Our founder, Howard Dayton, has said it many times before: If you don’t like the “B” word, call it something else.
If you feel like panicking whenever someone talks about a budget, call it whatever you want to. Whatever it takes to get you to create one… and stick to it.
See, a budget is like your blueprint, your road map, your guide. It’s a plan.
And I believe all good things start with one.
Before you can do anything—and do it right—you have to understand your current state. You can’t know where to start without first knowing where you are.
So, before you decide to get on a budget—or whatever you want to call it—first, ask yourself a few things:
What are my debts (not including a mortgage)? Do I owe friends/family? Do I have a car note, a student loan, any credit cards, or personal loans? How much do I owe for each one?
Write down how much you owe from smallest to largest and how much you’re paying on each.
Now you can move on to the other things you pay for on a regular basis. But let me pause for a second…
After you’ve listed your debts, you may feel overwhelmed, discouraged, regretful… a number of emotions. But let me just say this: It’s spilt milk.
Could you have done things differently? Would you have done things differently? Should you have done things differently?
The answer to all those questions is probably “yes.” I could have, would have, should have done a lot of things differently, too… But if we waste our energy on our “shoulda, coulda, wouldas,” we’d get nowhere, except in the dumps. So, don’t pour your energy into beating yourself up about your mistakes. Pour your energy into what you can do now to fix it.
Back to the next step. Write down everything else you pay for. Food, utilities, rent/mortgage, transportation, insurance, and whatever else.
Then, write down how much you earn from your job(s) and interest from your bank accounts (if anything).
Add up what you spend every month. Then, subtract what you spend from what you earn. If you have “leftovers,” you can use it to save for a rainy day (I’d recommend at least $1,000) and then start chipping away at your debt.
If you have $200 left over, put it toward your smallest debt. (Let’s call it Debt #1.) And keep doing that every month. You’ll still be paying your minimum on the other debts, but for now, pour anything extra you have into Debt #1, until you get rid of it.
Then, you’ll move on to Debt #2. Take the $200 leftovers, add it to the minimum you were paying on Debt #1 and the minimum payment required on Debt #2.
For example, if Debt #1 was a $1,000 credit card balance and the minimum monthly payment was $30, with the $200 left over, you would’ve been paying $230 until that balance hit $0. If Debt #2 is a $1,500 personal loan, with a minimum payment of $50/month, now that you’ve cleared Debt #1, take the $230, add it to the $50 minimum, and pay $280 toward Debt #2.
Keep doing that until you see everything on that debt list of yours crossed off.
This is called the “debt snowball.” It’s the method the best financial gurus, including Howard, teach.
If you take things day by day, you’ll see it work. And eventually, you’ll be able to take what you were using to pay off your debt and pay off the mortgage early, or save for a home and/or the future, and give more.
No matter your age, your career or how much money you owe, it’s never too late. Nothing is impossible (Matthew 19:26). Start saving or start your snowball today. With God on your side, what isn’t possible?
Melody Kerr, Managing Editor