Thursday, January 28, 2010

Easier Said Than Done Part I

The reason I created a spending plan in the first place was so that I could pay my debts down faster and to not have to go into more debt in the future. Having the budget gave me that general framework, but it ended up being quite easy to just forget about the money at the end of the month. Then money like my poker savings just disappeared.

So now that I've said I want to budget my money, here comes the tough part. Actually doing it.

I don't currently have a lot of wiggle room in my budget. About the only number I can play with is the amount of debt repayment that I make. With both my wife and I in school (and some previous poor choices) we've managed to get a substantial debt built up. We're not really living outside our means now, but we have a pretty big hill to climb and I'd like to pay it off as quickly as possible.

My biggest motivation is to get out of the condo I'm in. Both to get away from my loud bass playing neighbors and so that we can start on a family.

So I started to tackle the job this week. I'm a pretty organized guy and pretty frugal so I have to confess I figured I'd jump on here and write about some minor tweaks I made and give some great advice about tracking these numbers. Unfortunately I have to admit, it's not quite as simple as I thought.

First off using a credit card complicates budgeting quite a bit. I can see why most financial books recommend avoiding them now. It's not just about carrying a balance. The concept of credit is buy now and pay later, so this months bill is for last months purchases. Mix in cash and it gets very confusing.

It probably wouldn't be so bad if I put the cash aside when I made the purchases to pay the bill next month. At this point though I'm essentially a month behind with not a lot of hope of catching up. In hindsight I shouldn't have let that happen, but let's move on...shall we.

I still won't say credit cards are bad, but they do make for some interesting budgeting issues. In fact, I wrote a posting on why I use my credit card for almost everything. I'll post it in the not too distant future.

At some point I'd like to catch up, so I'm not a month behind (tax return perhaps?). In the meantime, I tally up this months surpluses and deficits and use the difference to pay more (or less) on the line of credit in the following month.

My advice to anyone just starting out is to put money aside when you make those credit card purchases.

Part II next week...

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