Making a Budget for Wise Spending : How to Help Kids Become Money Smart Series…
New Habits for a New Year
New Habits for a New Year
Jan Gamboa Ocampo
It might not be January, but it is the start of a new financial year. The start of a new year is the time when people examine their lives and make changes they believe will improve their self- esteem, personal relationships or professional career. And the new habit I’m talking about in this article is definitely relevant to this time of the year, because today we’re talking finance – and there in never a better time than right now to get your finances into gear. No more waiting til January; now is the time.
I remember when I was single. Every January, I’d make a resolution to become more fit and healthy. I’d enrol in the gym and cut out sweets. And every February, I’d skip gym sessions and eat a slice of cake every day.
When I got married, resolutions became furthest from my mind. I had difficulty juggling work, parenting duties, and making time for the hubby. I didn’t have time for resolutions. Hey, I didn’t even have time for a haircut!
It has probably been more than a decade since I last made a resolution. I think it’s about time I start again. And unlike the previous times when I made one resolution for nearly every aspect of my life, I’m going to make just one resolution for this new year.
You see, this resolution is fuelled by my desire to change my financial situation. For as long as I can remember, I have always lived paycheck to paycheck.
LaToya Irby, a Credit/Debt Management Expert, explains what living paycheck to paycheck is in her article How to Stop Living Paycheck to Paycheck:
“You know you’re living paycheck to paycheck if you find that you’re consistently running out of money before your next paycheck arrives. If you frequently have to borrow money from friends or relatives, take out payday loans or cash advances, or use your credit cards to cover your expenses until your next payday, then you’re living paycheck to paycheck.”
My father kept on telling me to save. He opened two bank accounts for me when he was alive – the first was during my college graduation and the second was when Mom died. I’m embarrassed to say it but I drained out both accounts. I had a job but when I found myself running out of money before the next pay day, I’d withdraw from the bank account. I did this until nothing was left.
I knew that this was a terrible way to live and that I should somehow put my finances in order. I knew that I had to save first and spend within the remaining amount. I knew that I had to save for my retirement. I knew that I had to save for big medical expenses. However, all this knowledge didn’t seem to do anything. Nothing – not those talks from my dad, not Suze Orman’s books, nor the many personal finance blogs on the Web – could push me to change.
Nothing that is, but the feelings of desperation and humiliation, both at the same time. I was down to my last hundred and payday was still a week away. My credit card was maxed out and I still had outstanding debts to pay my friends and relatives. The only option I had was to ask my brother for an advance on a land rental which he usually pays at a specified month of the year. Problem is he had previously told me that he wouldn’t give me advance payments anymore. He wanted me to manage my finances better. But since I was out of options, I had to ask.
Well, he refused as expected. And what I did next was probably the most humiliating thing I have done in my entire left. I begged him for money. He saw my desperation and gave in.
When I picked up the money at his house, I was on the verge of tears. When I saw that my niece was sitting beside him, I stopped the tears and managed to mumble “Thank you,” before stumbling out of the door. Once out of sight, I just cried and cried.
Right there and then, I made a promise to put my finances in order. I would never allow myself to be that desperate again. I would never humiliate myself again. Yes, that’s right. My brother didn’t humiliate me. He didn’t even say a single word when he handed me the money. He even made sure my niece wouldn’t see it. If there was someone who placed me in that humiliating position, it was me – all me.
I was reminded of Chip and Dan Heath’s article titled Why Emotion, Not Knowledge, is the Catalyst for Change. The article focused on creating change within workplaces, but I would argue that the same process applies on an individual level. The article discussed how real change came from real feelings and why knowledge alone couldn’t compel people to change and make these permanent.
Indeed, emotions can be a very powerful force that can jumpstart change. A bad breakup or divorce, when channelled positively, can lead people to try new things they’ve never done before. The death of a family’s sole breadwinner can lead the remaining parent to venture into a business and try to make that work no matter what the odds may be.
So I’m channelling all those painful emotions into something good. Not only will I make a resolution for the new year, I am going to make an action plan. Aside from LaToya Irby’s article which I previously mentioned, I also love Reyna Gobel’s article Budgeting When You’re Broke. Having read both articles, I’ve decided to do the following tips which I find very helpful for someone like me who’s broke and want to turn things around:
- Review credit card payments and due dates.
- Prioritise bills.
- Create a budget. I have created a printable Monthly Budget Planner which I’m more than happy to share with you here. Based on the previous months’ expenses, I will provide the planned amount in the chart.
- Ignore the 10% savings rule, for now. Start paying off your debts first. Reyna Gobel explains it this way:
“Stashing 10% of your income into your savings account is daunting when you’re living paycheck to paycheck. Balance your budget before starting incremental savings. It doesn’t make sense to have $100 in a savings plan if you are fending off debt collectors. Your piggy bank will have to starve until you can find stability in your finances.”
This is why I have two sets of the Monthly Budget Planner printable. Set A has Debt Payments for its first section. I will be using this one first. Once all my debts are paid off, I will be using Set B which has Savings and Investments for its first section. I hope to be debt-free by end of next year. To download the Monthly Budget Planner please click the link below:
- Track daily spending. You can do this with an app or free software. You can even do this on a notebook. The important thing is that you actually know where every cent and every dollar goes and write these down. Add all these and track actual expenses in the Monthly Budget Planner chart on the 30th or 31st (28th or 29th if it’s February).
- Review the Monthly Budget Planner. This lets you see if there are differences between planned and actual expenses. If actual expenses are higher than planned expenses, then there is definitely a need to adjust spending.
- Seek out new additional sources of income. If you feel that it is impossible for you to minimise expenses, the only other alternative is to increase your income. That’s what I do. Currently, I do freelance writing jobs and teach English business communication skills to Japanese professionals.
This won’t be easy. I’m sure of that. I have to unlearn decades-old attitudes about money and learn new ones. It will be a tough journey but one I will have to take for my sake and my child’s sake who I hope will grow up to be more money-savvy than I am.
About the Author
January G. Ocampo has been working in the education industry in the Philippines for fourteen years before she decided to work from home. During her time as an educator, she had been a classroom teacher, curriculum developer, and eventually an owner of her own preschool. She currently works as a Course Facilitator and Administration Assistant for an RTO based in Perth, Australia. She is also a freelance writer who likes to do research on and write about topics that will make her a better wife and mother.
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