It is no secret, I am not good at budgeting my money. As long as I remember, I have not been good at this task. During graduate school, I let my credit card get the best of me. I thought my taking out less money in loans, I would have less debt coming out of school. What happened, I racked up some credit card debit.
After getting my first job as a PT, I thought I would finally get back on track financially. What ended up happening was I kept coming across more unexpected expenses. And since I had no emergency fund and no savings, I put more and more on my credit card.
Task #1: Find out where your money is going and see if you can identify trends vs. regular expenses
Part of my new years goals of 2013 was to get this under control. I started a budget with the help of my sister-in-law and her mom. My first task was to track my spending. Ouch! I spend a lot of money and had absolutely no idea where that money was going.
Task #2: Find a system that works for you
I spent January tracking how much I was spending and consequently, bringing a whole new awareness to just how much money I was spending and how much of it was not necessary! I am using the "Home/Office Budget" book by Adams. It works better for me because I can write it down, see exactly where my money is going and see trends better.
I have used Mint.com in the past and occasionally use it on the go to see where I am at with my budget for that month. I have considered using the envelope method as well because I am a very visual person and it would likely help to see my money "gone".
Task #3: Establish a realistic budget and stick to it
This was the hardest part for me because I knew there were a few categories that I spent more money in than others. For example: Entertainment, Eating out/Going out and Shopping. For those categories I chose to to allot 20% of my total income each month. This seems appropriate for now, but obviously fluctuates from month to month.
Task #4: Begin to allot money for emergency fund
Currently, I have a very small emergency fund (pray to God no emergency happens to me). I am working on establishing a realistic % that could be put to this each month. My sister-in-law suggested about 10%, so that will be my goal. But right now it somewhere around 5%.
Task #5: Establish a plan to pay off my credit card
I dont even want to tell you how much money I had on my credit card. Most of this was the result of getting my last loan installment in Jan 2012 and not starting my job until Aug 2012. And even though I was making consistent money, I could not seem to get ahead of my payments. I found myself between this desire to pay off my credit card, but also knowing I needed to establish an emergency fund. So consequently I was making no progress at all. And then I got my tax refund...
I was fortunate to get a large refund this year primarily due to the education tax credit, paying off some interest on my student loans and claiming my moving expenses. I knew as soon as I heard the estimated refund, I would need to put all of it towards my credit card debit. And that, is how it was paid off.
Part two of this post will include how paying off my credit card has impacted my budget...
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