Beating Broke

Personal Finance from the Broke Perspective

Building a Budget From the Ground Up

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Creating a budget when you’ve never used one feels like a daunting task. If you’ve spend your life with money coming in and going out with no plan on what it’s paying for, now’s the time for a budget. Perhaps you’re swimming in debt and you can’t find a way out.

Building a budget is a lot like building a house. You need a strong foundation before you can do anything else. Ensuring that your needs are met each month is of utmost importance. Needs are the foundation of your budget. Don’t mistake bills for needs. Just because it’s a bill does not mean it’s a need. Your needs are housing, food, medicine, clothing, and transportation to get you to and from work. Credit card bills, Netflix, RV payments, and even an expensive cell phone in most cases are not needs. And in rare instances or unless you work from home, internet service is not a need either.

List Your Income

How much do you make or anticipate making each month? This includes all household income. For instance, if you have a roommate, how much do they pay for rent and utilities? If you’re married and you have a joint account, how much do they make each month? Your income is the starting point to seeing if you need to make adjustments to your lifestyle, find a way to make more money, sell off some assets, or downsize anything in your life.

List Your Needs

I said earlier that your needs are the foundation for your budget. Needs include housing expenses, food, clothing, vital medicine, and transportation. List these and subtract them from your monthly income. How much money is left? That’s how much you have to focus on paying down debt, and to go toward other financial goals and fun things. Your needs are not negotiable.

List Your Debts

This includes medical debt, car payments, credit cards, your credit builder card, and store credit. Anything you owe should be listed here. You want to write down the minimum monthly payment along with the total amount owed. Subtract these minimum payments from the amount that was leftover after your needs were accounted for. Is there anything left? Yes? Great!

Make Room To Save

Saving is vital especially if you want to stay out of debt. Emergency funds can help you take care of urgent situations without going into more debt. It’s important to start with a month’s worth of expenses, and then you can work on paying off debt while finding ways to boost your income through your daily job or a side gig that takes time and effort but has large potential paydays through sales or services in industries like events, real estate, or even transportation like Uber and Lyft.

List Your Wants

Here’s the place to budget for your fun stuff. Pick all the stuff you’d like to include in your budget. This can include saving for vacation, your internet and satellite service,  If you’re drowning in debt, it’s still important to budget even a small amount of money each month to do something fun. Whether you splurge on a monthly Netflix subscription or a couple of latte’s from Starbucks, these wants can help you get over the challenge of getting rid of the debt.

How Much Is Left?

Got more left? There are so many ways to use this amount. You can use it to pay extra on debt, to build that emergency fund, or even to give to a cause you care about. If you’re stuck in the negative however after your needs, debts, and wants, it’s important to look for ways to either make more money or spend less. Getting out of debt is a great way to increase your disposable income each month. But when you make less than your bills it feels overwhelming to get out. Look for things to sell in your home and try and pay off some of the smallest debts first. This will help you feel accomplished and get you motivated to keep going.

A budget is a fluid thing. You start by building with your needs, but money should be coming in and going out. Planning ahead is what helps you stay on track to your financial goals and it ensures that your needs are always met first each month. Once you get used to budgeting each month, you’ll be able to get more complex by adding in investments and other more complex financial tools.

Who Says Second-Hand Fashion Can’t Be Glamorous?

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Historically speaking, quality clothing has never come cheap. Believe it or not, but when adjusted for inflation, today’s clothing prices are significantly less than what they were in the past.

With that said, few households have the income to justify paying what stores are charging for designer clothes, shoes, and accessories. Unless there’s a good reason to buy new, you’re always better off buying preowned.

But who says second-hand fashion has to look dull and disappointing? The truth is that, with a few tweaks to your approach, it’s possible to look absolutely stunning in nothing but preowned attire.

The following are a few ways you and your family can save money on nice clothes, shoes, and accessories while still looking sharp:

Antique jewelry

Nothing adds a splash of refinement to an outfit like a nice piece of jewelry. Unfortunately, most strip-mall jewelry stores make it difficult for customers to know whether or not they’re getting a deal or getting ripped off. If you want fine jewelry at a relatively fine price, consider going the antique route. An antique necklace or pair of earrings will be expertly crafted from precious gems and metals without unfair markup. While all fine jewelry is inherently expensive, the unique style and elegant flair of antique pieces will justify the cost, especially since older jewelry was made to last centuries with minimal maintenance.

