Many survivors of childhood abuse find themselves struggling with money management in their adulthood, for a variety of reasons. We likely didn’t get much help learning good money management skills when we were children, either because our family was so dysfunctional or we were too busy surviving to learn how to budget or save. Perhaps, as an adult we found shopping, spending and buying lessened our pain, if only for a little while. Maybe we grew up and found ourselves in another abusive relationship. Our partner ruins our credit and leaves us deeply in debt.
Regardless of the reason, you might now be sitting in a situation where you are deeply in debt and even more deeply ashamed. You need some help, but don’t know where to turn. To help us all I turned to a wonderful woman, Amy Robles. Amy has a website called Woman Enriched. She teaches families how to not only manage their money but get out of debt. Best of all, she does it with compassion and kindness. I’m delighted to have Amy here today to give us some basic money management and debt eradication strategies!
5 Steps to Take Control of Your Money, So your Money Doesn’t Control You by Amy Robles
Money affects every part of our lives. As of December 2014, the average US household debt is $15,611. The choices you make every day matter. Don’t know where to start? Here are 5 steps that give you control of your money, instead of your money controlling you.
One: See all your bills
Pull out every bill. Every single payment that you have. This may mean that you clean out the area where mail is kept. Got them all together? Good. Look at that pile. Get mad at it. Realize that this pile represents all the times you either let people control you with money or didn’t take responsibility for how you were spending.
Now don’t beat yourself up over this. We all make mistakes. When my husband was on deployment, I was in a new place with a newborn and lonelier than I’d ever been. Spending money seemed to temporarily fill the hole in my heart. So give yourself a break. It doesn’t matter how you got here. You are taking control.
Two: Write it down
Now, take one sheet of paper and write down every bill. All of these are debts, right? What about rent? How much is car insurance? How much do you spend on groceries? Write it all down. We thought we had every expense and bill down but kept having to add more. Don’t worry if that’s you, too. Keep adding to that list.
Three: Make your plan
Now this is where it gets exciting. (Notice, I have never said the word “budget”. That word has such a negative connotation. You don’t need to feel punished, you’re making a plan.) This is where you decide between a want and a need. You need food. You don’t need to go out to eat every night. Determine between needs and wants.
On a new sheet of paper make some categories, like: home, food, transportation, utilities, medical, personal, debt. Under home you’d put the mortgage/rent payment. And insurance. Add it to the list. That’s your housing money plan.
Next category, transportation. Have a car payment? What about insurance? Gas money, too. What about money to pay for tires, brakes and repairs that will come up? Someone use a monthly bus/subway pass? Add it to the list. That’s your transportation money plan.
Now on to the food category. How much do you spend on groceries? Don’t worry if you don’t know, most people haven’t paid attention. When we first started our budget we learned we spent $800 per month on food for 2 adults and a child. Whoa. That’s a lot! Now we can shop at Costco and a grocery store, spending between $400-500 per month. We were spending $400 more per month than was necessary and didn’t even know it.
Do this for all the remaining categories. For your debts, write every one down, with the total balance and minimum payment due.
Four: Make Your Payments
Dave Ramsey suggests filling envelopes with cash so you watch exactly where your money is going. You may decide to use an app, like Mint and Level. Both are free, could be the perfect place to start. Have you considered YNAB? You pay for the software one time and it updates your home computer and all mobile devices to keep you and all your family members up to date. Whichever system you decide, stick with it so that you make sure that all your needs are covered.
Payments are due monthly, but your income can arrive at different times. You decide when to make payments. Want to move your billing cycle back one week to make it easier? Call the company. Take control, but with kindness.
Here is what the bill collectors don’t want you to know: Pay YOU first. Pay your necessities of home, food, transportation and utilities first. Only after they are taken care of, everything else goes to paying off debt.
There’s three main strategies to paying off debt quickly. How do you attack your debt? The debt snowball says: start with the smallest total balance, pay that one off first, while maintaining the minimum payments to the rest of the debt. After that one is paid off you take the money you would use for that payment and add it to the next payment, while maintaining minimum payments on all of the rest. The good news is that you see progress happening quickly that give you the momentum to keep at it through tougher times. The difficulty is that you are paying higher interest to on other debts.
The debt avalanche says: The payment has the highest interest rate gets every penny extra, while paying the minimums on all other debt. Keep at that until you have it paid off. Then move on to the next highest interest rate. The good is that you are eliminating the high interest rates. The bad is that you have to stay consistent and it can be difficult to not see a change.
There’s even the debt snowflake theory, which says: make every penny count. Literally. Got change back from the groceries this week? Throw it to the debt. Sold your old baby toys on Craig’s list for $5? On to the debt. It’s about making all this teeny changes to add up to debt repayment plan.
This is tough at first. Don’t think you’ll hit a homerun the first time you try this. No one does. Our first “Plan-Payment Process” took us a few hours. But we started answering questions we’d been avoiding. My husband and I started working together as a team.
There’s one rule about the Plan to Payment Process, all parties involved have a voice. No yelling, just communicating and figuring out how you can work together with it. Now, after months of doing this we can do it all in about a half hour. And know what’s been a bonus? Our communication is better than it’s been in years. We are working together as a team.
Five: Evaluate the Plan
You’ve made the plan and worked the plan for a month. Now, it’s time to evaluate the plan. Did you save up way too much money for transportation and now have a surplus? Did you under-budget the amount you need for food? Make those little changes and this next month will be a little easier. In the beginning, you may need to meet and evaluate every week because you forgot to add payments in. This is your process you’re creating. Make it work for you.
Have you considered working an additional part-time job, even for a short while, to get ahead? Have you thought about starting an online business or selling some items you have at home? Increase your income to help you get out of debt quickly.
Repeat steps 3-5. Forever.
This is where the discipline comes in. You’ll have things come up next week or next month that you hadn’t even thought of. Now you know how to work it into the budget. Imagine having $800 in August ready to go for holiday shopping. It’s possible when you put $100 away per month, or $50 per paycheck, just for the holidays. Wouldn’t that be amazing?
I want you to have that feeling of being in control of your own life. You can make tremendous changes in a short time. In fact, tweet me @itsamyrobles and tell me how things are going.
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