Balance Your Borked Budget

You’ve got a budget worked out to the penny.¬† You know every dollar that comes in and every dime that you spend.¬†¬†¬† All of your bills are getting paid on time.¬† Then, one day, it all comes crashing down. Your budget is no longer even a reasonable approximation of your cash flow.¬† You’ve got no idea what’s coming in or going out.¬†¬† Bills are piling up and fees are digging you deeper in debt.

What happened?  More importantly, how do you get back on track?

The first thing you need to do is identify the problem. What, exactly, went wrong?¬† Did you lose your job or need a surprise botox injection?¬† Your car died or your kid developed a hockey habit?¬† Sports car or shoe sale?¬† Whatever the cause, if you can’t identify it, you can’t deal with it.¬† Some of the possible problems may be things that can get clubbed and buried in the backyard, while other things may be expenses that won’t be going away.¬†¬†¬† If it’s a one-time expense, you can simply refocus your debt repayment to take it into account.¬† If it’s an ongoing expense, you will need to adjust your other expenses, possibly in a drastic manner, to make ends meet.¬† You can’t know which way to go without knowing what caused the problem.

Next, commit to to making it right. Don’t leave it at a mere commitment.¬† Actually commit and actually do it right. Future-you is counting on you to fix the problem before he gets screwed.¬†¬† This is important.¬† Without firm–and real–commitment, nothing else will matter.¬† At best, you will be treading water.¬† At worst, you will drown yourself in unanticipated bills.

Cut everything extra.¬†¬† Every expense–whether it’s your mortgage or your maid–is a rock in your pocket, one hundred miles from shore.¬† How much can you carry and stay afloat?¬† This isn’t the time to keep paying something because you enjoy it.¬† If it isn’t absolutely necessary, it’s got to go.¬† Cut your internet, cancel Netflix, learn to shut off the lights when you aren’t using them.¬†¬† Is the early termination fee less than 6 months of your cable bill, your satellite bill?¬† Cancel it.¬†¬†¬† You can always sign up again later.¬† This is the time to be ruthless.

Is there a way to bring in some extra cash?¬† Can you pick up a second job, or land a freelancing gig?¬† If you’ve suddenly found yourself unemployed, can you spend some time on being a Mechanical Turk?¬† Sell all of the things you don’t use anymore, or, more likely, never should have bought in the first place?¬† Do you have a spare kidney?

Remember, this is a drastic situation calling for drastic measures.¬† Your future is depending on you.¬† Don’t make him come back and kick your butt.

Update:  This post has been included in the Carnival of Personal Finance.

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Clearing Up Social Debt in 3 Steps

Debt can be thought of as a disease–probably social.¬† Most of the time, it was acquired through poor decision making, possibly while competing with your friends, occasionally after having a few too many, often as an ego boost.¬† Unfortunately, you can’t make it go away with a simple shot of penicillin.¬†¬† It takes work, commitment and dedication.¬† Here are three steps to treating this particular affliction.

1.¬† Burn it, bash it, torch it, toss it, disinfect. Get rid of the things that enable you to accumulate debt.¬†¬† If you keep using debt as debt, you will never have it all paid off.¬†¬† That’s like only taking 3 days of a 10 day antibiotic.¬†¬† Do you really want that itchy rash bloodsucking debt rearing its ugly head when you’ve got an important destination for your money?¬†¬† Take steps to protect yourself. Wrap that debt up and keep it away.

2.¬† Quit buying stuff. Chances are, you have enough stuff.¬† Do you really need that Tusken Raider bobble-head or the brushed titanium spork?¬† They may make you feel better in the short term, but after breakfast, what have you gained?¬† A fleeting memory, a bit of cleanup, and an odd ache that you can’t quite explain to your friends.¬†¬† Only buy the stuff you need, and make it things you will keep forever.¬† If you do need to indulge, hold off for 30 days to see if it’s really worthwhile.¬†¬† If it’s really worth having, you can scratch that itch in a month with far fewer regrets.

3.¬† Spend less. This is the obvious one.¬† The simple one.¬† The one that makes breaking a heroin addiction look like a cake-walk(My apologies to recovering heroin addicts.¬† If you’re to the point that personal finance is important to you, you’ve come a long way.¬† Congratulations!).¬† Cut your bills, increase your income.¬† Do whatever it takes to lower your bottom line and raise your top line. Call your utilities.¬† If they are going to take your money, make them work for it.¬†¬† If they can’t buy you drinks or lower your payments, get them out of your life.¬†¬† There’s almost always an alternative.¬†¬† Don’t be afraid to banish your toxic payments. Eliminate your debt payments.¬† This page has a useful guide to debt and how to clear it off.

Update:  This post has been included in the Festival of Frugality.

