How is your financial health? Are the last few days before payday as calm as the first few days after? Are you paying off your credit balances each month?
If any of these questions makes your stomach hurt, perhaps it’s time for a financial tuneup.
1) Create a zero-based budget.
Do you ask yourself, “Where did it all go?” Do you feel flush, restrain yourself from impulse buys, and still find yourself out of money at the end of the month? Pin those dollars down before payday. Name every dollar that is headed into your bank account before it has a chance to get out.
In my family, we do this in an Excel spreadsheet. You can watch a tutorial on how to set one up here.
We list our income for the month and all of our expenses, for example, Mortgage, Gas, Utilities, Food, Medical Co-pays, Haircuts, etc. After your essentials are accounted for, relegate some money to savings.
Lastly, budget for luxuries: movie tickets, fancy coffee, eating out.
The bad news? When payday arrives, there is no rush of elation, no spending spree, no new purse, unless that purse is named in the budget.
The good news? Your money goes exactly where you told it to.
Financial guru Dave Ramsey explains how a zero-based budget works here.
2) Create an emergency fund.
Does a flat tire, sudden furnace repair or surprise medical bill have the power to turn your world upside down? Start working on an emergency fund, a minimum of $1,000 saved exclusively for the unexpected.
Your zero-based budget can help. If you have money left over after expenses, put an “emergency fund” row in that spread sheet, and divert any extra dollars here.
A birthday card from your aunt with $20? Put it in the emergency fund.
A bonus check? Extra tips at work? Tax refund? Put them in the emergency fund.
If things are too tight to put anything towards savings, get creative. Have a cluttered garage? Start listing items on craigslist or have a yard sale.