Our lives are often so busy that we find ourselves over budgeting ourselves. We’re constantly running out of time and into overdraft. Those red numbers leave us feeling afraid, anxious, and sometimes even hopeless.
The worst part is when we’re running out of time, we often spend more money to give ourselves more time. Sometimes this is a great strategy, but if we’re not careful it can end up costing us more in the long run. Read on to see how you can save time and money with a budget.
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First, I am not an accountant and cannot give advice on your personal situation. I’m going to share the tips and tricks I used to change our financial life in a substantial positive way (without increasing income).
When Ryan and I were newly married, we had a lot of student loan debt – roughly $70k between the two of us (mostly me) – we also had a credit card, and a car payment. But Ryan wasn’t able to get a job out of university, so he went back to school and we found out we were expecting our first baby. All of that combined was a little much, but not bad. Until I ended up off work because of threatened pre-term labour and premature rupture of membranes. Our income went from $1500 a week to $400 a week. Our mortgage payment was $600 biweekly, our car payment was $100 biweekly, plus we had automatic pension payments coming out of our account, and student fees for Ryan. We went from thriving to failing very quickly. Because of our previous income, we didn’t qualify for any financial aid.
However, we did qualify for a bank loan. So we took out a bank loan. But that loan quickly got eaten up, so we got a credit card, and then another. My income had been great when I was working, but 2 people not working and spending lots of money is a bad combination.
I won’t bore you with our financial life story, I’ll just sum up to say that it took us roughly 10 years to really recover – and even now we’re still feeling the effects of that year. Because once you fall into large amounts of debt, it has a way of holding onto you.
Making Positive Financial Choices
Eventually we realized we not only needed to make changes, but we also had the resources necessary to make those changes.
The first step I took was going to the library and reading up on budgeting and finances. I also went online and googled as much as possible about finances until I felt I had enough information to make the changes necessary.
Steps to Take Control of your Money
- Print off 6 months of bank statements
- Use different colours to highlight different expenditure categories
- Make a list of the different categories, and add up how much you spent each month. Then average that number
- Make a list of all recurring income
- Compare average monthly expenditure to income
- Determine whether you need to make cuts to your spending or not
- Make a list of all required spending i.e. bills and utilities
- Make a list of spending that you can cut or decrease
- Divide up your income into spending categories – determine exactly how much you will spend each month in each category
- Each month stick to your budget – when you’ve spent the allotted money for the category, stop spending anymore until the next month.
For us, eat was the largest part of our problem. To make matters worse, when we tried to get help, the advice given to us made things worse. So I needed to try something different.
Instead of paying down our debt as fast as possible, we switched to paying it down as slow as possible for several months.
Instead of putting any and all extra money into debt, we paid the minimum each month. This allowed us to open up a few dollars here and there as our income fluctuated each month.
All of the extra money went into savings.
By creating a savings plan, we prevented ourselves from using credit for any further spending. Before, when we tried to pay off our debt as fast as possible, we found ourselves paying hundreds (sometimes thousands of dollars) a month toward debt, but things just kept getting worse. Things like the car needing work or the basement flooding created huge problems for us.
Once we had enough money in savings to replace a full month of income, then we started using our extra money to pay down debt faster.
Every extra penny went toward our smallest debt. For me, this felt great because I was able to quickly see a positive change in our financial life. When we paid off that credit card, we cancelled it. And we took that monthly payment and put it toward the next smallest debt. And then the next.
Anytime we used any money from savings, we decreased the money being put toward debt and filled our savings account again. That way any surprise payments that came up wouldn’t hurt us.
Decreasing spending was a lot harder for us. We’d spent so long going without, that as soon as we had money, we spent it. It was an evil, vicious cycle.
When we looked at our average expenses, we were able to see the little ways money trickled out of our account. We were also able to see the big ways money trickled out.
For us, the biggest problem was our food budget. I didn’t have a plan for meals, so I often cooked whatever I felt like at the time. We had a lot of food wastage, and a lot of mealtime stress.
I signed up for e-meals and it instantly transformed our life!
It took me a lot of time to give myself permission to spend the money on a meal planning service, but the free 14-day trial convinced me to see if it worked for us.
The biggest change I noticed was a decrease my stress level surrounding meals. The plan provided us with a varied diet, a shopping list, recipes, and was exactly what I needed to get control of our grocery spending.
What I really love about e-meals is how it’s possible to use meal plans for specific diets, they even have a gluten-free plan as well as vegan, paleo, budget, and many more. Plus we can scale the plan for a family or for a couple.
The shopping list meant we were only buying the amount of something we needed each week instead of more than we needed. There was a lot less food wastage. And because we could switch between plans at anytime, we always felt the plan was meeting our needs.
Permission to Spend
Part of looking at our spending habits, we needed to look at the reasons behind our over spending.
For us, we found that the more we told ourselves no, the more we spent.
So we gave ourselves permission to spend a certain amount each week. Each member of our family gets an allowance each week. This way we can buy a coffee if we want, or save up and buy a bigger item. Children have their own allowance so when they want something from the store, we know exactly how much they have and whether they can buy it.
Creating that allowance and budget took the emotion out of purchases. We no longer weighed the pros and cons against emotions, instead it was a simple, “Is the money in the account today?” if the answer was yes, then we followed up with, “Do I really want to spend that money on this item?”
How to Use A Budget
Using a budget is so much more than just saying yes or no to purchases. Using a budget effectively means making sure you divide your money into categories and only spend that money on those categories. For instance our heating budget is $150 a month, in the winter it’s possible we could spend more than that, but in the summer we have our service provider fees and negligible gas use on top of that. The money we don’t spend in the summer gets rolled over to winter heating costs. And at the end of the year any left over gets put toward our TFSA (Tax Free Savings Account).
In order to make sure we keep this money separated we have different bank accounts for different categories. Each member of the family has their own bank account. We have a gift account, clothing account, bills, vacation, debit, as well as a credit card, and a high interest savings account.
Each pay period I move the money where it belongs, then I don’t need to worry about it again. Most of our bills are automatic, and the ones that aren’t are the same each month, so I can pay them without receiving a bill.
Once our finances were stable, we were able to breath easier. We found we had so much more time to spend on the things we enjoyed because we were more deliberate with both our time and our money. We no longer spent as much time focusing on our money (or lack there of). Using a meal planning service saved us so much time over the course of a week, decreased stress, and a huge bonus was it cut our grocery spending so we had more to put toward debt and savings.
In a 6 month time frame we were able to get a savings cushion, and pay off more debt while putting less actual money toward debt because we stopped using credit for our purchases. It felt amazing!
Our day-to-day stress levels dropped drastically once we controlled our finances. This gave us the ability to see possibilities we didn’t see before.
In future posts I’m going to highlight some of the ways I’ve earned money while being a stay-at-home mom. And I’m so excited to be able to share with you ways other mothers have worked from home and earned money while staying home.
I hope you’ll be able to use these stories to find your own possibilities and create your own life of abundance!