Do you feel overwhelmed by money?
Does it feel like no matter how much extra you make, there’s still not enough in the household budget? I’ve been there, before. I can vividly remember a day, just a few years ago, when I was sitting in my garage holding a garage sale, stressed out about how we could make our income work for us. I didn’t know much about budgeting, beyond my accounting courses from college (in which I did just enough to scrape by). All I knew was that we had to do something to get a handle on our money.
We had quite a bit of debt at that time. Not as much as some, because I already understood the importance of paying things off as soon as possible, but a lot for our income. Even though my husband had just landed a great job, we were still barely making enough to scrape by. This wasn’t rock bottom for us, but it didn’t feel much better.
Setting Up a Household Budget
So, I did the only logical thing an organization junkie can think to do. I pulled out a notebook and a pen, and started writing down every expense I could think of. I mean it. Everything that we possibly spent money on! I started with the fixed expenses. These are items that don’t change from month to month. Expenses in this category include:
- Mortgage or rent payments
- Car notes
- Loan payments
- Cable/internet bills
- Cell phone bills
Once I had all of my fixed expenses written down and tallied, I started on my expenses that change from month to month. This is where you have to really think hard about where your money is going. I had to gather 6-8 weeks worth of data from my online bank account to really get a good handle on this part. For things like utility bills, I had to go back even farther. Some things you might include in this section of your budget include:
- Electric bill
- Gas bill
- Credit Cards
- Misc necessities (think pet food/supplies, paper products, medicine, etc)
- Gas for your cars
- Frivolous expenses (think eating out, shopping, traveling, etc)
How Can We Afford to Manage A Budget?
I sat down and started to work on the new household budget. I had to add up how much income we brought in, and how much money we had going out. (This is where I cried and poured a big glass of wine, because…ouch).
Don’t worry. I’m not going to tell you to eat out less or pay for a class.
We did not eliminate our debt by eating out less. I personally feel like, if we had the money to pay for a class or spent enough money at restaurants to pay off our debt, we wouldn’t have been broke in the first place.
Here’s what I am going to tell you. I am going to tell you what I did to pull us almost entirely out of debt, during a time when we had no money to spare. I say almost, because I don’t count our 30 year mortgage into the mix. We knew what we were getting into there.
Cutting the Fun Stuff
This part was absolutely the worst. I had to figure out where we could make cuts. As it stood, we didn’t have very much at all in our “frivolous expenses” category. We didn’t have the money left over to eat out or go on trips! So, I had to start elsewhere, and trim a little here and there.
I managed to make a dent in our expenses, though, and freed up enough money to start paying extra on our bills. Some of the ways we trimmed the budget are:
- Cutting back on our cable package. This is almost always an option.
- Meal planning to reduce grocery expenses.
- Becoming a one-car family. Getting rid of a car was no fun, but it was a worthy sacrifice.
Then, I was able to take the money we were saving with cuts, and apply it to our monthly loan payments. Up until that point, we’d lived paycheck to paycheck just barely scraping by, so it felt good to know I had a little breathing room. Just imagine how much better it felt to pay off all the debt and have even more breathing room in the household budget!
Related: Meal Planning: The Struggle is Real!
Where to Start?
Now that I had some extra cash to work with, I was able to form a plan for paying off all of our debt. This step could look different depending on how much you have to pay off. For us, I chose to save pretty much all of the money I had freed up so that I could put it towards our bills. We had several loans and credit cards to pay off, so this process did take some time, but my process went something like this:
- I paid off my smallest debts first. This goes against some of the advice I’d learned in the past, but I really needed the momentum at the time.
- Once I paid off my smallest debts, I started working on the loans with the highest interest rate. This was so that I could get ahead of the interest and actually start paying off the principal.
I alternated between these two types of debt, depending on what we had to pay off. I still paid at least the minimum balance on everything we owed, but chose one payment at time to focus on paying off. Every time I payed off an account, I put that payment towards our next bill.
Keep it up
With this method, I was able to pay off all of our debt within just a couple of years, and start saving money for a rainy day fund really quickly. It took discipline, for sure. When all of our friends were going out to eat every week and buying giant play-sets for their toddlers, we were steadily squirreling away money to pay off our debt and get ahead of our situation. It wasn’t easy, but if I had to do it all over again, I wouldn’t do it any other way. Getting out of debt and learning to manage our household budget the right way was the best possible thing we could have done.
Do you struggle with keeping a household budget? Let me know your biggest challenge (or secret for success!) in the comments below!
P.S: If you’d like a FREE copy of my Expense Tracker Printable, you can sign up here and get access to my printable library!
P.S.S: Want more budgeting advice? Jennifer from Jen There Done That talks about how she manages her budet right here.