ON FUN ~ The Envelope Please...

Edition #36
Thirteen Things about THE BUMBLES -and some of Molly's tips for getting out of debt and staying that way...

Twice in her life Molly has gotten herself into and out of debt. If there's one thing she can't stand it's having an unpaid balance hanging over her head. So here are some things that worked for her to keep her head above water and eventually got her back on dry land...

1. Keep a Spending Log for a week. How are you going to know what your budget needs to be if you have no idea how much you actually spend? Write down EVERYTHING that you buy out of pocket (i.e. not bills) using cash, check or charge - what it was and how much it cost (groceries, meals, beauty treatments, clothes, gas, toys, pet supplies, entertainment, treats/vices, etc.). Multiply the total for the week by 4 to provide an average monthly figure.

2. As you receive each bill (mortgage/rent, car payment, medical, insurance, utilities, credit cards, student loans, etc.) write down what it is for, how much you owe, how often it is due, the date it is due and the minimum payment allowed. Missing payments hurts your credit score meaning no one wants to loan you money when you need it. Minimum payments keep creditors away and give your credit a fighting chance. Paying more than minimums is less expensive in the long run. But something is always better than nothing. If you have any bills that are not on a monthly frequency calculate the average monthly amount and add it to your total monthly bill tally.

3. Make a list of all income sources from paychecks to side jobs, pension or social security checks and how much and how often they are paid to you. Average them out to a monthly figure as well. You can include people who owe you money too but good luck trying to track that down. They're probably in the same boat you are. Dump your spare change every day into jars and roll those coins every few months. Cash in those empty cans and bottles for the deposit rather than dumping them in the recycling bin or throwing them out with the trash *gasp*. Every little bit helps.

4. Compare your average monthly income in #3 to your average monthly bill expenses in #2 first. If you have any money left over you've got something to work with. If however you have months of unpaid utility bills or loans piled up, call them and work out a payment/installment plan to let them know you are making an effort to work things out. They're not likely to turn down offers for partial payments as opposed to nothing.

5. Never let your insurance lapse - whether it is for your car, your home or yourself. That is not a gamble worth taking. It is far less expensive to pay your premiums and receive a claim than to pay for repairs entirely out of your own pocket - which we now see is pretty empty. If you were in an accident tomorrow and you had no auto insurance, not only could you not fix your car but you could likely not replace it if it was totaled. And how exactly would you get to work to earn the money to pay for it all? Pay your premiums.

6. Do you have anything left over for #1? Probably not, which is why this next step is vital to keeping you from falling further in the hole. Time to trim the fat.

7. Look at all that stuff you spent money on. A big chunk probably went to food. That's as essential as your bills but you need to find ways to reduce the cost. Do you have to be so brand loyal when the generic brand works just as well? Do you really need to drink that much soda or coffee? Why do you need that many different types of cereal? Coupons and sales are everywhere - take the time to use them. Start your own vegetable garden. Buy at the local farmer's stand/market - sometimes you can negotiate or get bargain prices near the end of the day when the supply needs to be sold off.

8. Another money hog is gasoline. Plan your trips for errands in advance. The less times you have to go out the less gas you will use. Find the station that charges the least - sometimes paying by cash is cheaper than charging. Keep your tires properly inflated - it makes a difference in the gas you use. Carpool with friends/neighbors when possible. Take public transportation whenever possible, walk or ride your bike.

9. Now pretty much everything else needs to be trimmed or cut altogether. No more manicures, new flip flops or meals you didn't pack for yourself. Say goodbye to bookstores and hello to the library. No fun? No joke.

10. But lets be realistic. You are going to want to stop for a coffee here and there. Or you're a smoker. And then there's a night out with friends every now and then where everyone gets together for drinks. Or for your sanity you really need to hire a sitter so you and your spouse can just go out for a walk to stay sane. You need to budget a few bucks for fun too.

11. Now take your lower revised figure and replace #1 with that amount. Divide it by 4 and that is the amount of cash you need to take out of the bank each week. NO MORE than that - no excuses. Take money out of the bank the same day each week - every Sunday for example. If you have budgeted the above realistically then you will be OK. If you have been fudging numbers to make yourself feel better, you won't be OK.

12. Pull out a stack of envelopes and write categories on each one of all the out of pocket things you buy - groceries, gas, clothes, beauty, fun, etc. Next to the categories write the weekly amount budgeted for each and place that amount of cash in the envelope. Take what you feel you will need for the day each morning from each envelope and leave your ATM and credit cards at home. You will be paying by cash for everything - even groceries.

13. If you have any extra money left at the end of the week you can choose to carry it forward to the next by leaving it in it's envelope. Or you could move it into your Fun envelope as a reward. Or you can put it in a SAVE envelope and deposit that money into a separate money market account to build up a Do Not Touch fund to pay down those loans and other bills - which is a better idea to get that monkey off your back and the envelope method out of your life. The envelopes will train you to pay attention to how much you spend and learn how to think ahead for the various items you want/need to spend it on. And learning that is what helps to get you out of debt. Or, you could win the lottery.

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