Every once in awhile I feel like my finances have taken on a life of their own. They are like a ship in a storm and I’m getting tossed this way and that depending on how the wind blows. Do you know that feeling? You just get past once crisis when something else blows you the other way? It has been like that lately for me. I have been struggling to cope with a lower income and build my emergency fund and along comes life and suddenly I am trying to figure out how to have any income at all while spending as much time as possible with my parents. Now I need to add saving for another vehicle to the mix.
I have spent the last several hours compiling a plan to get my financial boat back on course.
- Where The Heck Are You?Obviously, if I don’t know where I am now, I won’t know how to get where I want to go. I think this is one of the biggest hurdles for most people. How do you accurately determine what shape your finances are in? I sit down with the monthly bills and determine what has gone up (or down) and if there is enough income to pay them. Not having a job with a regular paycheck, I also have to determine what my expected income is for the month. Then I need to figure out what I am going to have left over for living expenses and savings. I have a monthly budget but it’s still easy to get blown off course with added expenses or crises.
- Is Your Course Faulty
Sometimes you have to look at the course you have set and determine whether it’s the right one. We have recently been considering the pros and cons of purchasing a newer used vehicle. With all of our vehicles being over 15 years old, it would be really nice to have one newer, more dependable vehicle. Our question has been whether it is more efficient to repair the ones we have or to save that money and put it towards a newer one. Currently I have 3 vehicles and each have their own purpose. I have a 93 Geo that we use for running around town and long trips when we don’t have to haul the trailer. The Geo needs 2 new tires and door handles but it gets better than 45MPG. I have an 89 Ford truck that we use around the farm for hauling trash, wood and currently for pulling the trailer. It’s in good running condition except for an oil leak that means it uses a quart of oil for every tank of gas. I also have a 88 Chevy dually that is in the final stages of an engine rebuild. It needs an undetermined amount of repairs and it is really the one that we are questioning as it will also affect our income. - Prioritize
Once you have made your decisions about the course you really want to take, you need to decide which things are most important. For me, spending time with my parents is high on my priority list. It is not something that I can put off or change. I am going to have to push back some of the other things on my list in order to do this. I had been considering getting a part time or temporary job but I cannot do that and still spend 3 or 4 days a week in Georgia. If I go back to my vehicle decisions, the Geo is really going to save me money on gas in the next few months and so it might make sense to buy the tires that it needs. - Make a Map
So now I know where I am, where I need to go and which destinations are the most important. The easy part is to figure out how I am going to get there. I am going to go back to my budget and tweak it here or there giving a priority to my new destinations. I don’t think that a new truck is on the horizon in the near future so it will probably make sense to go ahead and make the repairs on the Geo. The total cost will probably be around $150. I know that doesn’t sound like much but it is over 10% of our total expected income for the month. That makes it a major decision. - Increase Speed
This is simply an evaluation of whether it is possible to increase my income for the month. While it is difficult to do with the economy and my other limitations, it is not impossible. I am going to sit down and make a list of possible ways to make additional money. - Decrease Fuel Costs
Again, this is simply checking my expenses to see where I can decrease spending. There are some things that are fixed: phone, mortgage, internet but there are other places that I can decrease my spending. My first step is to go through my budget and determine which expenses I can control. These would be things like fuel, groceries, entertainment, and even electric. Yes, it is possible to control your electric bill. - Short term Goals
My short term goals tend to be more flexible. They change more often than my long term goals. By the time, I have gotten this far in the process, writing down my short term goals are fairly easy. I need to increase my income to pay for repairs to the Geo and to rebuild my emergency fund. Short term financial goal: $650 in extra income. - Long Term Goals
My long term goals are fairly simple: become debt free, have 6-12 months of living expenses saved up and to begin investing for retirement. They haven’t changed much in the last year. What most people lose sight of when they are budgeting is that your budget should be your map to obtaining your long term goals. If your budget is not showing you how you are going to get your long term goals then you need to rethink it. - Is Everyone On Board
If you don’t want a mutiny to totally take you off course, you need to make sure that everyone in your family is on board with your budget changes AND your goals. You will have real challenges if half of your family has a different idea of what you should be doing to reach your goals. If everyone is committed to your goals, you can work as a team to reach them. If your spouse does not think it’s important to save money for an emergency fund then they are not going to be willing to make sacrifices for it. - Taking Back Control
Now you know where you are going and how you plan to get there. When unexpected things happen, you can quickly evaluate the effects and change your plan slightly to compensate instead of getting blown this way and that way. If you have an unexpected expense, you will know your budget and your priorities well enough to know that you can take money out of the truck fund to pay for it instead of giving up on your budget altogether. I can’t tell you the number of times that I have felt like my budget was totally blown out of the water by a car or home repair. Instead of adjusting, I gave my budget up totally and started over the next month. If it happened in the beginning of the month, I might blow the whole month instead of making a minor adjustment and keeping on with my current budget.
Most people are afraid of budgets because when you write it down, it becomes permanent. Budgets should be written but not be written in stone. They need to be flexible. You need to have a process for evaluating and updating not only your spending habits but also your goals otherwise when unexpected things happen, you will be unprepared to deal with them.
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Tags: budget, spending plan
Ah, you stole my ideas for some posts next week! You are far more articulate than I would be.
Great post!
I love the way you used the extended ship metaphor. I find that as you cut costs, you’ll actually end up saving more (not directly tied to cost cutting). There’s a powerful psychology with saving. The more you do it, the better off your financial life will become.