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Naked Money

In our house, the bills don’t get hidden. I’ve never tried to hide our finances from our children. I believe doing that is part of the reason I reached adulthood with no brakes. Growing up, finances were almost entirely invisible.¬† Now, I believe is financial transparency.

Now, as a father, I balance the checkbook and pay bills on the laptop in the living room where my children can see me. They see the stack of bills and they watch me balance the checkbook. We discuss how much things cost and how we can cut expenses while the bills are being paid.  Even the toddlers know Daddy is doing something important.

My ten-year-old son knows what sales tax is and where to find it on a receipt. He knows what property taxes are and how much they are in our neighborhood. He knows roughly what percentage of a paycheck gets withheld. I work to make my son financially aware. My girls are too young to understand the concept of money, but they will be receiving a thorough financial education as soon as they are able to grasp the concepts.

The hard part is explaining to my son how we screwed up our finances. I’ve shown him my paycheck and discussed our debt. I have explained to him that we were making much less money when we accumulated our doom debt, while maintaining a higher standard of living.¬† Now, when we go to the store, he doesn’t even ask if he can borrow money until we get to his bank account.¬† He has learned to dislike debt in almost all forms.¬† I’m fairly proud that my kid voluntarily practices delayed gratification.

What he doesn’t quite grasp is the idea of living within your means, even if your means are limited.¬†¬† “But, Dad, what if you don’t have much money?¬† Then you have to borrow money for nice things, right?”¬† I’m not sure how to break him of that.¬† Delayed gratification is an understandable concept for him, but the difference between wants and needs seems to be missing. ¬† Any ideas?

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Don’t Screw Future-You

A conversation between me and my temporally displaced self.
Future Me: Excuse me, Jason?
Me: Yes?
FMe:
Me: May I ask what that was for?
FMe: Of course.
Me: What was that for, jerk?
FMe: That was payback for all of the hell you have put me through.
Me: What?!? ¬†I’ve never even met you, before.
FMe: Of course you have. ¬†I am future-you, and I’m sick of getting screwed by past-me, that is, you.
Me: Huh?
FMe: Listen close. ¬†You’re not ¬†the sharpest brick in the box and I don’t want to explain this twice.
Me: ???
FMe: A long time ago, when you first met our wife, you were dumb.
Me: I don’t appreciate….
FMe: Shut up. ¬†I was dumb then, too. ¬†Remember? ¬†You…err…we bought a new truck, built an addition on our…err…your…err…whomever’s house, got married in the same year. ¬†On top of many other expensive decisions. ¬†Do your recall?
Me: Yes, I do.  So what?
FMe: If that wasn’t enough, you and your smoking-hot bride are still shopping like you’re rich. You drive a new car. ¬†Your kids wear new clothes. ¬†You’ve got a house full of new furniture. ¬†How did you pay for all of that?
Me: Naturally, I charged it.  Zero payments, zero interest for a year!  Pretty smart, huh?
FMe: What happens in a year?
Me: I don’t know. ¬†I’ve got a full year to figure that out.
FMe: ¬†I’ll tell you what happens! ¬†Future-you, that’s me, gets screwed! ¬†¬†Your raise didn’t come through. ¬†You had a baby. The truck broke down. ¬†Your wife took maternity leave. ¬†A roommate moved out. ¬†You took a loss in the stock market. ¬†You didn’t plan! ¬†You had no savings to cover any of those problems because you were too busy servicing debt to pay for your current life.
Me: How was I to know?
FMe: ¬†Life happens! ¬†You never know what is coming next. ¬†You need to plan and save for what might happen. ¬†Otherwise, you’ll just accumulate more debt to be serviced by yours-truly. ¬†That is not acceptable.
Me:  So?  What are you going to do about it?
FMe:
Me: Really?  Again?
FMe: ¬†I’m struggling to pay your debt. Your son starts college next year, but you’ve left me completely unable to help. ¬†Your daughter wants to get married in a couple of years, but the Father-of-the-Bride can’t afford a tux. ¬†My wife, your beatiful bride, wants a vacation that I can’t afford. ¬†¬†You’ve screwed me, dude.
Me: I’m sorry. ¬†What can I do to fix it?
FMe: Buy me dinner, first.
Me: Huh?!?!?
FMe: Stop the excess spending. Spend less than you make, for a change.  No credit.
Me: None?
FMe: None. ¬†Nada. ¬†Zip. ¬†Zilch. ¬†Only spend what you can afford. Budget. ¬†Pay off those nasty bills. ¬†Don’t leave me hanging.
Me: So, what you’re saying is that, if I don’t have the money, I shouldn’t buy it?
FMe: Exactly. ¬†That’s the path to wealth, freedom, and financial independence.¬† Live in the real world.
Me: Gee, thanks, Future-Me!  Now I know.
FMe: And knowing is half the battle.

What would your future-you have to say to you?

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