How many of you can relate to that line there? Always feeling broke but can never figure out why? I used to be the same, only with “breaking even” all the time and not being able to break the rhythm. It wasn’t until I started PRIORITIZING what I truly wanted in life until things started changing! As cliche as that may seem ;) But if money is always an afterthought, how can you expect different results?
I was actually just reading an older post on Enemy of Debt about this –> “When You’re Tired Of Being Broke, You’ll Start Saving!” It’s a feisty one, but you can’t help but agree with a lot of it.
Anyways, this all came up in a recent email question I got from one of our readers – we’ll call her Martha – and I figured I’d copy and paste our exchange in case it helps give anyone else some motivation or encouragement :) Maybe you yourself have something to add at the end?
Here’s what she wrote, followed by my response back:
J,
I am about to get a bonus that I can use to pay off my car. I was tempted to look at new cars and then I read your comments about being car payment free and I am back on track.
My mortgage started at 166,500 eight years ago. I got scammed in a negative amortization loan and now owe $178,800! I joined a class action suit last year and got $123.00 which is a joke.
I am 64 and really need to start knocking this down. I make 60K a year with bonus of about $2K-$3K quarterly. I also have an 11 year old son at home. Other bills are medical bills and regular household expenses. I don’t blow money but seem to be forever broke. Can you get me started with a plan?
Thanks.
Great! Way to go for not jumping over that new car, even though I’m sure it was hard! :) I get into phases like that too, so don’t worry – it happens to everyone.
RE: Your plan stuff. Not sure what exactly you’re looking for, but I’d say if you have a few thousand dollars “extra” every quarter from your job, that’s a GREAT way to start knocking stuff away no matter what it is in your life :) Esp with your mortgage. Do you already have a budget set up? Or at least have something written/typed down which shows all your money coming in and going out on an average month? If not, that’s where I’d start. You can download a bunch of free templates on my site here:
Best Free Budget Templates & Spreadsheets
If you don’t already have one, I’d then work on a “priority list” and jot down the most important things you want to accomplish whether it’s your debt or savings or whatever. Once you have that, I’d then find out what your “extra $” number is every month, or quarter, and figure out what % of it should go where. Or maybe 100% goes to your #1 until that’s done, and then trickles down to our #2, etc? That would totally be up to you as you know what’s more important to you than I would :)
But I’ll say that no matter WHERE you put it, as long as it’s going to savings or debt, there’s NO WAY you can really go wrong. It’s just a matter of preference and maybe a few dollars here and there – know what I’m saying?
It’s okay to change your mind every other month too – that’s perfectly fine. I do it a lot myself! But as long as you’re applying that hard-earned money towards whatever your TOP goals are at any given time, it’s hard to come away with anything but a win. Because that would mean you’re constantly doing what makes you happy at that time when it comes to your money! And if you’re happy all the time, then you’re doing just great, right?
That’s my take on things anyways. It’s hard to give specifics without knowing your entire history (or even you!) at all, but as long as you start making money a REAL priority – not just a half-way one – you’ll see progress happening in no time. And the longer you can stick with it, the longer both your finances AND sanity should start getting better ;) Hope this helps!!
Readers – what do you think? Anything to add to help keep our friend Martha on top and motivated? I didn’t know much about negative amortization loans to be able to say anything about it to her, but maybe you do and can warn us (or explain better?) why it may or may not be a good idea? I’m sure there are others right now currently contemplating it, so anything you can mention would be great… From Martha’s experience alone it looks like we should all run for the hills! Haha…
Hope this helps some of you!
————
(Photo by danielmoyle)
Get blog posts automatically emailed to you!
I think she needs to track all of her spending so she can see where all of her money is going. It doesn’t sound like she currently does that and she may be surprised by where her money is going.
Direct money to a savings account before you see it. Sine it seems like you are spending / using all the money that is available, putting money in a separate account will help you think of it differently and help build your savings.
It’s great that she wants to get on a better financial track! I agree that tracking expenses might be helpful, if she doesn’t already. She is 64, and I didn’t see any specifics on retirement savings. If she doesn’t have substantial retirement savings that she is contributing to and needs to catch up, saving for retirement would be my number one priority. To the point where she may want to consider selling the house (even at a loss) and renting, assuming she can find a cheaper rental in her area that is livable. With adequate retirement savings already in place, she may be able to knock it out, if she plans to work another 10 years or so, her retirement savings won’t suffer, and she can come up with the extra payments to make it happen. I would suggest that she take a close look at her budget and the hard numbers to really see what’s possible, and am interested in what others think too.
