Earlier I talked about the barriers we often face as we work to get a handle on our finances. Make sure you read the first post in this series here:
More times than not, it’s our belief that we are at the mercy of others when it comes to our money: our spouse or partner, our job, our children, the government, our debt, our hectic schedules. Regardless of the excuse we give, 99% of the time, our own behavior is the reason we have money problems.
And I totally get it — telling your money how to act is really, really hard because it means we need to become the person in charge. And this means the responsibility lands squarely on our shoulders. We need to learn how to tell our money exactly how it’s going to be spent. We need to own up to our past and how our spending behaviors have brought us to the place we are.
Here’s what my husband and I discovered when we started taking control of our money and living on a budget back in 2006:
Despite our frugal tenancies, we were still spending more money than we brought in every month.
We were spending money to make ourselves feel good without consideration to our family’s overall financial health. I took the baby shopping when I was bored. We went on vacation without checking to see if we had money to do so. We had a crappy mattress, so we bought a Tempur-Pedic on store credit.
We had bought the lie that paying for everything with a credit card with benefits and paying it off every month was the same as using cash. There were many months that we had to use our savings to cover our credit card bill because we didn’t have enough in our checking account, but by golly, we flew across the country for free twice (total).
No amount of cutting coupons, searching for deals, and accepting hand-me-downs could compensate for not living on a realistic spending plan that properly reflected our income.
We had no plan for our future apart from a yearly contribution to a Roth IRA. We were just earning money to pay for when we needed and wanted today without working on what and where we wanted to be in five, ten, and twenty years down the road.
We had no vision for the type of family we wanted to become. We knew we wanted to give significantly to causes important to us as we got older, but were behaving like that would magically happen one day without any action or sacrifice today.
I strongly believe that you will only find success in this process if you face your financial behavior head-on. What spending habits, skewed financial beliefs, and poor planning have contributed to your household’s current mess?
Here are the common erroneous financial practices that we have noticed in our lives and the lives of those who we have counseled:
1. Using credit cards instead of cash.
2. Spending next month’s paycheck today.
3. Living without an emergency fund.
4. Not planning for future expenses by saving for them every month.
5. Depending on next year’s tax return to cover current expenses or debt.
6. Using debt as a tool in any form.
7. Not allocating each spouse/partner “personal money” to spend how they wish.
8. Prioritizing your personal spending desires ahead of your family’s financial health.
9. Believing that you “deserve” something because you work hard either at your job or at home.
10. Believing it’s impossible to get ahead financially so you may as well just enjoy the little you have now.
Mark my words, living based on any of these beliefs will not bring you financial peace nor will they help you accomplish any financial goals. The only way things will change in your home is if you decide to live differently.
Once you’ve faced the financial beliefs that led you to your current financial state, the next step is to make some commitments. What changes are you willing to make to prioritize your family’s financial peace? Here are some alternative disciplines that will counter the practices outlined above:
1. Use cash whenever possible, even when it’s inconvenient.
2. Pay for your current expenses today, which means not using any sort of credit to pay for food, fuel, car/home repairs, unexpected expenses, etc.
3. Set aside money for emergencies. If you have debt aside from your mortgage, $1000 is a good place to start (this is Dave Ramsey’s suggestion).
4. Save for upcoming expenses. Write down the things you’ll have to pay for in the upcoming 12 months and start saving for them every month so you have the cash when the bill comes due.
5. Eliminate or decrease expenses so you’re not dependent on your tax return or some other anticipated windfall. Reduce your cable bill, buy secondhand clothing, use coupons along with store sales to save on groceries and household items, research cheaper insurance policies, etc. Use freed up money every month to first to pay off debt and then save for future purchases.
6. Take debt off the table as an option in your life. Pay cash for it or don’t buy it. Once you refuse to go into further debt, it’s amazing how creative you can get and how much easier it is to say “no” to yourself.
7. Set aside cash every month for each adult in the house to make independent spending decisions, even if it’s just $10. This alleviates most arguments about money because no one feels like they need to get permission to buy a shirt or a video game or a latte.
8. Say “no” to “bigger and better” for the time being. Practice the discipline of contentment and elect to be happy with what you have so you can target money to achieve your family’s financial goals.
9. Live as though you don’t deserve it if you can’t afford it (and I’m not talking about affording the payments — can you afford the entire payment). This applies to your children as well. You only deserve what you can pay for in cash without jeopardizing your financial health.
10. Decide to sacrifice the minimally awesome today for the dream of supremely awesome in the future. Commit to becoming the person who believes that life can be better with hard work and sacrifice.
Our family has consciously committed to living by the disciplines outlined above. It was difficult at first, as any new practice is, but after almost ten years it has become very much a natural part of our daily lives. Sometimes we are tempted by a purchase or business deal, but we know it’s never worth compromising the harmony in our relationship and the peace a debt-free life brings.
Have I convinced you that taking control of your money is worth the work? Are you ready to put in the time and energy to change the way you handle money for the sake of your family’s future financial peace? Coming next, I’ll tell you where you go from here by outlining how to start creating a monthly cash flow budget — one that accurately reflects your income and expenses and puts you on the track to telling your money who’s boss!
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