On the last episode of this novela we talked about where to start with a budget. For many people, getting started is the hardest part. There are many fears that come along with working on your budget or financial plan. For some it might feel overwhelming, others may not want to see what they have been doing with their money and for others they might just not know where to start.
Many of us have no access to financial literacy education. We work in a capitalist system where we are taught to go to school to become good workers. But we aren’t taught how to manage our hard-earned money or how to make our money work for us. Before I started this journey, I had never heard of a high yield savings account, I didn’t understand the importance of investing, I thought it was only something rich people did, and like thousands of others I fell for the predatory practices of credit card companies. The only people who gain from us not having financial education are our employers and banks.
Once you get over that obstacle, I still feel there is a lot of gate keeping in the financial world. I will never forget being told by a financial advisor that I didn’t make enough money for him to help me. Being asked for $6,000 to be a part of a group meant to help women of color entrepreneurs. I told her I was just starting out and I had barely reached $7,000 in my family emergency fund. I didn’t have $6,000 extra laying around. While I understand the value of people’s work and time. It also feels very limiting to someone that is just starting their financial journey.
All of these things are barriers for us to get our finances in order and create generational wealth in our communities. Not only is the system set up to keep us uninformed and resources for financial education can be difficult to access, but then our own feelings and fears also keep us from taking initiative and getting started. We avoid our finances, but working on them can actually create a layer of protection for us. Working on our finances is a way to ground ourselves on many levels. It is a reminder of where we are at and what we need to work on.
That’s exactly what happened with me. I didn’t have a solid constructed budget until December 2019. My entire life the themes that kept repeating in my head were:
- I am not good with money.
- I won’t ever be rich; debt is just a part of this.
- I don’t have enough.
- I am not good at math.
- I don’t know what to do or where to start.
- I have to keep working harder to make more money and then I will be able to catch up.
Have you ever had these thoughts seep into your mind? Let me tell you. All of the above were WRONG! I had enough money I just wasn’t using it properly. I didn’t have to be good at math to do any of this. More money also didn’t solve the problem. More on that later.
The thought of tracking my spending and seeing where my money was going was overwhelming. But I knew I didn’t want to be in debt for the rest of my life. So, I ripped the band-aid off, went into my bank account, downloaded all of my spending and sat down to categorize each transaction. This is where I realized I had spent over $600 on eating out and drinking in one month. For perspective, at the time we were renting a one bedroom from family for $650/month. Wow!!!!! Seeing that I had spent almost the same amount of money eating/drinking out as I needed to pay my rent felt like a punch in the gut. I knew at that point this had to stop. I had to release that fear of looking at my money and let go of the shame I felt for landing myself so deep in debt. $18,312.27 to be exact, of credit card debt alone.
I released those negative feelings, decided to take control and started building a plan. Step one was to build my budget was using the paycheck method by The Budget Mom. I wrote one budget for the paycheck on the 15 and one for the 30th based on when I had to pay bills. I established the amount of money I wanted to spend on groceries. This was based on my actual spending which I had gone back and looked at in my bank statements.
Here is a tip on how to look back at your spending:
- Download your transactions from your bank via excel (makes it a lot easier)
- Create columns on the right like you see here and go line by line marking which category each transaction falls under
- Once you label all of them add up the totals.
- You can do this easily by using the filter on option on the top right of the excel header
- Filter by category add up the totals easily (excel does the math when you highlight the cells together)
| Post Date | Description | Amount | groceries | budgeted | bills | fun | eating out |
| 8/9/2021 | ALDI | -24.36 | 24.36 | ||||
| 8/8/2021 | TARGET | -19.36 | 19.36 | ||||
| 8/8/2021 | EB STORY TIME ART | -15.38 | 15.38 | ||||
| 8/6/2021 | WM SUPERCENTER | -15.32 | 15.32 | ||||
| 8/6/2021 | SP * THE PLAY DATE | -15.51 | 15.51 | ||||
| 8/6/2021 | TARGET | -46.2 | 46.20 | ||||
| 8/6/2021 | FRONTIER COMM CORP IVR | -79.99 | 79.99 | ||||
| 8/2/2021 | GEICO *AUTO | -121.47 | 121.47 | ||||
| 8/2/2021 | Amazon.com | -21.98 | 21.98 | ||||
| 8/2/2021 | AMZN Mktp | -28.57 | 28.57 | ||||
| 8/2/2021 | STARBUCKS | -10 | 10 | ||||
| 7/29/2021 | WM SUPERCENTER | -58.59 | 58.59 |
You can also use apps like Mint or write it by hand. It doesn’t matter as long as you look back at your spending. Once you see where your money is actually going then you can have a better idea of how to structure a budget that will either allow you to maintain your lifestyle or make the necessary changes to meet your financial goals. This will also help you set up a realistic budget for things like groceries, gas and fun money.
Once I set up my budget, I decided to do the cash envelope method as a means to control my bad overspending habit. Every time I got paid, I went to the bank to take out cash and filled up each envelope. I would use the cash in each envelope for each category spending. If there was no money left in it then I had no money to spend. When I went to the market, I would only take the amount of money I wanted to spend, $50 or $100. Using cash meant I had to be more intentional while shopping because I was limited to the cash I had on hand. This really made me aware of where my money was going.
I stopped using my credit cards for 2 years. I worked on my budget consistently and I started to see progress. I was spending less and being more conscious of every dollar I was spending. I was asking myself is this really a need or a want.
When you are working on a budget knowing the difference between a need and a want is important. We may think things are needs because our emotions make us feel that they are, but they are just lustful wants. A true need is something like rent, food, insurance, and transportation. A want is a gym membership, Netflix and buying coffee.
Of course, we can always customize our budget to include the things we want within reason. I still visit Starbucks from time to time, I pay for my crossfit gym and I budget in season pass tickets for the whole family. A budget doesn’t mean restriction. It means having a PLAN. It means giving your money a job. Giving your money, purpose, direction and being intentional with your spending.
That’s the thing: dealing with money can be overwhelming, intimidating and fear/shame-inducing, but it doesn’t have to be—even, or especially when it feels like everything is set up against you, the way our economic system works, that is not far from the truth. Still, we already know what happens if we do nothing: it stays the same and nothing changes. Sometimes the hardest part is actually getting started; that was the case for me. Now is the perfect time to start. As the holidays come around that means we will be spending a lot of money and we need to do it intentionally in a way that fits our values and goals.
More on this novela in the next issue. But keep an eye on my Instagram @mom_money_boss for an upcoming Money “Therapy” Circle that addresses a lot of the issues I talk about here, our relationship with money and facing our fears when getting started.
