I am taking New Years resolutions very seriously this year and top of the list is getting debt under control. Reality finally hit me like a brick to the head and I realized that our household needs a budget if we are going to not only survive, but thrive.
But where do I start?
How do I make this work?
I downloaded budget tracker apps on my phone, searched online for advice and finally cracked open Gail Vaz-Oxlade’s Debt-Free Forever book that I’ve had for years.
Making a budget means getting rid of debt, feeling less stressed, saving for the future, and most importantly, ensuring the future of our family.
After going through all of our spending, including monthly subscriptions, I realized that we needed to cut back, like way back. We can no longer just buy whatever we want and when we run out, rely on credit.
January 2019 will be the first month we start our budget, which means no credit cards, no debit cards, and a cash-only budget. If at any point in this year we need to buy something online AND we have the cash to actually buy it, we will either transfer the cash to our credit card right away or preferably, put the cash on a prepaid card.
I ordered the KOHO prepaid card for this purpose and will update this post later with how well it works.
Where to Start
Sit down with no distractions. Open your online banking account(s) and the Budget Tracker excel sheet I created.
- On the Budget Tracker, enter your household take-home income per paycheck.
- Then enter all of your fixed expenses listed on the sheet such as Mortgage/Rent, Utilities, Cable/Internet/Phone bill etc.
- Next enter and estimate of variable expenses and paid subcriptions.
- Enter your total debt amount and then how much you are going to pay off each month.
Feel free to download and change the headings as needed. You can add/delete columns or rows but note that the formulas will need to be updated for the calculations to be accurate.
Now that you know where you are, assess if there is anything that needs to be changed. Do you need more cash at the end of the month? Can you cancel or reduce any variable costs like subscriptions or maybe your cable bill?
How much can you afford to pay off your debts each month?
How much would you like to save?
Enter it all in and make sure that at the end of each month it balances out to a positive number.
This tool will allow you to see how much you can pay off and save, not only each month but also by the end of the year. Go ahead and fill out your estimates of all your income and expenses for the year to see just how much richer you will be by the end of it. (Pro tip: If the expenses are the same just click the bottom right corner of the cell and drag it right to the end of the year.)
Get out Your Mason Jars
Set your budget for your magic jars. Gail Vaz-Oxlade recommends having 5 jars labeled:
- Groceries and Personal Items
- Transportation (Fuel/Transit/Parking)
I chose to do a biweekly budget for these items because we are paid biweekly but you could do a weekly/monthly budget if you prefer.
These jars are your spending money and should be exclusively cash if possible. This means that from now on, you will be withdrawing this cash on a weekly/biweekly/monthly basis, according to your preference, and filling your jars.
The only thing I am not using cash for is Transit but I have worked out how much it is costing me by reviewing my Presto statements and will transfer the amount needed onto my Presto Card every 2 weeks instead of doing auto-load from my credit card.
If you run out, stop spending and spend less next time. If you absolutely need to, you can take from another jar, but try not to do this. If it happens on a regular basis, consider modifying your budget.
Update Often and Stay On Track
Check your bank account/credit cards at least weekly to make sure you are on track and no pesky unexpected charges show up, at least for the first few months.
Make sure to enter your starting account balance and your debt balance each month to make sure you are on track.
If you go over budget on something, make sure to update the tracker right away and adjust accordingly. Maybe you need to take cash out of another jar or savings, or simply pay less on debt that month to make up for the difference. Updates are important as if your income changes, even if it’s a few dollars on one paycheck or if you receive a cash gift.
Sit Back and Feel the Stress Relief
I know it was a tiring experience, but don’t you feel better now? Instead of your debt continuing to accumulate, you have taken the necessary first steps to eliminate that debt and start saving for your future.
If you continue on this path, you will no longer need to worry about interest on your credit card payments or emergency expenses because you’ve actually been saving!
You can even upload the Budget Tracker to your own Google Docs so that you can update it on the go.
Still Need More Cash?
If you still find that you can’t afford to pay more than the minimum balance on your debt, you can’t afford to save, or you need more cash for your jars even after canceling or reducing payments wherever possible, it means that you simply need to make more money.
Consider getting a second job like Uber, Skip the Dishes, or Blog writing to make up the income. Here are some more ideas to get started on a side hustle.
Also, do you really need all of those subscriptions? First thing I did was cancel JustFab, and all unnecessary Newspaper/Website/App Subscriptions.
Next on the list is reconsidering our cable/internet options and shopping around. Another thing Gail Vaz-Oxlade recommends is trying to lower your interest rates on your loans but I have never been successful in doing so.
- Don’t forget to take your spending cash with you when going shopping. I forgot once in the beginning and learned my lesson because I had to use debit and then deposit the equivalent cash back into the bank account to stay even.
Please let me know if this Budget Tracker helped you in the comments below!