It’s Called Currency

This can be a tough question. After all, most people just “pay the bills” and get on with it. But what about those times when money is tight or you’ve got an especially large bill that’s going to affect your monthly finances more than usual? Does food rank above entertainment in your spending plan? Does transportation come before recreation? Do shelter and utility payments get made before you pay on any credit cards? Are you properly prioritizing your spending, or is your money spent in whatever category is yelling today?

At the top of your list, as your highest priority, should be your rent or mortgage payment, followed by the various utilities that keep your shelter comfortable, and then food. Once these three areas are covered, you need to pay your car payment and the necessary costs associated with that transportation such as insurance, oil changes and gasoline. (Don’t forget to budget for tags, taxes, periodic repairs and tires.) Next comes clothing for each member of the household and the various medical expenses for each person, such as health insurance and dentist bills. And then there’s the important miscellaneous expenses like life insurance, child care expenses, hair cuts, school tuition, child support and alimony, toiletries and cosmetics, organization dues and gifts. Once all of these areas are covered, you can consider budgeting money for recreation and entertainment, but this amount may be small or non-existent if you have any major debt like credit cards, student loans and lines of credit.

Please note that debt is last on the list. Not because it isn’t important, but because it is less important than paying tuition and insurance and making sure the utilities stay on. If you’re pinching pennies, you should definitely NOT be adding to your current debt load. Anyone with a compulsive spending problem should put their credit cards on ice in the fridge (seriously, by the time you melt the block of ice to retrieve the cards, the compulsion to spend will likely be gone) or adopt an envelope program (where the amount you can spend for a particular category is kept as cash in an envelope and when you’ve cleaned out the envelope, you’re done spending on that category).

I’ve been there. I know what it’s like to have credit card and collection companies calling and threatening you. You make promises to pay that you can’t keep, and the situation just gets worse. When dealing with them, remember that you have priorities and they are not at the top of your list. You need to have shelter and food before they need a dime. You need to get to and from work in reliable transportation before you entertain the idea of a night at the movies. You need to drop “vacation” from your vocabulary if your money situation is out of control. Make a few sacrifices to get your financial priorities straight and you’ll find that the waters are not so choppy. They become much easier to navigate when you’ve got your course mapped out and your landmarks are in sight.

Tags: budgeting, cashflow management, priorities // 1 Comment »