Monday, April 30, 2012

When paying the bills is too much

Originally posted June 13, 2011

I'm excited to introduce the first of several guest bloggers I have lined up for you to enjoy: Kendra. Kendra is the mastermind behind Voice in Recovery. She shares her story and walks you through recovery. She is insightful and cute. Here she talks about how if you are struggling with abuse in one area it usual permeates to other areas of life as well. Including finances. Enjoy!
When I was struggling with alcohol abuse, eating disorders, self harm, panic attacks, saying my life was unmanageable is an understatement. Life revolved around my struggles, and everything else I could not handle. Everything seemed too hard, too challenging, and would lead to panic attacks. I was unhealthy in my body, mind and soul, and my life, career, finances, all became too much to handle. I could barely pay a bill, let alone open an envelope without getting crippling anxiety.
I was fortunate to have my parents, who I was able to assign as people who would handle my finances, while I could get healthy. I went into treatment, residential, and asked them to take care of what I could not handle myself. When I got out of residential, I took some time to focus on me, my treatment, going to support groups, and eventually getting a job. Four years later and I not only handle all of my finances and have a job, but my life is indeed manageable and full. It has been a journey, just as any other struggle, to take back over my finances and learn to budget, pay bills and save money.
I am an accountant by career, and so I am knowledgeable in what I needed to do in order to take over my finances. I am looking to buy a car in a few months, and had to sit down, make a budget and make a serious plan about what I needed to do in the next year.
Here are my 5 Tips to Handling Finances:
1. Know what money you make and spend in a month.
The first thing I recommend anyone do, is to download a month of their banking detail into excel. I know Bank of America has an option to choose the date range, and export the data to excel. I then would recommend downloading a simple budget spreadsheet so you can see what comes in and goes out. You won’t be able to budget anything until you know what you make and spend.
2. Determine your fixed, variable and negotiable expenses
Fixed expenses are what must come out every month and are the same amount. This can include your mortgage, rent, car payment, student loan payment, hulu, cable, Netflix, etc. Variable expenses are ones that are monthly expenses that you must pay, but vary, such as gas, groceries, pet food, cleaning products, etc. Negotiable expenses are what I consider my “wants” versus my needs in the fixed and variable categories. Negotiable expenses for me have included restaurant dinners, movies, clothing, iTunes, books, concerts, etc. When I did a few months of my monthly ins and outs, I was shocked to see my negotiable category was ranging from $700-800 a month. WOW. I had no idea exactly how much I was spending, but it was making me only able to live paycheck to paycheck, and unable to save, put money to 401k, etc. I immediately made changes, and stopped spending so much on my wants, looking for ways to save in my variable category (shopping during sales, using coupons).
3. Credit Card and Credit Score Management
Credit cards have high interest rates, and are a huge struggle for people in this country. I didn’t have credit cards for years because I wanted to only spend what I made; I never wanted to owe more than I was making. I now am trying to rebuild my credit. I would recommend you sign up for a free service where you can get all three credit reports so you know exactly what is on your credit report and see if everything there is valid, or needs to be put on the budget to be paid off. I recently got a very low credit card, for just $300, and spend about $100 a month on it, money I know I can spend and pay off completely each month. If you are trying to build credit, pay off what you spend every month to avoid high interest fees. If you are terrible at credit card management, consider closing all your credit cards and negotiating settlements with the card companies to pay off in installments.
4. Utilize automatic payments
If you're as bad as I am, I like the security of knowing all my bills are on automatic payments. It takes out the questioning of trying to figure out what bill is due when, and since I have enough money to handle my fixed and variable expenses, I set up these automatic payment withdrawals from my account to avoid late fees. I have lost a LOT of money in the past just by forgetting to pay bills I meant to pay.
5. Make monthly and yearly financial goals
Is your goal to save for a car, a house, or is it to build your 401k, savings, or pay off your student loans? Knowing where you want to start is important. As Suze Orman will say, always pay off your student loans, because even if you get in financial distress and enter bankruptcy, your student loans will always be there. Since I want to buy a car, I am learning a lot about credit unions, interest rates, my bad credit, and facing what struggles I will come across when applying for loans, especially with high interest rates. I have to be accountable for my past, as well as realistic with my goals now. I know I am always learning and learning to approach one goal at a time financially.
For me, financial independence has taken time, patience, and learning along the way. I am still learning, and utilizing the web, my family and people who are knowledgeable to help guide me. I also am lucky I am an accountant and understand these basic principles. I know people who may say “if you are an accountant how did you get in such trouble?” Here is the thing, when you are struggling in life, everything, including the most simple of tasks seems overwhelming. I had days where I struggled showering. There is nothing wrong with me, or anyone else who is fighting with a struggle and taking their own time trying to find new ways to manage their lives. It takes time. But it is possible. Never give up, and be open to learning and asking a lot of questions along the way.
P.S. Thanks again to Kendra for sharing her advice and experience. Take the time to check her out at Voice in Recovery.
P.P.S. There is still time to enter the giveaway. Click on over for there for the rules.
P.P.S.S. Be sure to check back, I have some more amazing guests lined up for this week as well as another giveaway (and this one isn't a book, something kind of new for me:)