Don’t Monthly Payment Yourself to Death

shredded bills

Most people are probably painfully aware that gas prices have been rapidly increasing over the last couple of years (and especially months), thus also increasing the costs of any items needing to be delivered from anywhere, the most common being groceries. Many people are feeling the crunch in their budgets as they find themselves having to pay more for the same amount of groceries and gas, yet not earning any more income.

So how can you lessen the blow of these rising costs on your own budget? I believe much of it has to do with how your budget is structured. For the most part, people can benefit greatly by not budgeting every last dollar they make. Now I’m not suggesting that you not have a plan for every last dollar you make — just that you don’t allocate every last penny to different bills that have to be paid each month.

When I first started budgeting as a single young adult, I totaled up what I made each month after taxes and used that to determine how much I could afford to spend on different items throughout the month. I have an extra $200 a month? Well I can subscribe to cable for $30 a month, buy more clothes with $20 a month, and buy a newer car with a payment that can be up to an extra $150 a month! It kind of felt like a game to me — figure out how to use every last penny I made in order to buy the things I thought I wanted. I even took on a second part-time job to make more money that I could spend each month.

When I budgeted this way, I felt every unexpected expense that came up (meaning I was definitely negatively impacted by it). Anytime extra money would come my way it would disappear as fast as it appeared and anytime there was an additional cost, I somehow didn’t have the money to pay for it. Handling my finances was a very stressful process because of this and I dreaded doing it. I seemed to always finish the budgeting process with the thought that I didn’t have enough money to pay for everything and it usually left me feeling depressed.

When I met my husband and we got engaged and started to merge our finances, I begged him to handle the budgeting because I found it to be too stressful. He did handle the budget for a couple months, but we quickly realized that I was simply better and more natural at it than he was, so I took over again and was right back where I started.

As we started our new marriage, we were focused on paying off our credit card debt and to do that, we took on the least amount of monthly expenses that we could. Because of that, we were able to pay a substantial amount off our debt each month. Money was still tight because most of our extra money was going to the credit cards, but at least they were getting paid off.

Fast forward one year and our credit cards were finally paid off. We suddenly had a bunch of extra money leftover at the end of each month. But somehow through the process of paying off those credit cards in a year, I learned a thing or two about budgeting and financial discipline and was not quick to find a place for all that money each month.

Since that time, we’ve kept our monthly expenses at a minimum and haven’t designated every dollar we make towards something that has a monthly bill. We have satellite tv, but we have just the basic channels. We have a home phone, but no extra features. We have no car payments because our 2 older cars run just fine. We set a limit for our grocery spending, even though we can afford to spend more. And the rest of our money goes into savings.

The beauty of our budget is that when certain costs rise, it doesn’t mean that we won’t be able to pay all our. Since our budget falls below what we make, we have wiggle room for the unexpected. Granted, I don’t like spending more money for the same amount of gas or groceries, but it happens and there’s not a whole lot I can do about it at this point.

With the rising prices and the economy where it is right now (with savings account rates dropping like crazy) I admit that I am putting a bit less money in savings than I have been. And while that doesn’t exactly make me the happiest, it’s ok because I wasn’t counting on that money for any particular thing and I don’t have to worry about how I’m going to pay my bills.

You might be thinking “Great plan — if you do make more money than you have budgeted out, but I’m not making enough to cover my necessities right now!” I understand that there are people who are genuinely struggling with a lower income and rising costs right now and I just encourage you to make this a goal — to under-budget your income. Understand where your income level is and live below that. If you have 12 million cable channels because you can afford it, maybe cut down on a few. If you only pay for the basic channels and are still having trouble, you can cancel cable altogether. There are certain things that are not a necessity and not worth the extra stress and worry that not having enough money brings.

The bottom line I would encourage everyone with is this: Don’t monthly payment yourself to death. Leave some room for the unexpected and the rising costs — or at least make it a goal to do this when your income goes up or when your debt is paid off. It’s amazing how much you won’t miss those extra little things when you have the peace of mind of knowing that you can pay all your bills each month.

Image courtesy of ::: Billie / PartsnPieces :::

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6 Responses to Don’t Monthly Payment Yourself to Death

  1. Dave says:

    Great advice – personally I have been simplifying the monthly payments that go out – trying to consolidate and really thinking hard before signing up for that new subscription or service. Not only is there more money left over but you get rid of the overhead associated with tracking and paying the expense each month – which, however small, contributes a bit of hassle or stress when money is tight.

  2. Miranda says:

    One thing we do is avoid those contracts. It rarely saves you that much, and (unless you are getting a cell phone) you can usually convince the provider to give you the contract rate anyway. That way if something comes up, and you need to cancel something, it is easy and doesn’t cost you a fee.

    For the cell phone, we just have a pay as you go phone. We never use the cell phone unless it’s an emergency anyway.

  3. Great message. It’s little wonder that the first question the salesperson asks you (at the car dealership, electronics store, even rental or real estate office) is how much can you afford per month.

    By getting you to focus on the monthly cost, you lose site of the total cost and the true necessity of each dollar you are committing to.

  4. A Marino says:

    It is sometimes difficult to lower expenses in the beginning when you are getting out of debt. One reason could be contracts. Another is that every penny that you do have left over is paid to the debt.

    I, like you found out that it is not a good idea to budget every penny. Now, Dave Ramsey might not agree with this but he does have a budget line item called “blow money”.

    We have a budgeted expense called “UNALLOCATED FUNDS’. It is just that. Unallocated funds used as a catch all for miscellaneous items like expenses that go up in price but not yet budgeted for. It could be for photos, or anything unexpected. At the end of the year, I transfer any money left into savings.

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  6. kathryn says:

    It feels really good to have some wiggle room in the budget. We’ve always tried to have small payments so we have more flexibility.

    But since you don’t have any car payments…this is a great time to make a plan to set aside money for the next car. Even if you have a lot of good years left in those old cars, you’ll need to replace them eventually. If you set aside a “car payment” each month, you could be ready for the next car…maybe even able to pay with CASH!

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