I’ve often talked about the importance of budgeting. Sadly, most people live paycheck to paycheck, many of them going into credit card debt to make ends meet. It is an endless cycle that causes stress and anxiety. When presented with the concept of saving, the response is, “I wish! I’m barely making it now. Any extra money I have goes to paying down my debts. And when new bills for repairs come up, they’re never cheap. I need a fairy godmother or a money tree.”
The first step to budgeting is distinguishing between wants and needs. We all need to have a roof over our head, food, clothes, and utilities. Wants, on the other hand, vary from person to person, and time and place.
“Wants” tend to wreak havoc on budgets, because while they are momentary, they are very seductive. Even when wants are calculated into the budget, what do you do when the budgeted allotment has been used? Do you just forgo the desire or move some money from some other pocket, the proverbial “steal from Peter to pay Paul” scenario? Or do you just charge it because it was just too good to pass on?
One thing that I’ve noticed about wants is that once I achieve any of them, they are hardly as good as I thought they would be. The anticipation was more titillating than the actual item I wanted. Then the negative feeling about wasting time, money and/or calories comes back.
The second step to living debt-free is to cancel and cut up your charge cards. If you don’t presently have the money to make the purchase, skip it. The odds are that if you wait a little while, you will have time to think about what is important and if this is an impulse buy versus something that is really needed.
I heard a great plan for living debt-free called the 75-15-10 plan. The plan looks at every dollar brought in and tells us that $.75 is used for our spending. $.15 goes into an investment account, while $.10 is deposited into a savings account. And for those who think, “I can’t do that. I can hardly afford what I’m doing now,” the response is to consider this another tax on your pay.
Nobody brings home their gross pay; they only get their net pay and must make that work. If one sees this $.25 going into another pocket, unlike the taxes, it will grow later in life and will be yours. And you’d be amazed how fast your investments and savings/emergency funds grow. For example, someone bringing home $400 per week would break it down to $300 for expenses, $60 for investment and $40 for savings/emergency fund. In one year, one would have secured $2,080 for emergencies/savings, $3,120 for investments and $15,600 for living expenses as opposed to just spending $20,800 with nothing to show for it.
The “magic” is in following a system. Systems work, may it be weight loss, bodybuilding, studying, financial planning, etc. Find a system that makes sense to you, follow it, and you’ll be amazed at the results.
If you would like to explore this or any other topic, feel free to reach out and make an appointment to talk.
Looking forward to connecting.
Rabbi Fred Nebel
Director of Jewish Family Services
(574) 233-1164 x1806
RabbiNebel@TheJewishFed.org