Member preview

I’m Always Broke — But It’s Part of the Game

I don’t have enough money to pay off my credit card.

I study my finances a lot. Probably more than I should. Yet, there are still times when I spend out of control and buy things that I don’t need. I don’t expect myself to be perfect and neither should you.

I’m just like you.

I’m also not very good at following strict budgets or keeping track of every single expense. I’ve tried various budgets and they never last too long. For me, the simpler it is, the better.

50/20/20/10 Rule

  • Fixed & Variable Expense: 50%
  • Invest: 20%
  • Savings/Loans: 20%
  • Fun Money: 10%
Example: 50/20/20/10 Rule in action.

Fixed Expense: These are usually reoccurring expenses that cost the same every month. This includes: rent, gym membership, phone bill, etc.

Variable Expense: These are usually expenses you budget for every month because it can vary month-to-month. This include: gas, food, and even dates with your significant other (this one can get out of control if you don’t budget!).

Invest: Put money aside to start investing. A good way to begin is by opening a brokerage account where you could invest in stocks or mutual funds.

Savings/Loan: Put this money towards your loans or into a savings account. You could even choose to split it between both or pool all towards one.

Fun Money: Enjoy yourself and spend it on what you want! Building for retirement is cool and all but don’t forget to enjoy your life while your young.

This could also be an opportunity to save up for stuff you “want” but don’t “need”.

Example: Actual Expenses exceeds projected expenses 😨
Example: Actual Expenses below projected expenses. 😃

Automate the process.

Your fixed expenses are typically set in stone. Make your life as simple as possible and automate these payments. This includes:

  • Automatic payments for the phone bill/internet/insurance/gym. There are more important things to worry about than wondering if your phone bill was paid or not.
  • Automatic transfers to your savings/investment accounts when you get paid. This will stop you from saying “I don’t have enough money to invest this month” because it will not be an option.
Setup automatic payments on your credit card for the last day.

This means if your credit card statement is posted on the 1st of every month and the payment is due on the 30th, then set the automatic payment for the 29th or 30th.

All this is very important and let me tell you why.

You need to pay for each statement manually. This is the only time of the month where you need to sit down for 10 minutes, go over the statement, and click that pay button with your mouse. It is when you figure out where you stand in your monthly budget and financial plan.

The automatic payment is your backup in case you forget to pay for it manually. The last thing you want to do is miss a credit card payment!

Back to not being able to pay off the credit card.

This happens when your expenses exceed your income. Since everything goes on a credit card these days it’s not difficult to do so. When this happens, I know that I’ve had a bad month of spending and it is something that I need to correct or adjust for the following month.

In my scenario, I could probably transfer some money over from my saving to checking account to pay off the credit card. But I don’t. Unless it’s a one-time expensive expense (ex: computer, tv, sofa).

This is because it’s all a part of the game.

The game where you always feel broke. Until you’re tired of being broke and do something about it. That something means putting together a couple of good months in a row where you spend less and save more. When you go from having $200 in your checking account to having $5000.

When this happens for me I know that I’ve won and I don’t like playing on easy mode so I transfer most of the money elsewhere (stocks/savings) and start over.

You might lose some battles here and there and that’s okay. Just know that you are setting yourself up to win the war.

Remember — personal finance is personal. So find something that works for you and enjoy the ride!