Your first step on the journey to financial peace is getting control of your money. If you don't have a budget your are NOT, I repeat: NOT, in control of your money. Before the beginning of the month give every dollar of your income a name. This is what we call a zero-based budget. It's not going to be perfect the first month, or even the second, but you need to have a PLAN.
Do you have more names than you have dollars? You're not the first, don't be scared. Take a piece of paper and start righting down your expenses: start with your four walls. Once you've taken care of the roof of your head, food, basic utilities, and clothing move on to things like car payments and fuel. Debts go at the BOTTOM of this list. Now, figure out how far down the list your income stretches. Now draw a line, anyone below the line isn't getting paid; you don't have the money to pay them.
Now go back through the expenses that are above the line. Where can you cut back? Can you drop cable and watch tv online or subscribe to Netflix? How about losing the data plan and cutting to the bare minimum on your cell phone plan? Find ways to cut back on your utilities and grocery bills. Quit eating out. Now take all of this extra money and use it to get current on EVERYTHING.
Once you are current, this "extra" money you found in your budget goes straight to savings. Your goal is $1000. It may sound like a lot but it shouldn't take long at all.
This is what we call the Baby Emergency Fund (BEF). This is your cushion from Murphy. Do you know who Murphy is? "If it can go wrong, it will go wrong." Do whatever you need to do to build your BEF. Work overtime, do odd jobs, forgo your daily coffee/soda, whatever you have to do to scrape this together FAST. If it means getting another job, DO IT!
Take it from someone who wasn't there all to long ago: this may seem like an impossible task that is going to take forever, especially when you're just recovering from always worrying about when your electric is going to be cut off, but it is doable! While we were trying to get our budget under control and get current we started saving in a jar. I'm a waitress, so all of my change and ones went in the jar each night and I was amazed at how fast that total grew. It took me less than 3 months to save a couple hundred dollars. I'm not going to lie, it was hard…every time I felt like I was making headway, Murphy would come for a visit. I'd get up to a few hundred dollars and something would break, or a bill would be way more than budgeted. By the time I rebuilt the jar, something else would happen. I started this back in September and finally managed to complete Baby Step One by using part of our tax refund.
This, my friends, is the beginnings of Financial Peace. We've had or BEF in place for almost a month now and we haven't seen much of Mr. Murphy. I haven't stopped the jar either, it's a nice little habit and I rather enjoying adding onto that little total everyday. It's amazing the way my stress level has dropped just knowing that Murphy could visit and I've got a way to handle it and won't be paying 30% over 3 years to pay whatever damage he causes. Between that and the breathing room I found in our budget by truly figuring out what our necessary expenses are, we're even able to move and pay a deposit and double rent for a month without touching the BEF.
So, kids, what have we learned today?
