Come, friends, and listen to a cautionary tale. There was a married couple who thought they were money savvy. But, it turns out they were really, really delusional. After years of accumulating credit card debt, something had to give and this sad couple ended up doing the unthinkable… filing for bankruptcy. It was a humbling and humiliating experience for this middle-class, college- and grad school-educated dynamic duo who, at one time, thought they had it all figured out.

Many years later, this couple is back on the right financial track. In fact, so much so that I, um, I mean, the woman, was able to quit work to stay home with the kids and work doing things she loves like writing for e-zines. But how did this happen? How did the path to financial tranquility present itself?

It started with a budget. What does a budget do? First, it gives you a clear picture of how you are already spending your money. Second, it helps you achieve your long-term goals, like buying a house or retirement. Arguably, making a budget and sticking to it is not fun. But it is absolutely necessary for you to be financially successful.

So how can you get started?

• How much money do you make? List paychecks, child support, any income you receive on a monthly basis. This is the amount you have to spend each month. The goal is to not spend more than you make. If you have an income that is irregular (working on commission, self-employed), there are forms to help you figure how to determine your monthly budget.
• Make a comprehensive list of everything you pay for. Not only rent or mortgages, but lattes from Riverside Perk and golf games at Braeburn, mani-pedis, etc. Track your fixed payments (student loans, car, insurance) in addition to your variable payments (electric bills, credit cards, cell phone). List everything!
• Categorize your budget. Necessities such as housing, utilities, and extras such as entertainment, etc. should all be listed. There are free budgeting forms online here, here and here.
• Plug all your current expenses onto your budget form and evaluate. Are you spending more money than you make? If so, some things are going to have to go. Really look at your expenses. Are there places you can cut to pay more on a credit card or loan? What are your long-term goals? Can they be achieved with the budget you are looking at?
• Spend your money on paper before you actually spend it. Make sure you can account for all your money. Need groceries? Stick to the amount of money you budgeted for it. Did you budget for drinks and dinner once a week at your favorite local spot? If you did, take cash and spend only what you budgeted.
• Budget an emergency savings fund. If you have at least $500 in an emergency fund, you may not need to use a credit card when you have car trouble or your water heater leaks (ask me how I know).
• Experts say to give your budget at least three months to work. You will have to tweak it. Your needs will change, guaranteed. And that’s okay! Just stick with it so you can move forward “in these economic times,” pay off debt and save for the future.
• Do you need help? Wichita has more than 100 financial planners ready to help you. But you can get started on your own, right now, with free tools from the Internet.

Fear not, friends, for this tale has a happy ending. Budgeting money properly and doing away with credit cards at first seems limiting, but actually sets you free to save for the future (house, college, retirement) and allows you the opportunity to be content with what you already have, which, as I have learned, is perhaps the best lesson of all.

(image credit)

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