Reality Bites

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So apparently, I can’t be trusted – not even by myself.

I won’t bore you with the details, suffice to say this last week has been a matter of rinse-and-repeat of less-than-stellar habits and resulting outcomes, and rather than continue to beat myself up and feel horrible about myself and this rut that I just can’t seem to get out of, I looked at how I manage to keep doing the same things, over and over.

Not just the why (that’s a no-brainer, just another incredibly emotionally stressful week in the life of this weary girl), but the literal how – if I keep making a good budget, and I keep paying my bills and essentials first up (which I have, yay me!!!!), how is it possible that I can keep spending money that I shouldn’t have to spend?

The answer was right in front of me, and until today, I didn’t even see it.  Cards.  I have a couple of debit cards that only work when there’s cash in the account, and when I leave funds in those accounts for future expenses, something in me still sees them as available funds, that are very easy to access when I’m feeling vulnerable and looking for the quick fix.

Fortunately, the solution to that part of the issue is easy – as evidenced by the photo above.  No more cards = no more access to enabling my own poor spending habits.  I’m still working on the emotional connection part of it, as I keep saying, it’s one step at a time.

On a more positive note, I’m feeling less overwhelmed by the status of all my current debts, as I finally seem to have nearly everything sorted – payment arrangements made with various companies, direct debits set up, smaller amounts owing assigned to the budget.  It is a constant juggling act, especially when those unexpected things come up – sometimes I feel like I’m constantly potting out spot fires and trying to stop everything from going up in flames.  But I know that this will pass, and that every single day, I have exactly what I need.

Baby Stepping

So how did you go writing up your budget?  Whatever you’ve done won’t be perfect, and will be continually subject to change, but I hope that you’ve worked out at least the beginnings of some framework to manage your income.  It’s an ongoing process, believe me!!!

I feel like I need to back up a bit, to give you a bit more insight into my process in dealing with my financial situation.  I have been dealing with financial ‘issues’ my whole adult life, and as I’ve mentioned before, I’ve gained a wealth of information through all my investigating and researching over the years.  I’ve tried so many ‘methods’ – which have ultimately failed due to me, not the method – but a couple of resources have really resonated with me and the principles have ‘stuck’, even if I haven’t adhered to them.

Dave Ramsey’s Total Money Makeover has been a literal guidebook as I’ve been navigating my way through financial waters.  It is based on the US financial system, however the basic principles can apply to anyone, anywhere.  Dave talks about starting with 7 Baby Steps:

  1. Build up a $1000 emergency fund
  2. Pay off all your debt with a ‘debt snowball’
  3. Save 3- 6 months worth of living expenses
  4. Pay 15% into your retirement funding – (here’s the first difference between Australian and US systems)
  5. Save for your kids’ ‘college funding’ – (another difference)
  6. Pay off your home early
  7. Build your wealth and give

Right now, I’m working towards building an emergency fund, and as I get overwhelmed by too much information and too many things to focus on at once, I’m focusing on this one goal for right now.  An emergency fund serves as exactly that, funds for emergencies – things that we don’t anticipate, like the car breaking down, or a cricket ball going through a window, unanticipated medical expenses, the list could go on forever.  This fund isn’t for the things that we can anticipate – needing to replace appliances, general car or household maintenance, ongoing bills etc.

Dave has a program called Financial Peace University, available as an at-home study and as classes (only available in the US, to my knowledge), and the website also has a forum community (limited access for free, unlimited access for a subscription fee, along with other tools), and in FPU, the baby steps are broken down even further.  These extra steps are very sensible and relate to what we’ve already talked about.  Here they are as they make sense to me – what to do even before you start your emergency fund (Step 1):

  1. Vow and declare that you will NEVER borrow money for anything ever again, except maybe a house.
  2. Cut up any credit cards you have, and if need be, any other cards that access your money (this actually comes after Step 1, but I needed to do it now)
  3. Make a budget
  4. Stop any contributions into super (for the time being)
  5. Get up to date on ALL your bills
  6. Get life insurance if you have considerable debt, that would be a burden on your family if you died
  7. Get rid of any major ‘Luxury’ items that you’re currently paying off, that would stop you from paying off your debt snowball within 12 months
  8. Cut out any spending in the ‘Luxury’ category so you can put that money towards your emergency fund.  Get a second job if you can!!

