Becoming the BOSS of your money
Hands up if these feelings describe your most recent shopping experience:
Swipe, swipe, swipe… joy!…… followed by.. panic, worry, fear.
My name is Lyndsay and I know this feeling all too well. The joy and excitement of buying new things, immediately followed by the feeling of dread from somewhere deep inside whispering ‘you know you have debt and you can't afford that'. If you are debt free, money master this post likely isn't for you, however, keep reading for basic budgeting tips! This post is primarily for the girls who work their tails off to earn their money, but never seem to get to keep it; a cycle of living pay-cheque-to-pay-cheque.
I'm here to tell you, you do not have to live this way! And what gives me the right to deliver this message? Well, I don't have degrees in finance, but I have always had an intense interest in money and how it works, and I have also had the personal experience of digging myself out from under a very large pile of financial shit (I mean real shit, like rental properties with mortgages included). Coming out the other side I discovered the freedom, joy, and peace that comes when you pay off debts and afford your lifestyle. I am not exaggerating when I say this is life-changing and motivated me to share with anyone I can.
Whether you have credit card balances, car loans, student loans, or some variation of all and more, you can and should put in a little sweat and tears to get out of it. It will be worth it! I bet you have dreams that financial stress is keeping you from. Imagine if you didn't need that crappy 8-5 job to pay the bills and instead had the resources to quit and build something of your own, or the resources to travel anywhere or buy anything you wanted.
This isn't about being greedy and making your world revolve around money, this is about living a life you love with less stress and worry. Money is a tool, ladies, a fantastic tool to help you in your pursuit of the life of your dreams, or in pursuit of the Gucci belt of your dreams; wherever your aiming.
So, sounds good, but where do I start? Here are the three things to do right now to help you get control of your situation and start to tackle debt one step at a time. It is important to go through the steps in order to set the foundation you need to build upon for financial success in the future. Don't just pick a credit card from your wallet and profess to pay it off in 3 months- walk through the steps with me and together we will make a plan that works.
Step 1: Lay it out
The average person has no idea how much debt they actually have; they may know the payments they make monthly, but they don't know what they actually owe. The first step in tackling the debt is to look at it, pull back the curtain and lay it all out. Take out a pen and write down the balances of all the debts you have in order from the smallest balance owed to largest, except your mortgage (where applicable). You may need to do some digging to get the actual numbers, don't just guess! Next, to each balance write the interest rate and the minimum monthly payment. It may look something like this:
BMO Mastercard- $1420 @ 18%, $18.00/month minimum
Visa Card- $3200 @ 20%, $34.00/month minimum
Car Loan- $12,340 @ 5%, $342.00/month minimum
Student Loan- $23,560 @2.75%, $232.00/month minimum
Make sure to ignore the interest rate and monthly payment when prioritizing the list. The debt with the smallest balance is debt number 1, the second smallest balance is number 2, etc. The reason we do it this way is that we are going to throw everything we have into tackling one debt at a time. Starting small means we see small wins early, resulting in gained momentum and a higher chance of success.
Step 2: Budget & Track
The second step is to make a basic budget. A budget is like a set of instructions for your money, you are telling it where it will be spent before you even get your pay cheque. This is the part most of us struggle with because it can be hard to build a realistic budget that we can actually stick to. The rule here is to be realistic but be smart. You have to know that if you have debt you are not yet on track for wealth building (sorry, true fact) so having $450 in your clothing budget when you have credit card debt- that is likely, not smart.
You can make your budget in excel or you can write it down on a napkin- doesn't matter to me!
This is a simple process guys, just some basic adding and subtracting. You can make a budget for every payday or you can do one for the whole month; whatever works best for you. I, personally, have better success with budgeting for every pay cheque.
How to make a budget that works:
Write down your income- if it is variable, make an educated assumption and adjust.
List your expenses for that budget period- this includes a small amount to savings and the minimum monthly payments to debt (ONLY the minimum, never budget more than the minimum to each debt, including the minimum payment on credit cards- you will see why below),
Tip: Your budget will and should change each time you make it. For example, add in money for a birthday gift and then take it out next time, add in your cell-phone bill in one pay cheque and remove it the next time; do this every time you make the budget so that it matches what is actually happening in your life for that period. Now add up all of your expenses.
Zero your budget- your budget should equal $0 when you minus total expenses from total income; in other words, your expenses should match your income.
If you have money left over, add it to the payment you are making on your smallest debt. For example, increase the minimum payment you are making to your smallest credit card by the amount left in your budget, this will zero it.
If you have a negative dollar amount left then you need to take things out of your budget because, I am sorry friend, but you are living outside of your means and something has to go. This can be where things get tough because it means sacrificing. Keep in mind that you didn't get in this situation because you were living within your means, right? It is time to adjust for the short term.
Tip: The goal here is to squeeze your budget so that you have extra money to pay onto your smallest debt, this is how you will reduce your debt load. You will continue to pay only the minimum payments on all debts except the smallest one, this one you are attacking with every extra dollar you have. Once that debt is paid off, debt 2 becomes 1 and you attack it with every extra dollar you have. This is called the ‘debt snowball' because the pile of money you are throwing at the top debt gets bigger as you free up more and more money with each debt you pay off.
Step 3: Track and Adjust
Now you have to track what you actually spend in each of the categories you set up in your budget. This may seem like a lot of work- I get it- but you can't plan it and then not check if you stuck to it. At the end of the bi-week/month you will be able to see how much money you are actually spending and on what and then adjust your spending habits and your budget as needed. This is the KEY! You might be surprised to see just where all of your money is going. Keep in mind that you don't have to do this forever, but you need to do it to get the information to help you see where all the $$ is going.
Tip: There are a ton of budgeting apps out there like Mint, Every Dollar, and many others. These give you categories and can even sync with your bank accounts! Personally, I use a very simple excel spreadsheet for my budget because I find it easier to be in control of the whole process, but a lot of people prefer apps, whatever works for you!
I will close with saying, please be easy on yourself. You will not always stick to your budget, but it is the effort and awareness that counts. Once you start to control your money instead of letting it control you, you will start to see more of it show up, more of it stays with you, and you will become better and better at being a boss of it and understanding the power of the tool you have. Don't tell yourself that you will start when you get a raise when you get out of school when you ____ (fill in the blank). Start now! If you don't start to build these habits and practices now with the income you currently have, you won't do it later either. Getting a raise doesn't change our spending habits, we just spend more. If you start now, then when more money starts to show up for you, you will know what to do.
Make 2019 the year you change your financial story and work towards the financial freedom you so deserve. Money situations are very specific so please, if you have questions about ANYTHING money related don't hesitate to DM me via Instagram @lyndsaygillon. Cheers to a happy and prosperous 2019!