I get many questions like this one from “Jenny” (she asked that I not use her real name) and I always feel a bit funny answering them. While I want to give all of you encouragement to live your best financial lives, no matter where in that financial life you may be, I recognize that the only expertise I have comes from my own experience. So, please, take my advice with a grain of salt – and feel free to add yours to the comments section!
I recently heard about your blog and I’ve been reading through it (although I still have lots to read). I read your “honest discussion” last night, to which I have to say, good for you, you should be really proud of yourself.
About me for a minute. I got married my sophmore year of college, had my first kid the year after I graduated (while my husband and I were in Israel), and my second kid a year ago. Basically, since I graduated college I’ve been a stay-at-home mom. I watch our money and, thank gd, we’ve been okay. I have a rough budget and a general idea of what we spend and because we had my husband’s income, we were doing okay. Still living pay check to pay check, but able to pay our bills in full and on time.
As of a week ago, we uprooted and moved to a house that we bought (even with taxes and everything our monthly payments will be less than it would be to rent) so that my husband could go back to school. I’m pretty financially responsible but I’m scared of debt and as of right now, I’m jobless and my husband is a student. I know student loans are “manageable debt” but we’ll still owe over 100k at the end of the two years he’ll be at school. I need to look for a job, however I’m having trouble finding something as I don’t have that much experience. Additionally, it only seems to be worth my while to get a job if it covers more than childcare will cost.
And then there is the house. I think we got a relatively good deal for it. The sellers accepted our first offer, which we thought we were low-balling. The house needs some work, mostly cosmetic things though (eg. the walls had to be plastered to cover cracks so the whole house needs a paint job.) I’ve been painting myself to save money but the truth is, we can’t really even afford to pay for the paint. I’ve been trying to come up with a budget but even without house work, I can barely fit things in.
I know you are not a financial expert or anything but if you have any suggestions I’d appreciate it. I’m super impressed with your ability to not exceed $500 for your monthly budget (with three kids!). Sorry for the long e-mail but again, any advice would be appreciated!
It sounds like Jenny is in the “famine” mode of the feast-or-famine expression. Of course, thank God, those of us in North America are truly fortunate that even at our worst times, we are rich beyond measure in comparison to many in the world.
Even still, that doesn’t make it easy to negotiate these frightening waters.
I don’t think there is a single magic bullet for getting through these times, so I will, instead, highlight a number of strategies that can work.
#1. Build an emergency fund.
The greatest thing I gained from being on the Dave Ramsey plan is the financial PEACE that comes from having an emergency plan. He says to start with $1,000.
When we built that baby emergency fund, it was the first time in our lives (individually or as a married couple) that my husband and I had had any money set aside with the earmark EMERGENCY. Until then, we’d relied on credit cards… and the generosity of parents… to get through the tough times.
Three years ago, saving $1,000 changed our world. Will $1,000 get you through every major life calamity? Of course not. But it will get you through most of the every-day “emergencies” we encounter. It will cover insurance deductibles. It will cover repairs on heaters and air conditioners. It will cover trips to the emergency room (most of them, at least).
Once you save that $1,000, you can start on your debt snowball. Or if there is an impending emergency on the horizon – like a job lay-off – you might want to save a bit more.
If saving $10, let alone $1000, seems impossible, keep reading.
# 2. Increase Your Income
Yes, living on less is important. But if you’re already living on a bare bones budget (and even if you’re not), the quickest way to turn things around financially is to bring in more money. At this point, $1000 extra a month would change Jenny’s life. And most of us can earn $1000 a month if we put our minds to it.
- If you’re a SAHM, you can babysit neighbor’s kids when they get off the bus in the afternoon before mom or dad get home
- You can get a paper route
- You can mow lawns, shovel snow, paint houses, do fix-it-jobs
- You can consult or take on freelance jobs (that’s what I did when we decided to get real and get out of debt)
- You can get a part-time job – Starbucks and Trader Joe’s even offer health insurance benefits to their part-time employees!
- You can sell stuff – If your house feels too small, what better way to gain space than get rid of stuff you don’t need or love (I wrote yesterday about how I successfully did that on Craigslist with a bunch of baby gear)
#3. Make a Written Budget
Now that you’ve got some extra income coming in, it’s time to make sure that every.single.dollar is doing it’s utmost for your family. A written budget is essential for EVERYONE, but all the moreso for those of us living on the margin.
Even if you think you aren’t “splurging” or “over-spending”, odds are you are.. .somewhere. And, as I always say in my KOAB classes, even a small leak in your basement will eventually destroy your home’s foundation.
Sit down with your spouse (if you’re married) and make sure that “every dollar has a name” (as Dave Ramsey always says). Then, once you’ve made that budget, recognize it for what it is: A binding contract. That’s right! Binding!
If you spend money that isn’t on that contact, you are breaking your word. Once you stick to that budget (it may take a few months to get the hang of it, but it’ll happen – keep at it!), you will suddenly have more money than you ever thought you did. You may even find that saving and paying off debt isn’t as hard as you thought it would be.
#4. Make a Menu Plan
Coupons are fabulous. Stockpiling is amazing. But the single most important thing you can do to cut your food budget is to MAKE A MENU PLAN.
It doesn’t have to be gourmet – in fact, it shouldn’t be, if you’re struggling financially. Pasta, sauce and cut-up veggies is a perfectly acceptable plan for any day of the week. Chicken and noodle soup is a-okay for Shabbat dinner.
Just make your plan, and then make your shopping list. You will be shocked at how little food you actually need to buy to feed your family once you are shopping according to a plan.
#5. Prioritize non-essential expenses.
I totally get the burning desire to fix stuff in the house. But unless you have no heat in the dead of winter, it can (more than likely) wait. Rather than hiring a bunch of contractors, sit down and make a list: From most urgent to least urgent, with an approximate value assigned to each item on the list.
Start saving the money (after your emergency fund is in place – new windows are not an emergency). When you have the cash to pay for the first thing, get a series of bids – or did it yourself, if you’re handy that way. Check it off the list and move on to the next item. Rinse, lather, repeat.
If you don’t have house repairs, apply this same strategy to whatever “I wannas” are on your list. And be discerning – clarify wants from needs. And needs from basic necessities.
The basic necessities are (1) food, (2) utilities (no, not cable), (3) shelter – mortgage or rent, and (4) transportation. Everything else is a need or a want. Not a necessity.
#6. Focus on your family.
Times of financial stress can do a number of marriages. Ask me how I know! In fact, it’s one of the leading causes (the leading cause?) of divorce.
So, it’s all the more important to keep your focus on your family. Find creative, FREE (or extremely frugal) ways to spend time together as a couple – and as a family.
Rent movies from the library. Play board games. Go for a walk. Play at the park. Eat homemade pizza night on the floor in the living room. Have a dance party. Take advantage of free outdoor activities during the summer. Sign up for your local library’s email list – they always have great free activities for kids and adults.
When all is said and done, the relationships that you have at home are your most precious asset – invest in those before all others.
(P.S. I’m not even touching the issues of student loan debt being “manageable” and buying a home when you have outstanding debt. I’ll let the Dave Ramsey Kool-Aid drinkers handle that one. )
Well, as I said, that’s my 2¢ based on nothing more than the expertise of my own experience. Please add your advice, too, in the comments section!