Feeling Overwhelmed Just By Hearing the Word Budget? Start Here.
Let's talk about what to do when you feel overwhelmed by that dreaded B word – budget.
First of all, congratulations because you’ve made a decision to take back the reigns of your finances and control it instead of letting it control you.
Our world is filled with information overwhelm. When you google ANYTHING, ANY TOPIC at all, you will come across hundreds of websites giving you a ton of information.
Should we save for a house first? Should we continue to contribute to our retirement? Should we live off the grid and under a rock until our debt is paid off?
We were in this scenario too.
I remember having this conversation with my husband when we first started budgeting. The interest rates were really low and all of our friends were buying a house. I remember scrolling through the real estate websites just infatuated with the idea of owning a place we could call home.
Then I heard this little voice on my shoulder say – FOCUS ON ONE THING AT A TIME. BECAUSE IF YOU TRY TO JUGGLE TOO MANY PLATES AT ONCE, you know what happens? Those plates will come crashing down. It won’t be pretty. It won’t be music to your ears. You’ll be left with a mess to clean up.
So in the back of my mind… I tried to justify it.
- I NEED a house. It makes sense to buy when the market is good.
- I NEED to save for my kid’s college.
- I NEED TO save for my retirement.
- I NEED TO BE DEBT FREE.
I decided to made a mock budget. If I saved this much per month for our house down payment, it will take x amount of months until we can get a house.
Then the remaining can go to debt. So if I allocate this much, I will be debt free in about 7 years.
Then I need to save for my kid’s college. Ok, so I can do this much per month and then he’ll have x amount by the time he heads to college.
Oh wait, I still need to put in money for food, current housing expenses, maybe a date night once in a while… gas for our cars… and … wait did I say food?
It was so overwhelming and all I wanted to do was curl up in a corner with a bag of Doritos and take a nap.
Let’s scratch all of that. The trick is SIMPLICITY. Focusing on one thing at a time.
So if you’re feeling overwhelmed, don’t worry. I’m going to give you three tips that you can do starting right now.
1. Know your numbers.
When I listen to the Dave Ramsey show, most of the callers do not know their numbers. He will ask, “How much is your income or how much is your house payment and most people don’t know.
If you can relate to this, that’s OK.
Start with calculating your income. Look through your bank statements and see how much you get paid every month. This is not your gross income. We want the number that hits your bank account after your company has taken out taxes, insurance, and anything else that comes out of your paycheck. If you’re married, you’ll need to know what your spouse brings home. Do you have any extra income – rental income, child support, alimony, money from side hustles. All of this counts towards your monthly income.
Once you know how much income you bring in every month, the next step is to add up your expenses. Start with the fixed expenses.
This is your rent/mortgage, car payment, childcare, utilities, phone bill, internet. Any bill that you pay on a regular basis that is an absolute must. We are not counting in food expenses yet because that can range from month to month. We also didn’t count any extracurricular activities. We just want to know how much it cost to keep our lights on and a roof over our heads. I did include phone and internet in here because for most of us, we are working from home or have virtual school for our kids.
Now you are going to minus your expenses from your income.
This is the number that you have left over every month to spend on food, clothing, and other miscellaneous expenses.
For example, say you have $2000 left after you’ve added your income and minused your fixed expenses. Great! Now you can plan on what to do with that money moving forward.
2. Live on less than you make by simplifying your budget
Now you are going to add up all of those extra expenses that vary from month to month. This is entertainment, dining out, groceries, memberships, subscriptions.
When we made that first budget, we had so many things coming out of our budget. Our list was expenses was super long and overwhelming.
When you have expenses like cable, Netflix, Hulu, Amazon Prime, HBO, gym membership, and various subscriptions, it is hard to even look at your budget because it’s so cluttered.
We decided to simplify our budget.
We cut out all the expenses we could live without (for now). We told ourselves it was only temporary and that once we were in a better financial position, we could get those things back.
