How to Deal When You Have More Month Than Money
I look around and see a lot of people hurting financially. I hate that. Some have lost their jobs, others have made a financial mess for themselves, and both are in fear of what the future holds. At any rate, here we are. We need to skinny-up and get our own house in order before sending money to another person’s house.
The first step in getting your financial life in line is taking care of what Dave Ramsey calls the four walls: housing (including utilities), food, transportation and clothing.
Whether you own or rent, your housing shouldn’t be more than 25% of your take-home pay. If it’s more than that, you should consider selling or looking for a cheaper place to rent.
We have to eat, don’t we? But if you’re in a financial mess, beans and rice is what’s for dinner until your finances turn around. While getting out of debt, our family of four spent $400/month on food and household needs (toiletries, light bulbs, etc.). We budget for $500/month now, but we only eat out a couple times a month for a special treat. To save money we shop at Aldis, grow a garden, buy meat and eggs from local producers, cook from scratch and always, always, always make a menu and shop from a list. (Just ask my kids what happens if your requests don’t make the list ... probably go without until the next big shopping trip.)
Dave Ramsey says all of your cars, trucks, boats, and four wheelers' value shouldn’t add up to more than 50 percent of your yearly gross income. So if you make $50K/year, your total value (what they are worth today -– not what you paid for them) shouldn’t be more than $25K. If you have more than 50 percent, you have too much invested in items in which value drops like a rock. If you’re make a couple of huge car payments, getting into cheaper cars would free up a lot of cash and get you back on track quicker. (We sold our brand-new truck when getting out of debt. It was the best thing we ever did.)
I’ve seen very few people running around naked. The ones I have seen were being chased by cops. So it’s not just a hunch; you probably have enough clothes to get by on until you are out of your financial mess. If not, or if you have kids that tend to grow regardless of what your bank statement says ... shop garage sales and used clothing stores to save big. (I just found two pairs of GAP jeans, a pair of Cruel Girl jeans and three new shirts for me at Salvation Army and paid less than $20 for all of them.) Good deals are around every corner if you look.
With the money left over, you should pay off your debts -- smallest to largest -- until the money is gone. If you’re getting a tax return or some windfall, don’t forget to get $1,000 in the bank for an emergency fund. And cut up your credit cards for goodness sake, they are nothing but trouble.
You can do this. The hardest part is making up your mind to change.
Get more simple living ideas at http://www.reclaimsimplicity.com/