Greetings from a long long hiatus! I’ve just decided that’s how I roll over here at Up in the Loft. The good news is…it’s working! Somehow, anyway. My page stats have been going up and up and guess what? I didn’t have to stress over making sure I stick to a posting schedule. This is my creative outlet, in many ways, and so it can’t be stressful. How many times have I written about this very topic? Too many. Moving on.
I write today with a budgeting story, albeit a short one. Here it is: For a terribly long time, my husband and I have relied on credit cards every single paycheck to carry us through to the next paycheck. Not good, but it’s what we did. The worst part is that it wasn’t necessarily out of need, it was just because we spend too much money. We did manage to pay down the cards a few times, only to see them climb back up. Over the years, I’ve gotten “fed up” with debt (I put that in quotes because I wasn’t really fed up, even if I thought I was), and cancelled various store cards and such. While these things were a step in the right direction, we were still using a credit card for frivolous things. Because we wanted to.
Fast forward to one month ago. I stumbled upon this youtube channel. Rachel Cruze somehow inspired me. All her videos are short, they are simple, and she is pretty entertaining to watch, as well. Something clicked, and I realized that the reason I was spending on credit is because I don’t have a budget.
What? But my color coded spreadsheet I’ve spent hundreds of hours creating and updating and checking like an obsession?! That’s right, it’s not a budget. It’s a ledger. Well, it’s an incredibly helpful and much-needed ledger, but not a budget.
So here’s what I did:
- Analyze where I tend to overspend, thus causing me to put fun things, gas, or groceries on a credit card.
- Decide how much cash I should put aside each paycheck for those very things.
- Use cash for those things.
- Don’t use credit for those things.
And that’s my story. HA! So simple! But here’s the honest truth–cash is hard, these days. So here’s what I ALSO did to make the above steps sustainable.
Managing my leftover cash
There were lots of problems with the way I managed my leftovers, but three were the main culprits.
Problem 1: Even though my spreadsheet says I should have cash left, I tend to NOT have cash left for eating out, getting gas, and buying groceries.
Solution: I realized this is because my one left over cash pile in my one checking account is for entirely too many things and I can’t keep track of them all. I’m not one to balance my checking account on paper, so here’s what I did: I researched online for a checking account at a separate bank that was 1. free of monthly fees and 2. offering cash for opening. When I found one, I opened it! Then, I set up direct deposit to that account from both Austin’s and my paycheck. I added up what I would like to spend a week eating out, a generous weekly gas budget (I commute and it’s just not an option not to drive), and a grocery budget. Then, I looked at the amounts of our paychecks vs. our bills and decided how much from his and mine per paycheck could be deposited to this other account.
The total amount puts a little less than 800$ a month into this account for us to use on gas, groceries, and going out together for dinner or drinks, and we both have a debit card for these things. Cash is just too hard for us, and we won’t stick to it if we have to have different piles of cash in our wallets for different things all the time. We haven’t used credit for these things since…and truthfully, and I haven’t even thought about it. I’m honestly kicking myself for not setting this up sooner.
Problem 2: I feel guilty every time I spend money, even though I spend money all the time.
Solution: Give yourself spending money, which is ONLY there for you to spend. This also is one that I am kicking myself for not doing sooner. So here’s what I did: I know that if my personal money was just a number in my head and I used my main debit card for this, it would not work. Same with my husband. So I looked at what we typically had left in our main checking account after bills and obviously excluding the money that was deposited into our Gas, Grocery, Going out account (3 Gs. Love it), and I picked a number that we could each have that was challenging to stick to, but not too hard so that we went over all the time. For each paycheck that comes into our account, we each get that amount–in cash. Personally, I’m all about “easy,” so I made it an amount that is divisible by 20$ bills so I can just run by the ATM on a payday and grab my personal cash. This cash has to last me until the next pay check comes in, when it gets replenished. It’s for any time I’m by myself and want to grab coffee, lunch, etc. It’s also for me to buy things I want for myself such as an eyeshadow palette or a t-shirt or whatever else. It works wonderfully, but I will say it took us a few paychecks to figure out the perfect number for each of us. And we determined that it’s ok to take an uneven amount, depending on individual needs.
Problem #3: Online shopping. We love Amazon and Etsy and Steam and any other place that we can buy online vs. in store.
Solution: What we honestly do is, drive to a store that sells those giftcards. Pay cash for the gift card, then come home and buy the item online. If it’s a store that doesn’t have that option, we plan ahead and buy it with cash from the main checking account, and withdraw less for our personal money. Or we just don’t buy it. Chances are we don’t need it or want it that badly.
And really, that’s it…I separated my checking accounts into two places with designated uses, and I pulled out my spending cash. Seems very simple, and it is! But this is really only one piece of the puzzle. I did this to manage my left over cash, but where does the rest go?
Where does the rest of my paycheck go?
Of course, I have bills. And debts. Lots of debts. But the good news is, it’s also very simple.
- Pay your monthly bills out of your main checking account
- See how much is left
- Pay yourself your spending money
- Pay money into savings
- Choose a debt to rrrreally focus on and pay as much as you can
- Pay the minimum on all others.
Bonus: Separate a high balance credit card into smaller, 0-interest balances by doing a balance transfer (or two…ha). It’ll make it easier to pay these down and give you momentum toward paying down debts. I’ve done it!
One more thing–budgeting this way (where you tell every dollar to go) is often referred to as a 0-based budget, meaning you have 0 dollars left of each paycheck because you allocate every dollar to a debt, a savings, or a spending category of your budget. If you’re like me, that would mean you would actually end up with 0 dollars in your checking each paycheck because of the way you have things set up. So what I do is set 100$=0. Basically, I “tell” 100$ of each paycheck to sit in my checking and do nothing. This way, I build a cushion in my checking account and don’t feel like I could have an overdraft or something if I forget about a check or the Netflix bill or something. My plan is, once I get to a big enough cushion, I can make a decent payment on a debt or into savings, so I don’t have too much just sitting around when it could be getting me a step closer to my goals. It works out for me!
So what does this have to do with Back to School?
Back to school is like a more exciting New Years, to me. It could be because I’m a teacher and it’s just in my blood to get amped during the back to school season, but I do feel like it’s a time of restoration. By that I mean, the kids are back to a routine, the temperature falls back to a reasonable number, Pumpkin flavored things come back, lots of TV shows start up again, you get my gist. It is the perfect time to start a new routine–like a budget!
Use this time to kickstart your motivation. What are your goals? What are you saving for? What debt are you wanting to get rid of? What credit card do you want to cut up and forget about? What dress from Gap have you been eyeing? Take charge, set up a system that works for you, and tell your money where to go! There’s not better time than now!