By putting our spending on paper (or the computer screen), we saw where all the money was going. Later, when we actually understood that a budget should balance and have everything in it, we started budgeting ahead of time for expensive things such as school clothes, car repairs, church camp for the twins, or even Christmas gifts. Our financial situation completely changed. We went from absolutely needing two incomes to seeing the possibility of living on only one income. It wasn’t just the fact we got rid of the credit cards or the car payments, but it was that we had changed our minds about how we spent money. A big car repair would no longer go on the credit card. A car repair would come out of savings.
If you are having trouble with money, you should do what we did. Put all your spending into a spreadsheet, on paper, or into a program like Quicken. You have to see what’s ugly about your money and fix what’s wrong whether it’s credit card spending, unlimited restaurant eating, or perhaps trips to the movies constantly. It takes some discipline and it takes desire to change your financial situation. Before buying cable’s ultra awesome movie+DVR package that costs $150 a month, do a simple calculation and see what it’s going to cost per year. We did that with everything. Annual spending puts things into unique perspective. $10 a week at Starbucks comes out to be $480 per year.
The keys to our turnaround:
- Elimination of impulse purchases on credit cards
- Having goals that were realistic and having a timetable for achievement of the goals
- Establishing an emergency fund through regular savings
- Defining “emergency”
- Budgeting for almost everything – including clothing, music and video purchases, movies, and recreational events
- Trimming back all spending to almost nothing and then slowly back things as we were comfortable with them and as the budget allowed
- Agreement or consensus between both of us about what we were going to do. This alone made the whole project fun
I suppose the main idea behind my Financial Wake Up Call is that we had to change our attitudes and philosophies 100% for this to work. Both of us had to be in agreement that it was necessary. These days we have no debt other than our home and the very end of my student loan. Having next to no debt to service with payments is the only way it is possible for me to stay home with the kids. We changed from a “I want it now” philosophy to one of waiting and saving. We decided it was no longer worth it to have new cars when the old ones worked just fine.
We used the free Office Suite called Open Office for our budget. The program is called Calc is very similar to Excel. Below are some links to Personal Finance websites or particular articles you may want to read: