I get extremely frustrated with the large banks and the government for the amount of money they are making off of student loans and credit card debt. If you are like me and have student loans (or credit card debt), you need to get serious about creating a budget. Creating a budget helped me get out of debt, and one strong piece of advice I can share with you all is to allocate time each week toward budgeting and reviewing your finances. You cannot get out of debt if you don’t 1) understand where your money is going and 2) create a budget to tailor a game plan to get out of debt.
Before getting serious about my finances in December of 2015, I had a budget that my wife and I created. The problem was that once we created the budget we never checked in on the budget to see how we were performing each month relative to the goals that we set. We didn’t get into too much trouble by not checking in on the budget, largely due to the fact that we live well below our means. However, we were not knocking out debt as quickly as we wanted to.
One of the first posts on my blog was: How do you get your finances under control? The first two steps I discussed were:
Step 1: You need to start tracking where ALL of your money goes
Step 2: Create a budget and develop a plan to find ways to save money
For the first step, I probably put in close to 15 hours each week investigating where we were spending our money. 15 hours is a great deal of time, but as I investigated where the money was going I was shocked and eventually, it became addicting to track where our money was going. Most people, myself included, use credit cards and we are not disciplined… It was so frustrating to see how much money we were spending on things we didn’t need. If you are finding that you cannot stay disciplined, you may want to go to a cash-only budget. With the cash-only budget, you take out the amount of money for each category in your budget and when the money runs out you have to wait until the next month. Here is a good post on the cash-only budget from Scott Alan Turner.
I had my accounts synced on Mint.com, which enabled me to go back and look at where we spent money each month in 2015. I recommend using Mint because it is great for tracking expense. The budgeting features are ok but not great. Or, you can collect your receipts and manually add up how much you have spent.
My wife got fed up with me constantly saying, “Wow, can you believe spent over $1,000 going out to eat last month!” Ultimately, what she was looking for was a solution rather than me constantly complaining, which is some good advice for you husbands out there 🙂 , Therefore, I set out to re-create our budget.
Now that we understood where all of our money was going, I could focus on the second step: create budgets for each category and then check in on our budget to ensure that we were not overspending.
Continuing to check in on your spending against the budget you create is vital for improving your financial situation. There are going to be expenses that come up that will create challenges for staying on budget. You can only account and plan for these expenses by spending time on your budget and understanding how to allocate unexpected expenses in your budget appropriately. I still spend time adjusting my budget even after nine months of focusing on it weekly.