There’s a saying I love, and repeat often: “Money can’t buy you happiness, but it sure can buy you freedom.” Money provides the means to be able to pay down debt, save for emergencies, occasionally splurge on something for yourself–ultimately, the presence of money means you don’t have to worry daily about the absence of it.
But what happens when you don’t feel free, largely because you don’t have the kind of money that gives you financial freedom, or even just money to put toward that freedom? If that sounds like you, worrying about making dollars stretch and praying that no emergency comes to pass, you’re not alone. Many, many people are living from paycheck to paycheck, unprepared for the car breaking down or the water heater going out or the unexpected urgent care bill. The good news is that there is often a way out: it’s not often fast or easy, but there are rules you can stick to in order to get there.
Write stuff down. Plenty of blogs and columns will tell you that a budget is mandatory, and it probably should be. But what if you’re the kind of person that just doesn’t jive with budgets: the planning, the sticking to, the re-planning, etc? My big tip, and the one thing that has saved me for years, is just to get my money down on paper.
- What does that mean? It means that I have a page every few months where I write down, in a list, all my outstanding debts, my recurring monthly bills, and how much I have saved up. I make mini-goals for myself: I want to have this bill paid off by X date. I want to have this much saved up by this time. Each time I get paid, my “budget” is really quick and dirty: the number amount goes at the top of the page, and then I start subtracting expenses and see what’s left over. This way, I know that all my bills are paid (even to myself!) before I start spending any money at all.
There’s science behind writing things down. It helps us better organize our thoughts, clear out our minds, and develop a plan of action that we’re more likely to stick to. If you find yourself struggling with a “formal budget,” try just getting your money situation (expenses, savings, recurring bills) down on paper right now.
- 10% to savings, 10% to debt. I once read an article that consolidated tips from wealthy people on how to destroy debt and build wealth. One tip said that 10% of each check should go into a savings account. As someone who has gone through “seasons” of saving (doing really well for one year, and terrible the next), this was a hard and fast rule I could understand. 10% of every single paycheck becomes the most important bill: the one I owe to myself and one that is non-negotiable. Now that I have the rule, it’s also the first bill I pay each time I get paid.Another tip said to put 10% of your paycheck toward your debt. In my case, 10% wasn’t enough to cover all the recurring debt I had, so I decided to put an additional 10% of my paycheck toward it. If 10% of your paycheck is more than you owe in bills every month, then this will work really well for you! Take that extra chunk and pay down your debt even faster. If you have an extra 10% to spare after your bills are paid, I highly recommend using it to aggressively eliminate debt.
10% is easy because it’s a nice, round number. But what if you can’t do 10%? That’s okay! The important part is to find a percentage that works for you and stick to it. If you can’t do 10%, what about 8%? Or 5%? Even if it’s a small number, the important part is that you’re creating good money habits, you’re saving, and you’re paying down debt. The amount matters less than the practice in this case. If you pay in less, will it take longer to build that savings account? Sure–but slow and steady does win the race.
- Rinse and repeat…often. These are good, basic principles to help you get your money in order, or at least under more control. But it’s not a one-and-done sort of event–you should be evaluating your financial situation regularly. Every couple of months, write it all down again: your expenses, your savings, your recurring bills. Take stock of how far you’ve come and really celebrate your new habits and what you have accomplished. Then reevaluate your situation: can you increase the percentages you established? Do you need to decrease them for a couple of months?Did you have to deplete your emergency fund for an actual emergency? Are you not hitting your mini-goals you set for yourself? Don’t beat yourself up: finances are not static, and your money-life is going to be dynamic, changing, sometimes up, and sometimes down. Focus on your victories and get planning for more!