Photo: Flickr/jessica mullen
Today’s reader mail comes from Jennifer who writes:Hey Ginger,
I’ll keep it short so you get all the important details. Right now I have a full time job where I’m paid monthly. However, my problem is that I run out of money by the last 10 days of the month.
I’m in some hot water at work because I often have to call out because I can’t get to work. This week I was written up because I wasn’t able to come in to work because I had no money for gas. I feel horrible and need some tips because I really need to budget my money properly so that I can 1. keep my job and 2. get out of debt.
This is completely overwhelming for me and I need help! I know you write about “every dollar having a job” and I feel like my money is all over the place and this is out of control! This is sooooo stressful and I need you to help me figure this out because I don’t want to lose my job. I need to get out of debt and I need to figure out how to budget on a monthly salary.
Thanks for writing us Jennifer!
Here’s where I would start:
1. Review your paycheck for unnecessary deductions. Sometimes companies add deductions to our checks that we’re aware of but never factor into our bottom line. For example, at my very first job, I was paying for parking when I took the metro to work. It made no sense for me to pay for something I wasn’t using. Also, check your health insurance deductions, is this the best (read: most cost conscious) plan for you right now? Meet with HR to discuss your options.
2. Give Yourself A Raise. Take Back Your Money! Are you getting a hefty refund back during tax season? If so, divide that refund by 12 and that’s how much of an increase you could be giving yourself each month. You can do this by increasing the number of personal allowances on your w-4 to increase the net amount in your paycheck. The more allowances you claim, the less money withheld from your paycheck, with the maximum being 10.
It’s important to note that if you claim too many then you can end up owing more at the end of the year but you can adjust this by filing a new W-4 which you can adjust at any time. Still, if you owe the IRS/state government money then you can set up a payment plan with them. By getting a refund every year, you are giving the government an interest free loan for 1 year and you have to petition them to get it back. Put that money to good use and save it yourself or pay down debt!
3. Start tracking Your Money: As you’ve read Every Dollar Has A Job, assign them tasks accordingly. You can do this a few ways based on how you like to track your money. I tend to use a combination of a bad arse spreadsheet that I hacked and Yodlee/Powerwallet. Power Wallet is perhaps my new favourite since I love the interface, alerts and intuitive budget plan interface. Yodlee is great if you want to have the ability to slice and dice your information 20 ways through Sunday.
Needless to say the tools are robust but nothing the novice user can’t figure out. Budgets Are Sexy always has a stack of spreadsheets, so check him out and find one that works for you.
4. Budgeting A Monthly Paycheck: There are few ways to handle this because it can get trick if you’re used to bi-weekly paychecks. I would personally recommend that you have your monthly paycheck deposited into an account like ING Direct where you don’t have debit card access to it. Upon deposit from your job, schedule 2 deposits.
The first, after the initial deposit and then the second 2 weeks later. 1st and the 15th are a good place to start. This way you don’t have the whole month’s paycheck staring you down and you’re forced to budget based on every 2 weeks rather than the month. This is a good way to control your spending if you’re used to being paid twice a month or every two weeks.
5. Start Envelope Budgeting: This is a great way to start limiting yourself if you struggle with overspending. The modern way to do this is budgeting via pre-paid debit cards because no one really carries a wad of cash around anymore and you are limited to only what’s loaded on the debit card.
6. Digging Out of Debt: Follow these steps:
- List your debts:Creditor Balances Due dates Minimum payments Interest rate Contact info for each creditor
- Due dates
- Minimum payments
- Interest rate
- Contact info for each creditor
- Call each creditor and get the due dates and related minimum payments
- Set up online bill pay for each creditor and set it up to pay the minimum except for 1 (or more if you can handle it)
- Pay as much as you can over the minimum payment for one of the creditors. I like to start with the smallest but you can start with the largest or the highest interest rate. This is all psychological and while most will start with the highest interest rate, it’s best to do this in a way that works for you. I like the impact of smashing small debts while working up to large debts.
- Once you’re done with the small debts then you take the minimum payment from that plus the extra and roll that towards the minimum payment of the next largest plus what you were paying on the previous debt. This is called the snowball method.
This is all I have for now. I’d love for you to start with these basics and work through them before addressing other issues. I would also recommend a face to face with your managers to let them know that you are addressing these issues by taking ownership so that you can get on their good side again. Hopefully, you’ll write in and let us know how you’re doing in 3-4 months!