When you change your money habits, you change your life! When you are in financial trouble you are managing money incorrectly. You are living above your means. You might be using credit to supplement your lifestyle. Credit and credit cards cannot be your emergency fund!
If you are using credit or credit cards to cover your day-to-day living expenses, to cover a deficit to get you through the end-of-the-month, or to “buy” you your wants and desires, you need to stop. The first thing that you need to do is figure out your monthly essential living expenses. This include housing, food, transportation, and utilities.
These four items are musts. They are needs. You and your family need to eat, a roof over your head, a car or public transportation to get you to work, and utilities. If you cannot cover these expenses with your current paycheck, then you need to cut back on one or more of these items.
You might need to move to a smaller place. You might have to start buying hamburger meat instead of steaks. You might need to sell one of your cars. You might need to start riding the bus or subway. Cable TV, internet, and cell phones are not utilities. They are not needs. These are wants. You might need to cut them out completely. If you are under contract on your cell phone plan, see if keeping your plan is less expensive than having to pay the early cancellation fee and getting a pay-as-you-go phone. If it’s cheaper, then stay with the plan. If you don’t have the $300 or $350 in cash, on-hand, do not charge it to get out of the contract. You’ll only incur more interest charges.
If you have cut expenses to the bare necessities and you are still short, start selling items you have and have not used in a year or more. Consider getting a second job. Start a low cost, home-based business.
Start using a Money Blueprint each month. Track your expenses using a Money Blueprint notebook. These two are crucial if you want to change your life. Learn to say, “No” to eating out regularly, going out with friends for drinks or dinner regularly, buying expensive gifts for friends or relatives for birthdays, anniversaries, baby showers, wedding showers, and at Christmas.
If you do these simple things, you are going to change your money habits, and you will change your life.
(Note: If you need more instructions on creating a Money Blueprint, read this post, How to Create a Spending Plan. The beauty of the Money Blueprint in the Resource section is that it does all the calculations for you including the ratios.