Has the following ever happened to you?
You get paid early in the month, you pay your bills, you start paying down your debt, you buy your groceries, and you’re doing great. But then somehow, inevitably, you get to the end of the month, and money is tight.
It happened to me all the time. I’d run out of money before I ran out of month.
It was so frustrating.
I had goals, and big plans for my money. And yet … the month was just five or six days longer than I planned for.
It caused so much stress in my life, and it was something I was doing to myself. Something had to change. Here’s what I did:
Step 1: Plan better.
You know how much money you’re bringing in, and you know you’re already spending more than that. How much more do you need at the end of the month? Write it down, because next month, you’re going to plan better.
Step 2: Write next month’s rent/mortgage check first.
I always paid rent on the 1st of the month (hey, I lived in an English basement apartment — my landlords saw me every day!) because I wanted them to know I was a responsible person. Heck, I wanted to be a responsible person. Simply by prioritizing rent, I was able to shuffle other money around as needed.
Step 3: Get a savings buffer.
Some people call it an emergency fund, but I don’t like that. The name implies it’s an emergency when you’re out of food on the 29th and you’d like to go to the grocery store (NOT the restaurant — now’s not the time to eat out!) and you’ll want a buffer to help you do that. Start with $500. Then gradually build it to one month’s pay. Prioritize this over your debt payment. Having a buffer goes a long way toward feeling more comfortable about your money.
Step 4: Use credit cards wisely.
I’m not an advocate of going into credit card debt (who is?) but it gives me peace of mind to know that what I’m spending now can be paid next month. Do not do this if you have credit card debt because you shouldn’t be using credit cards when you’re in debt.
Step 5: Look for leaks.
Is there a place where you’re spending too much of your money? Perhaps even subconsciously? Look for things like ATM fees, annual fees, gym memberships you pay for but never use, giant cable bills, your daily coffee/soda/tasty treat of choice, alcohol, happy hour, ice cream … anything extra. Because really, you do not need Thai food more than you need money at the end of your month!
If you follow these five steps, you’ll find that your stress level will dissipate. You’ll take a day off if you’re sick. You’ll push your debt freedom date back a little, but it’s giving an inch to gain a mile. The peace of mind that comes from going to bed knowing that you’ll be okay financially, no matter what tomorrow brings, is worth adding a savings buffer and looking for leaks.
Once you get to this basic level of financial fitness, you’ll be ready for more advanced moves. But you must walk before you can run.
Image by dave