Once you’ve done all this, you can start building your emergency fund.  For me, I’m at stage 5, getting up to date on all my bills, although I can already tick off steps 6-8 as well (I’ve stopped spending, don’t have any major items to get rid of, and I have life insurance through my superannuation fund)!!  Once my current bills are up to date, I can start putting any extra funds towards my emergency fund – at this point in time, it’s going to take a few more months before I can do that, but I have that next step as my goal.

It helps me to have a plan, with clear, specific steps along the way that show me where to go next.  And for that to be broken down as much as possible, so that when I get overwhelmed, I can just look and see what is the next thing to do – transfer a payment, revise the budget, call a company to discuss a payment arrangement.  Small steps, but ones that are realistic and manageable.  ‘Pay off my debt’ is overwhelming.  ‘Write down my current bills’ isn’t.  That’s it – not even ‘work out how to pay them’, just write them down.  Here’s a great article on The Art of Simple about simplifying and focusing on your financial goals, and for more encouragement, another mum’s journey to getting out of debt.

Here and now is where I need to look, where my focus needs to be.  When I look too far ahead to there, when I think about living in The Land of When, it all seems hopeless, too far away, that it will never happen.  But I can do now, I can cope with what’s right in front of me, as challenging as it may be.

And you?  What are your particular challenges in the here and now?  How do you manage with doing all-the-things?

Accountability and moving on

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So the last couple of weeks have been particularly stressful around here, but despite the emotional and physical energy spent in dealing with all the stuff of life, I learnt a few more things about myself when it comes to money.  Well, to be more specific, a few things I already knew were confirmed in the absolute, and required a very honest, unfiltered look at myself.

When life throws curveballs at me, I drop the balls I’m already carefully juggling to to be able to deal with what’s right in front of me, and invariably turn to junk food for comfort, which requires spending money, and I will find money in areas I have no business looking to fulfill this comfort.

Even though I know that this is borderline harmful for me in so many ways.  I still do it, just for the relief of a few moments of getting what I want.

And then I start feeling guilty.  And my physical symptoms worsen because of the c**p I’ve eaten.  And I get grumpy, and my family bears the brunt of it. whether it be my snappy mood or my withdrawal to try and deal with it all in my head.

Ouch.

That’s an intellectual ouch.  I wish it physically pained me to write that, but it doesn’t.  Because it’s not new information, it’s a truth I’ve known for a long time, but have never really, truly faced up to, let alone spoken it aloud.

Yesterday was one of those days, and also my youngest son’s birthday.  I had chosen to cope with yet another emotional upheaval with c**p food, and by mid-afternoon felt absolutely terrible, and limped through the rest of the evening, a version of myself that I didn’t even have the energy to feel guilty about.  Awesome birthday present for my kiddo.

So yes, I most certainly have emotional triggers when it comes to spending money I shouldn’t, and eating food I shouldn’t, and I’m tired.  Physically and figuratively, I’m so, so tired.  But today is a new day, a fresh page to keep writing this story.  And I will, as imperfect as it is.

Where to now?

So.  We’ve talked about creating the vision of your ideal financial life, and starting to take steps to work towards it.  I’ve said it before, and you’ll keep hearing it along the way, I am far from being an expert in all this, and I’m just fumbling my way through.  But I have got enough experience and knowledge to work out a rough plan of where to go next, and for me that’s been working out the most important things requiring money right now, and working out my budget.

I get paid fortnightly, as is probably the most common format here in Australia, so I work on a fortnightly budget.  Each round of two weeks has some constant spending requirements, and some that vary, depending on the time of the month.

To work out what needs to be spent where, the first thing I do is look at my list of Essentials, Helpful and Luxury.  At the moment, my income only covers the Essentials category, and for me the list looks like this:

  • Mortgage
  • Giving
  • Grocery shopping
  • Electricity
  • School fees
  • Petrol
  • Personal loan repayment
  • Credit card minimum balance
  • Home and contents insurance
  • Phones (home and mobile)
  • Council rates
  • Water supply
  • Car registration
  • Medical costs
  • Miscellaneous (a tiny amount!)