Vintage style

Retro fashion has been paradoxically en vogue for decades. These days it seems like the styles of the 1970s, 80s, and 90s are considered an acceptable part of modern fashion, so use that to your advantage. Thrift stores, online auction sites, and old-fashioned yard sales are goldmines for vintage clothing items. However, as far as looking your best is concerned, it’s a good idea to avoid looking like you just stepped out of a time machine. In other words, incorporate one or two pieces of vintage fashion into your outfit, rather than a head-to-toe throwback ensemble.

Tailored outfits

Gowns, suits, and other formal wear are meant to be custom tailored for an optimum fit. That means you shouldn’t buy nice clothing at thrift stores – or does it? Tailors can make adjustments to preowned clothing the same way they do for new items. With this in mind, consider buying gently used formal wear that’s a little too big for you. Take it to a reputable tailor and nab yourself a gorgeous outfit for hundreds less than what you’d pay otherwise.

Posh resale

Many companies these days make a business out of reselling gently worn designer label clothing items. These businesses operate with reduced overhead by shifting everything online other than the cleaning, storing, and shipping of the clothing itself. They pass the savings onto the customer while still earning enough to make it worth their while.

Hidden treasures

Sometimes you just have to get lucky. It could be a heavily discounted jacket you find at the flea market, or a beautiful brooch you come across at an estate sale. Whatever the source, the only way to uncover hidden treasures is to get out there and start hunting. With that said, it’s crucial to do your research prior to purchase. Just because the sales staff claim it’s a steal doesn’t make it true. Consult online pricing guides to gauge the true value.

Quality clothing should be made to last. Unfortunately, today’s trend of disposable fashion means people pay more for the brand than the clothing itself. In order to look great without spending a fortune, folks ought to opt for preowned clothing, shoes, and accessories. Doing so ensures you aren’t going broke just to stay fashionable.

How To Accumulate Assets and Diminish Liabilities

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Accumulate Assets and Diminish Liabilities

There are a few financially intelligent, dedicated among us that are intent on creating wealth early in life. But, unfortunately, most younger Americans are more interested in accumulating homes, cars, clothes, and other items to make life more comfortable. However, if we can change our mindset and realize when enough is enough, we can more easily accumulate assets and diminish liabilities.

Change Your Mindset

So many of us spend our 20s and our 30s trying to accrue items. We buy houses, buy a car, furnish our homes, go on great vacations. While there’s nothing wrong with any of these things, they do hinder our ability to accumulate assets and diminish liabilities. Most Americans this age think their 20s and 30s are a time to accumulate things and show that they’re successful. This mindset is wrong if you’re looking to retire comfortably.

Instead, think of your 20s, 30s, and even 40s as a time to accumulate assets and diminish liabilities. For instance, Tom graduated from college with $35,000 in student loan debt. He landed a job out of college paying $85,000. For the first two years of that job, Tom rented a room rather than an apartment and ate the proverbial beans and rice. He lived a completely spartan life so he could pay off that student debt in two years. His only object was to diminish his liabilities. That is the type of thinking and acting that helps secure your financial future.

Recognize When Enough Is Enough

Accumulate Assets and Decrease Liabilities
Photo by Scott Lorsch on Unsplash

Likewise, many of my friends are in their 40s and have teenagers. Time and time again, these friends upsize their house, spending perhaps 1.5 or 2 times what their original house cost, so they have more space. But, just a few years later, the teens go off to college, and now the parents are empty-nesters in a big house.

My husband and I already live in a modest house, but we’re looking to relocate. Even though we have three teens or nearly teens, when we buy a new house, we plan to buy one the same size or smaller than our current house. We know the empty nest is right around the corner and don’t want to pay more for a mortgage, utilities, and property taxes than we have to. Buying this way will help us diminish our liabilities so we can continue to save for our retirement.

Final Thoughts

If you can change your mindset and recognize when enough is enough, you can easily accumulate assets and diminish liabilities. When you save yourself money by not buying a fancy new car but instead contenting yourself with your 10-year-old car, or when you forego buying a bigger house when you have teens, you can use that extra cash to invest. As you invest more and more, you are accumulating assets.

Realize that most of your life is about building wealth. Then, when you’ve reached your financial life goals, you can ease up and spend a little more freely.

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