Its scary to think Martha is headed to retirement with a mortgage. How much longer does she plan to work? I’d recommend sitting down with her child and outline the new family budget that has savings, and perhaps an extra mortgage payments first before other expenses. It is important to have her child involved to some degree in the family finances.
I think a definitely budget needs to be started, and then the debt needs to be tackled quickly.
I think Rohit’s suggestion is an excellent one. Another thing I would like to know is when she plans to retire. That will be important for deciding how she wants to prioritize her money usage.
EVERYONE should read Larry Winget’s book “You’re Broke Because You Want to Be”. He tells it like it is, in plain language. I love Larry and his writing style!
I agree with J. have a budget and direct your money, that works best for me. I am a hard-core freak sometimes and if it were me, I would give myself an allowance, prioritize my savings goals, make a mission, vision and goals of where I want to be in 5 years and change my mind every week until I got it right. Oh and if I could, I would sell the freaking house and go with something else, but not sure if you can by the way your mortgage sounds. Sorry, I have no experience with mortgages, except for my 5 year, paid off early, personal loan, turned mortgage. (Besides it was only for $20,000.)
Wow, I thought my mom’s situation was bad. I can sympathize. I am not a financial planner, but this is the advice I would give to your reader: go speak with a financial planner. Tell him your concerns, your goals, your headaches.. heck, let him have it all. Then let him/her draft a master plan for you to get out of this hellish scenario you’re in. I’m guessing it’s going to take a whole lot of saving. Living way below your means as in.. nearly scavenging for food and clipping coupons. It might even involve help from her family. Do you have any family? Can they assist you in any way that allows you to save the majority of your income to pay off your mortgage as soon as possible? The goal should be to pay off your debt and begin saving aggressively. – my 2cents.
Thanks guys, this is great! I’m gonna forward this link along to her in case it helps her out more – it’s always nice hearing more than 1 take on things! I’m obviously skewed budgety to the point retirement didn’t even cross my mind here, haha… That’s what I have you here for though ;) You guys are awesome.
Got a message back from Martha via email just now:
“I feel almost famous! I especially felt comfortable when you said as long as I prioritize and keep paying down debt I am OK. In the past I always felt like I wasn’t doing my budget or my plan perfectly and would give up.”
Thanks again everyone! :)
Was the 64 a typo? No? Ok. If she doesn’t have one already, I’d also recommend getting life insurance so he child is covered in the event anything happens.
If she’s got a computer, I’d highly recommend a good piece of budgetting software similar to No Thirst Software’s “Moneywell” product (for mac) or similar software for the PC.. These sorts of products excel at building a budget with all expenses right in front of you and using envelope budgeting to divert money for required needs or upcoming expenses,etc.. I frequently feel the same way — I make a fair amount of $$ and still wonder where it goes.. It always seems like we’re scraping for money here and there which makes it difficult at tax season or when property taxes are due (now!) and we don’t have an extra $5k handy for the tax guy.. Ugg! It’s a work in progress!!
I know, taxes are the hardest to set aside! We have to do it every quarter since I’m self-employed, and it comes to like $8,000 if I recall correctly. Not fun! I liked it more when it was all taken out automatically, haha…
I just did my budget for the next 6 months. I literally do it very… simply. I take a sticky note and I write down my exact net income per each paycheck with the date per sticky note. (thats 12 of them because I get 2 a month for 6 months). I hang these stickys up or keep them in my planner.
Under each net amount I start subtracting things that are due, and then I see how much it goes down. I recently added a new field for “emergency savings” and I try and keep my remaining amount under 200 dollars so I can’t ever spend more than that. If i have a remaining amount of under 200 dollars after all my bills are paid, I add the amount to my “emergency savings” for that time and then it evens out.
ex: 11/15/12 $1000.
-200 student loan pyment
= 800
-500 car payment
=300
-150 emergency savings
= 150 (spending money for two weeks!)
Then when I actually get paid, my automated emergency savings deducts, and so does my automated student loan and car payments.
Cool! Haven’t heard of that system before, I like it :) But only cuz it WORKS for you, haha… that’s a bit too much math for me ;) But whatever works!! I may have to steal this and blog about it later, thanks my friend.
I think if you’re not blowing money but it leads to feeling broke all the time then you have to think about ways to make more money. Higher income is your insurance for saving more if you can still manage to live well below what you make.
Well I don’t blow money on things (other than my raging cocaine, prostitution and gambling addictions) yet always seem to be broke. And depressed and depraved… weird huh?
haha… well played, well played.
i also need help.. im always broke and dont know where my money goes. im 23 and have a baby the father doesn’t work so i practically pay for everything. from nappies, food, school,ect. i stay at home with my aunt and i have to contribute money as well. got insurance, phone bill and a loan i took but dnt know what i did with it. got store account bills to pay.. help