Recommendation? Looking at Fianances in a More Reasonable Way

R

RedLynx

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Aug 5, 2011
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Hi guys,

This seems like the best BladeForums place to post this kind of question as I am seeing all kinds of threads here.

I am posting here because I have been active on the forums a long time and know quite a few of you and we talk about a lot of things, and many of you may have some great advice. This is one of the few forums in which I participate, that's why I am posting here and perhaps not a more apt forum that deals with these kinds of issues. It's a bit silly, I suppose.

Anyway, I could use a new way of thinking.

Without giving too much away or looking for any kind of pity, I spent a very long time in poverty and only in the past few years have I managed to dig myself out of it. Or, am in the process of doing so. But I think those years, some of which were when I was quite young, left a kind of way of thinking that is not healthy. I was hit with an unexpected expense today, and as is usually the case, it has done a few things:

1. Even though I almost never spend money on myself other than necessities, I now feel like I have to work overtime to balance that expense as quickly as I possibly can.

2. I feel like I can't spend any money on things I might enjoy until I make up what I had to pay for the expense.

3. I know myself well enough to know that once I do pay it down, I'll just tell myself I should save more money in case something else happens. Something will eventually happen, so I feel like I'll never really feel good or at ease spending money on myself for non-essentials.

4. I made extra last month but now I feel like that effort was "wasted" because a portion of that went to the expense rather than into savings, even though that is partially why we have savings. I know that is not entirely logical, but I do not know how to think differently. I even stand to make more than my monthly goal here too, but I am self-employed and the industry is sporadic, so that isn't guaranteed.

As I say, I feel a bit silly posting such a thing here, but it's become clear to me that I do not necessarily think about work and money in very healthy ways and may overwork myself for no reason or at the very least, forget to enjoy the fruits of the labor. If any of you have ever had similar issues and learned how to change your outlook, I would appreciate the advice. Thank you.
 
Create a budget. Figure out what your regular monthly income is. I don't really know how to factor in extra money because that's not really how my business works but you can probably figure out an average of how much you can expect so you can add that. Then figure out your monthly expenses that you have (rent, mortgage electricity, gas, heating, food, insurance, phone, cable, etc). Hopefully, there is more coming in than going out. Sometimes you realize that you have a bunch of monthly expenses you don't need.

Set aside a set sum for savings and a set sum for "fun" (movies, going out to dinner, new knives, whatever). I don't know if you have a 401k or something equivalent but you can have tax advantages there. You should also have an emergency fund starting (for medical, if the furnace fails, car repairs, etc) that is easy to get too and not tied up in an investment account.

The fun money should come last and not be a huge amount depending on your circumstance but even if its a little money there is something there to enjoy. By budgeting for "fun" you don't have to feel guilty (which you shouldn't anyway) about spending money for non-necessities

If you have debts get them paid down as fast as you can, but still set aside for savings and fun. My wife and I would generally take the highest interest debt and pay that down as much as possible while paying minimum or slightly more on other debts. For example, we worked on credit cards first-paying as much as we reasonably could every month. We worked this into our budget so we knew how much we had to pay every month. Student loans second and mortgage came last because of the better interest rates but we kept everything current and didn't miss payments on anything. This is the "debt avalanche" approach. The "debt snowball" approach takes and pays off the smallest debt fastest without regard to the interest rate and then when that gets paid off you roll that payment into next smallest debt. Both work, the debt snowball approach has I think better short term success because you see debts get cleaned up one by one. Since my wife is really a numbers person she figured we'd save the most by paying the high interest stuff first.

Talk to your bank about some investment\tax savings ideas if you haven't.

FRAT approach. Set a budget and include some fun money in the budget. Work hard, don't feel guilty.
 
Unexpected things come up.... transmission goes out in a car or simply unexpected costs. New frig? You need to build up an emergency fund. I think if you have a regular income, the emergency fund should come nearly first (at least one month's income) and then begin paying any consumer debt as quickly as you can beginning with the highest interest stuff first. The house comes first, but it is often these days one of your lowest interest bearing debts. So, I just let the mortgage ride paying monthly.

Do try to reward yourself from time to time.

This year I had to buy a new car (we weighed the options used vs new decided this was going to be "long term" and went new), replaced two HVAC systems on my house, two TV's that blew out with a power surge, plus all the routine stuff. Will need to buy new tires for my work van soon and that's another $1000. Things just keep a rolling. The need for an emergency fund is very important. That way you don't have to finance the next emergency.
 
May I suggest a book.
Total Money Makeover. By Dave Ramsey
It uses the snowball method mentioned above. I live by this and love it. No more money fights with the wife and little money stress anymore. It takes some time to get there using any plan. Just work a proven plan.

Mike
 
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As mentioned work out a budget and put allowances for rainy day savings for unexpected things ... and even if it is a small piece set aside for entertainment such as a dinner out with you wife/girlfriend (hopefully not both) ...

and try to set a bit aside for your "want" list .. the things you would enjoy buying if you could ... and if you can work a little extra and put that in your wants fund it may take a lil while but you won't feel guilty ... and you'll know your Bill's are payed and you have a bit set aside for the what ifs that pop up.

Hang in there I think most go through it ... and when you do finally get to buy yourself what you've been wanting ... it feels really good that you got there.

- JJ
 
Dave Ramsey says get rid of the credit cards. But if you can pay off the monthly bill when it is due, it can be a useful financial tool.
 
It took me about 40 years to figure out it's good to have emergency money on hand.
I got it done by ridding my self of credit cards, I have only a debit card that I rarely use.
Cash is king for me, it's ez to see how much money you have when it's there in front of you, I also learned to not make snap decision buys, to say to myself do I need this new bauble, will I use it? Do I need or just want it?
I also think in terms of how many hours, days, weeks I would have to work to pay for it.
I'm still poor by most people's standards but I have what I need and have NO debt.
 
Actually, your way of thinking seems like a pretty healthy route to financial success. Budgets only work for people with regular income. Sounds like yours is sporadic as is mine has been all my adult life. Get out of debt and become goal oriented if not already. Don't compare your financial situation to others, else, it will drive you crazy. Good luck.
 
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