(Guest Post by fellow blogger, Kathleen. Who apparently enjoys stirring up trouble ;))
Hi, friends. I’m Kathleen, and my corner of the internet is way across town, at FrugalPortland.com. I have admired J$ from afar (and got a little star struck when I met him at FinCon last year!) for a few years now. His writing is funny, and his advice is sound.
There’s just one thing, though. I don’t think budgets are sexy at all. In fact, I was thinking about the least sexy thing I could think of, and yes, Warren Buffett in a speedo came to mind. Sorry about that!
I don’t budget, at all. I think it’s the wrong way to get in control of your money.
The Problem with Budgeting
Here’s the thing. When a person finally decides to get their head out of the sand and stop spending more money than they’re earning, we want to capture that enthusiasm. Instead, general wisdom comes along and says,
“You want to stop financing your lifestyle? Kudos to you, sir or madam! Now, track every single dollar that goes out, stop doing all the things you’re doing with your money (have we told you how bad Starbucks is yet?) and change your lifestyle completely. Tomorrow. No! Today.”
Then, the person decides that it’s too hard, that maybe they’ll try something else, and holy cow do they need a drink.
There Has to be a Better Way
If someone came to me, ready to change their financial lives, I’d tell them,
“I am so proud of you for realizing that this way of life isn’t sustainable. Here, sweetheart. Have a seat. Get comfortable. You’re going to have to change a lot of things, but the first thing you’ll have to change is your mind. Understand that you can do this.”
Change your attitude about the kind of person you are.
I think you are great. Spectacular, even. You made mistakes in the past, but no judgement here. Credit card debt sucks, but that doesn’t mean you suck for carrying credit card debt. I promise. Don’t beat yourself up. Let’s get this sorted out.
The No-Budget Way to Get Your Finances in Order
Instead of focusing on spending, let’s take a look at how much money you’re bringing in each month. Are you thinking of a number?
Now, let’s look at all your bills, including debts. Like I said, this is a judgement-free zone. You don’t need to make excuses or be embarrassed. Just list them out.
What are you left with when you pay all your bills, plus the minimum payments on your loans?
Great. Let’s work with that.
We’re not going to budget. We’re just going to pay your bills, pay your minimums, then, see what we can do with the rest.
In this stage, it’s important to just STOP using credit cards, even for incidentals. That is what your debit card is for, okay? It’ll keep you from spending more than you have. And that’s an important step.
Beyond Treading Water
Spending less than you earn is the key to getting out of debt, and getting out of debt is the first step toward being in charge of your financial life. You can do this any way you choose. There are shelves of books regarding the “right” way to pay off debt, but the bottom line is this: the math hardly matters.
If getting out of debt were a simple mathematical problem, then we wouldn’t need the experts! Don’t worry about the interest rates. Hey, you weren’t worrying before, why start now? Think about what I like to call the “debt of highest pain” — that one that you are most ashamed of. The one that you continually kick yourself for having. That could be a personal loan to a parent. A medical loan. Anything. For me, it was a credit card. I hated that I had credit card debt. I knew I wasn’t the kind of person who carried a balance (I also had to change my attitude!). I just had to prove it.
So I spent my time, and all of my extra money, making the credit card debt go away. There was a time where both the balance and the interest on my credit cards were lower than my other loans, but that didn’t matter. I wasn’t the kind of person who had credit card debt.
I didn’t have a budget then. I still don’t. I do keep a very close eye on all of my accounts (and would recommend Mint above any other tool out there, just don’t use the “budget” section!) and have a plan for each.
Budgets aren’t sexy to me. What’s sexy is being in control of my money, not having my money control me. And if a budget helps you get in control, then it makes you sexier.
And that’s what we all want, right? To be sexier.
Kathleen writes at FrugalPortland about her path to financial independence as well as ways to save money, live simply, and enjoy the fun things that Portland has to offer. Also online dating.
[Photo by Aaron Friedman / Outfitted by J$]