…Being an American is expensive…
…The poor rent, the middle are buying, the rich own. The poor pay interest; the rich earn it…
One of my coworkers asked me how we had discovered a fraud transaction so quickly. I told him that my wife came across it when looking at our online statement.
“Oh I don’t ever balance my check book!” he declared, telling me that he knew roughly how much was in there, and when he goes to the atm and can’t pull anything out, this is how he knows he has no money. This worked for a while for me too when I was 18 and a complete fucking moron.
You don’t have to obsessively check every transaction of your banking, but somewhere between here and there is a happy margin of managing your money.
Like most people, a lot of our friends are in debt. Unable to understand how to eliminate it, they often use it as a crutch for their life situation. There are many strategies, and endless advice on getting out of debt. But before you can build an emergency fund, or begin any well thought out plan you need to stop continuing your debt before all else. It’s bad enough that many people are paying the minimum payments on their credit cards, but every month they’re adding more and more purchases onto that bill. Cut up all of your credit cards. Stop accumulating more debt. This should not be a very emotional thing to do, and if it is then you have a long road ahead of you, and perhaps you’re not ready to get out of debt, and maybe never will. There are a vast number of people who do not see anything wrong with carrying heavy debt. There are people who do not see how the advertising industry has perverted our lives, people who do not understand that hyper consumerism is escapism. For these people endless meaningless buying is not a problem, but a solution to something more empty in their lives. Until you know where you stand on these things, you will never be able to take your financial situation seriously. You will never understand frugal living, and financial responsibility. Where do you stand?
When I paid off my Toyota Camry, that I bought used and recently had a few thousand dollars worth of work put into it to ensure me that it would last beyond my goal of 300,000 miles. So when my Check Engine light came on I knew I wouldn’t be able to sleep until I got it fixed. The car was still running the same, and previously I had paid my mechanic to fix the problem which usually resulted in a faulty O2 sensor. Luckily my mechanic was booked that weekend. When I came home a google search for “My check engine light came on, Toyota Camry” brought me across Seve Olson’s blog.
Following his advice and finding it to be most relevant to my situation, my problem was diagnosed and fixed within thirty minutes at the low cost of zero dollars.
So having an emergency fund is fine and good, but what if you find yourself dipping into it all the time? Before you can learn to live frugally or even responsibly you have to know what is coming in and what is going out. A parent at our son’s preschool was ranting to anyone who would listen which she does all the time, apparently they had been living way beyond their means for too long, and probably would have continued longer had the phone calls began. More recently I’ve heard people bragging at work that once they filed bankruptcy they could get any loan they wanted since the lender knew they couldn’t default for another seven years. Have we lost any sense of shame in our fiscal irresponsibilities?
The most important thing you can do for yourself is to create a budget. This is your base line assessment of your monetary flow. Remember to always pay yourself first, even though most experts recommend 10-15% of your income, anything is better than nothing. The rest is easy, just write down how much you need to pay for your housing, utilities, transportation, insurance, bills, and anything you regularly spend money on. This will often help you realize how much of your money is actually being wasted and on what. Although there are many ways to create a simple budget I found that budgeting on a fiscal year, more interesting, easier, and shows the most potential to build savings.
There are 52 weeks in a year, and if like a business you divide this weeks into periods of four week months, then you will have a thirteen month fiscal year. 52/4=13. Wait thirteen months in a year? That doesn’t seem right, why are there only twelve in a normal year. Let’s see, “Thirty days hath September, something else and November.” The best way for me to understand this was thinking back to my time in the service. We would get paid on the 1st and 15th of every month. Sometimes our paychecks between the 15th and the new month would seem excessively long. This was especially true when the 15th fell on a sunday or a holiday, where could be paid up to three days earlier on that friday. But the main reason is that not all months are equal in length. So looking at our elementary math earlier this means that somewhere in the year I’m missing out on a free months worth of pay. This must have been what that guy was talking about years ago in that financial class about making an extra mortgage payment every year.
Stick with me. Our new fiscal year will begin on April 1st. Lets say that that’s when my rent is due. So after paying my rent for April I budget saving a quarter of next months rent every week. Next month’s rent is not due until May 1st, but I will pay it on April 29th, four weeks or 1 fiscal month into my budget. June’s rent will be paid on the 27, July’s on the 24th and August’s on the 22nd. I’m already paying rent a week early. Eventually I will be so far ahead of my rent that it is essentially free money that I may have otherwise not noticed, and blown on wine or coffee, or god forbid fast food somewhere.