Saturday, September 7, 2013

Simple Living 101: Part 2-Money Management

Part 2 of what I've learned from Simple Living so far...

Pare Down and Cut it Up


Today, I only have one (usable) credit card. EH and I had two credit cards each and decided to cut up one each. They both still have balances on them but at least we won't be tempted to use them because they're simply no longer available.

Some debt control web sites/books suggest that you freeze your credit card but I knew I would be blow drying that frozen credit card every month to buy something I didn't need. So, if it's possible for you, cut that bad boy up and throw it away.

Out of sight, out of debt, hopefully.

If It's Broke, Fix It
EH and I used to have banking accounts with two different banks. One account we opened when we first moved in together. We discovered after a couple of years that it wasn't working for us. We didn't have access to our account online and the customer service was atrocious. So, we eventually took our money to a different bank but, for some reason, we kept the old account open. This past week, I finally closed  it and what a relief it was!! If something isn't working for you, whether it's a bank account or other type of financial account, don't be afraid to change it. What you gain in peace of mind is far more than any anxiety you might feel.

 Spender vs Saver

There's nothing that can drive a nail into simple living like a spouse who's not on board. I've always liked having my own money so right from the jump I knew that when EH and I got married we would have a joint account but maintain separate accounts. Another part of that decision stemmed from how different our thinking is when it comes to managing money.

EH comes from a family that was just getting by for most of his childhood. His father supported the family by driving a cab and his mom worked on and off while raising he and his brother and sister. He never went without the basics but he definitely didn't have many extras. When his parents needed extras, they bought it on credit, and struggled to make debt payments. His financial motto is: It's just money; I can make more.

My mother made her living as a nurse and most of the extra money in our household went to buying things that would make us appear to be the perfect family. New clothes, new purses; a new pair of shoes, hair, nails, etc. I hated it and rebelled against it. My financial motto became: Money is precious and spending on more than the basics isn't necessary. It wasn't until I moved out of the house that my spending habits became unmanageable. During that time I felt a tremendous amount of guilt about being in debt and spending money on myself.

I'm stingy with money and EH is extravagant with it. How do these different financial styles co-exist?

Over the years, we've rubbed off on each other. I've begun to let go of the purse strings a little and he's been able to say, maybe we don't really need this after all. Communication is key when you have a spouse that doesn't have the same ideas about money management. Both spouses need to have a say in how the money is spent. You can't get out of debt if one person is spending money you don't know about. I say this out of experience.

I used to think that EH should handle the bill paying because he was bringing home the money. Looking back I can see that my thinking was based more on my own insecurity over not working than anything else. Having EH handle the money didn't work out well and like some men all men it was difficult for him to talk about it. After a few fights, he finally admitted that he was overwhelmed and stressed about making the money and managing it too.

Since I'm not working at the moment, EH has his check deposited into his personal account and then he and I will sit down with our budget (made in Excel and posted on Google docs so we both have access to it). I go through the rows one by one and he transfers what needs to be paid for that pay period into our joint account. We've configured all of our recurring bills (utilities, credit cards, student loans) to pull from that account. Whatever is left over can be used as spending money. This was important because in the past we would have spending money and bill paying money in the same account and find out later that a certain bill didn't clear when we thought it would which would lead to spending money that wasn't there to be spent. Having money for bills come out of one account means we can leave that account alone until all bills are paid. Our new method allows us to spend away knowing that when the spending money runs out, the fun is over.

Our biggest expenses each month are from our combined student loan debt (approx $80,000 and counting in total) We've come to terms with the fact that unless we hit the lottery, which we don't play, or money falls into our laps from the sky, we'll be paying on these loans until we kick it. What we're really concerned about is getting rid of our credit card debt. We've paid off credit card debt in the past...twice!! and somehow one or both of us will start using the card again for an "emergency" and then we're back in the hole. It's a slippery slope. The goal is to have just one credit card to be shared by the both of us.

This part of my simple living lifestyle is still a work in progress but I have faith that we'll get there. The money I'm saving in other areas of our lives is being used to decrease our debt. Now, I try to question every purchase and if EH can convince me it's necessary, we'll usually get it. It works the other way too. If I can convince him that we can do without it, it stays in the store.

Next Up: Part 3: Improvements in the Home

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