These are some of the things we cut out:
Now we don’t pay for cable because it’s included with our condo, so paying $14 a month for DVR doesn’t seem like that much. But it was an expense that we could live without because we hardly watch cable TV anyway. And when we do watch something, we have Netflix and Amazon Prime and we can always find something to watch on there.
To this day, we still don’t have DVR. I don’t miss it.
IPSY is a makeup subscription where you get high end and drugstore products to try each month. I loved getting new makeup products each month but I just wasn’t using it fast enough since I work from home and only use makeup on the weekends. So even though I loved this subscription, it just wasn’t worth paying the fee every month for makeup that would sit in my makeup drawer for months at a time.
PIANO LESSONS: $150/month
Our son Brandon had been taking piano lessons since he was ten years old and loved it. He was super dedicated and really good at it. But as he entered high school, he was getting more and more involved in school activities and just didn’t have the time to practice anymore. We kept it for a while but because he was also involved in band activities which also costed money (though we didn’t have to pay a monthly fee), we had to have a hard talk with him and ask him to decide which one he wanted to do. We couldn’t afford the piano lessons AND the band fees. So band was actually way cheaper because all we had to pay was the uniforms and registration fees.
GYM MEMBERSHIP: $50/month
Cutting this out was really hard for my husband. I’m a homebody so I just worked out at home with free YouTube videos or I would exercise outdoors. But for him, he liked being in that environment with everyone working out around him. It wasn’t the same working out with weights at home. But it was only for a little while so that we could get a handle on our budget. Eventually when we started making more money, he was able to go back to the gym again.
FOOD is also a budget buster. You will think that you only need $300 for food per month, but if you were previously spending $800 a month, $300 is not going to work. You’ll be busting your food budget in no time. But hopefully you’ve already identified some expenses that you can cut out (for now) and use some of that money towards your food budget.
Jordan Page, founder of Fun Cheap or Free.com recommends spending $100 per person per month. So if you are a family of four, that means your food budget is $400. That includes your groceries, household items, pet food, and toiletries. But when you are first starting out, cutting it down that drastically could make you want to quit. It’s like when I decided I was going to cut out carbs from my diet for a whole month. Guess how long that lasted? Not even ONE day. So I started small. I started cutting down on sugary snacks, then bread, then rice and over time my body got used to not consuming that many carbs.
The same goes for your food budget. Start by cutting it down by $100. Go from $800 to $700 then $600 until you get to a good number that works for you. As a family of three, there is no way we can survive on $300 a month for food AND household items. $450 is our magic number which I am still trying to get it to $400 but it’s a work in progress.
3. Save $1000 in your emergency fund
Before you start trying to pay off debt, save for a house, save for your kids college, and save for your retirement the first thing you need to do is to save some money for those unexpected expenses.
If you are familiar with Dave Ramsey’s baby steps, the first step is to save $1000 as your baby starter emergency fund. Dave says that having $1000 as your starter emergency fund serves as a buffer so that when you have a car repair or you need to take your pet to the vet, you won’t be busting out your credit card and getting further in debt.
We all know that $1000 is probably not enough to cover a big emergency like a major car repair or a big medical expense. But if you don’t even have an emergency fund to begin with, start with $1000. Because like Dave says, it’s not IF it will rain, it’s WHEN it will rain. Sooner or later, you will be hit with an unexpected expense.
We had our fair share too. We had unexpected dental expenses. We had to buy new tires for my husband’s car. My car wouldn’t start and I had to replace the sensors which costed us about $900.
It wasn’t fun paying all that money but because we had our emergency fund, we just paid it and moved on.
- Know your numbers with your income and your fixed expenses
- Live below your means by simplifying your budget
- Start a baby emergency fund
So I hope these three tips helped to lessen the overwhelm and provides a clear guide on what to do step by step.
Thank you so much for being here with me today. Until next time, have a great day and keep moving forward one step at a time.