That’s it.  Right now, there is no wiggle room for anything else.  I have two jobs, one for which I’m paid a fortnightly retainer + any extra work above that amount, and the other which is casual for a set amount of hours per week.  To work my budget, I work on the absolute minimum amount of income I can receive in a fortnight, and anything extra is a bonus.  As it stands at this point in time, my income plus government family allowance *just* covers the bare minimum essential expenses. I am very grateful that I have these jobs to provide for what I need, and the last year has very much been a lesson in defining needs and wants.  Losing your job and being unemployed for 5 months can do that for you!!!

Whenever I work more hours in my main job and earn over the minimum amount, I try to put that towards some of the things in the Helpful category, but something always inevitably comes up, and as I don’t have an emergency fund, or funds for the unexpected, that’s where the money goes.  I have been very fortunate to date that I’ve (nearly) always had money when I’ve needed it, just the right amount, and the times I’ve been short I can look back and go ‘hmmmm, if I hadn’t bought that c**p food/ coffees/ insert any other things I didn’t need, I would have more $$$ for xyz that I DO need!!’.  So yep, lessons learned.

I have also learned that the best way for me to not spend money on things that I don’t need to – and to avoid filling emotional needs with food (or anything else) – is to make sure that every single dollar of income is allocated to a category (also known as creating a ‘zero budget’ and ‘giving every dollar a job’, read much better advice at Dave Ramsay and You Need A Budget) and to get rid of my income as soon as it comes in, on the things I need to spend on.  I get paid on a Wednesday evening, so I sit down and pay all the bills I can via internet banking that night, and as of today I will be doing my grocery shopping on a Thursday morning, to make sure all the grocery money is spent on groceries, and not dipped into for anything else!  I’ll go into how I plan for meals and grocery shopping later, right now I’m focusing on the ‘mechanics’ of spending my income as it needs to be.

I’m sure some of you might be asking ‘but HOW do I work out my budget?  How do I work out what I need to to spend each fortnight/month/ whatever, when my bills are all over the place?’.  Some bills/commitments will fall into your budget cycle (fortnightly/monthly), but other don’t, like the bills that come quarterly, every 6 months, annually etc.  For all the bills that fall outside of your budget cycle, work out the total annual cost required, and divide them by 12 (for monthly payments) or 26 (for fortnightly payments), depending on how often you want to include it in your budget.  You can do this with any payments that you want to split up.  For example, I have some payments that are debited directly from my account fortnightly (school fees, personal loan repayment), so I don’t have to worry about those.  Then my mortgage payment is monthly, but I divide it by two to create a fortnightly payment – the amount is still debited monthly, but the full amount is spread out over two budgets (this is in theory anyway, this month will be the first time I’ve done it!!). For my quarterly payments (council rates, electricity, water supply, car registration), I add up 12 months worth of bills, then divide that amount by 26, and allocate funds in my fortnightly budget toward that bill (again, in theory, I’ve done it in the past and have fallen off the wagon, but am back on it now!).  This way I don’t have large payments consistently in each budget that I’m struggling to pay (as has been the case for the last 12-18 months).

Once you have the amounts worked out, you can decide what method you want to use to pay them, whether it’s contacting a company and requesting a direct debit be set up, or you manually make a transfer via internet banking, or go and pay it in person with cash (do people still do that anymore?), it’s completely up to you.  I use a combination of all three, but do try to set up direct debits as often as I can, that’s what works best for me.

Now some of you will have unallocated funds after fulfilling your Essentials commitments, and even Helpful and possibly Luxury categories (well done if that’s you!!!), or you might have some other goals you want to include in your budget – don’t worry about that so much for today, we’ll come back to that next week.  Just keep your $$$ in a safe place and try not to spend them!! (Yes I know it seems a bit backward, to wait to ‘finish’ your budget, but I’m just making this up as I go!!)

Phew!!  That seems like an overload of information even for me, and I’m the one writing it!!!  There are some fantastic resources available online for all things regarding money management, budgeting being just one of them – my favourite go-to sites and goldmines of information are Money Smart (Australia), Dave Ramsey and You Need A Budget (both US).  Go here, here and here for the budgeting areas on each site (or search for ‘budgeting’), I’ll be referring to these sites throughout this journey as I have learned a lot from them, and love their very practical approaches to managing money.

This week, I’m going to set you some homework – go forth and budget!!  If you need any help, please feel free to contact me via e-mail stitchingmum at gmail dot com, or in the comments below, and I’d love to Skype with anyone if they’re game (contact me via e-mail for info)!!!

Remember, you’re not alone in this, we’ll take it all one step at a time.