isn’t for everyone – no matter what your budgeting software preference, the important part is that you budget (or devise a spending plan, or whatever you would like to call it).  But for those who have never tried budgeting before, I thoughtinsight into the hacks I’ve devised for the budgeting program I use may be helpful.

I use the spreadsheet version of PearBudget.  It is a free downloadable spreadsheet that you can use to keep track of all the money flowing in and out of your household.  I like having something on my computer that I enter the data into.  There are other programs that will automatically download your bank and credit card transactions, and if that is what you like, that’s great.  I like doing things the old fashioned way, it makes me feel more connected to my spending.  This is an excel worksheet (I use it in OpenOffice, a freeware program) that has done all the coding work for me as far as making numbers go to the right places.  That makes me happy.

When you download the PearBudget spreadsheet, the first thing you’ll do is create your monthly budget.  PearBudget uses a monthly system and a yearly summary.  There are categories for regular expenses, variable expenses, and irregular expenses.  Regular expenses are those that are the same every month – mine are things like our mortgage and car insurance payment.   Variable expenses are those that vary per month, such as groceries and gasoline.  Irregular expenses are those that aren’t every month but need to be accounted for – I include all our annual expenses as well as things like clothing, medical, and haircuts.  You have ten slots for each category – it isn’t necessary to fill up all ten slots, but try to remember all the different categories in which you spend money.  If the total comes out higher than your monthly income, you’ll need to adjust some categories downwards.

Now for the hacks.  Move on to a specific month, like October.  Just because, well, it is October.    You’ll see that on the left side are the days of the month in number form, and on the right side a column that you can enter your income into as it comes in too.  In the middle and on the bottom are the categories you entered on the first page.  I had one problem.  The irregular expenses don’t have any monetary amount associated with them on the monthly sheets (the variable does, and the regular should be regular so you don’t need to remember them necessarily).  I wanted to be able to track how I was doing as far as spending the irregular categories.  Enter the “note” function.  If you right-click on any cell, you can enter a note that will be associated with that cell.  I love notes.  I use notes all the time.  I put notes to describe:

• What did I spend that money on and where?  For example under groceries, a entry might have a “Kroger” note on it.
• How much is left in that category?  Under irregular expenses I track what I budgeted per month with a note, as well as what gets carried over from the past month.  So if I had $30 left over from the last month I add that to whatever I budgeted per month and I enter that in the next month’s cell note.

My next hack is in regards to dealing with the monthly budget.  My first month using PearBudget went swimmingly, and I matched my ending balance on my budget sheet to my bank balance.  I continued with the next month, and something went wrong – I couldn’t match the bank balance and the budget remainder at the end of the month.  After a lot of pondering, the solution was simple – because this is based on month to month, I need to enter the remaining balance from one month as income on the next to carry it into that month.

The last hack I use is highlighting in regards to income.  I use not only notes, but the cell color to make sure our different sources of income get allocated correctly.  I snowflake all of our extra incidental income (from surveys, the blog, my part time jobs) towards debt, and to make sure it goes to debt and not anywhere else, I change the cell color to purple until it is applied to debt, and then to yellow once it is applied.  that way when I look at my snowflake savings account, I can figure out where all the money in it came from quickly, and keep track of when it gets moved to paying off debt.  I lose track of less incidentals this way.

Those, in a nutshell, are my three PearBudget hacks to make using it suited to my needs.  Play around with the program – don’t be afraid to mess with things and see what happens.  Like budgeting itself, a good budgeting tool is flexible and adjusts to your own needs.

Yesterday’s post about how to start the process of getting out of debt garnered several comments and good discussion among commentors.  Two themes that stood out for me particularly were the idea of budgeting around an irregular income, and the fact that some of us have cut everywhere we can cut and still aren’t making quick progress through debt.  Later this week I’ll talk about some more ideas around irregular income budgeting, today I wanted to address the fact that sometimes, there isn’t anything to cut.

When I started taekwondo over 8 years ago, my instructor would often tell our class that the journey to black belt was not a race.  That there were many paths to get there, and that each of us had to find our own way and pace, and that the only person you were competing against was yourself.  I heard those words, but it took me a long time to actually listen to them.  I was running a race, in my head – I was going to become a black belt the fastest way possible.  And I did test every testing cycle, even making up classes when my spouse and I got married and we went on our honeymoon so I could stay on that breakneck pace I’d set myself.  And the day did eventually come when I was to test for my 1st degree black belt, in basically the shortest time allowable by my martial art.

And for the first time in my short martial arts career thus far, I didn’t break my boards, and I didn’t pass my testing.

I learned a valuable lesson that day, and carry it with me still.  Although the impatient person that lives inside me would like everything done yesterday, life is lived in the progress and the journey.  I can’t compare my progress and speed and path to anyone else’s - circumstances dictate different things for different people.    I also learned about not letting setbacks derail progress, but that’s a lesson for another post.

A person I met online wrote to me a year ago about how my getting out of debt inspired her to do the same.  Just a few days ago, I heard that she’d successfully paid off over $75,000 in debt in just about a year’s time.  On the other hand, longtime reader and frequent commentor Jinger is on a fixed income, and paying down her debt little by little.  Some months, many months, there just is no extra for her to go towards any debt progress above the minimum.  My story is somewhere in between.  Do I wish that I could have paid off our $36,000+ debt in less than a year?  Of course.  Do I wish that I could do something substantive to help Jinger make more progress?  Yes again.  But in the end, the important part is to keep going.  Even when the progress is slow, even when it seems neverending – keep on course.

There are ways that one can try to speed up progress that I’ve previously discussed, but sometimes it is all we can do to just keep on making progress at all.  The journey might be longer and more fraught with difficulty, but the journey is still there.  And at our own pace, we all make progress, if we truly commit to the goal.