As the credit crunch continues, more and more people are learning to adjust to life without credit. It’s been four years since I borrowed money or used a credit card. Here’s how I live without borrowing money.
I live on a budget. My wife and I receive monthly paychecks and I receive irregular income from various sources. I use the You Need A Budget software to create my budget and track my spending. As I create my monthly budget, I’m able to think about the coming month’s expenses, and plan accordingly.
Many people, when dealing with personal finances, feel anxious and frustrated. Budgeting can help with these feelings, because a realistic budget helps to remove some of the what ifs and replaces them with actual realities. When you create your budget, you may not like the numbers that you see, but, at the very least, you’ll know exactly with what you are dealing.
Learning to live on a budget can take time. Be patient. It took me almost six months to get things right. Eventually, creating a budget will become second nature and you’ll actually look forward to sitting down with your bills and hammering out your monthly plan. Seriously. Trust me!
Sure, my budget helps me get through the month, but also create short-term and long-term plans. Remember, you’re learning to pay CASH for every thing. That new washing machine? You are going to pay cash. That newer automobile? You are going to pay cash. College for the kids? Yep, you are going to pay cash. So, you need to plan, plan, plan. (Note, when I use the term cash, I mean that you are going to pay for these things, up front, instead of borrowing money and paying for them later. The actual method of payment might be cash, debit card, online bill pay, or check.)
I have several short-term plans (and goals). Currently, we are saving to buy new furniture, a newer automobile, and new appliances. But, I also have long-term plans (and goals), including buying a house for cash and paying for our three kids to go to college. So, even though we are debt free, and could spend our money foolishly, our plans keep us honest and frugal. In fact, we have less spending money, now, than we did when we were in debt, because so much of our savings are allocated to future purchases. (Of course, the cool thing is, even though this money is allocated, on paper, for specific future purchases, we could, in the event of a real emergency or opportunity, use this money for anything we wanted. That’s what’s great about having money in savings. It’s ours, and we can use it as we wish.)
There are no shortcuts. If you want to have enough money in the future, you have to sacrifice today. If I bought every gizmo and gadget that I wanted (and could, at this point, afford), I would never achieve my long term goals. Right now, we live in a house that is provided as part of my compensation. We really want to buy our own home. But, our real goal is to pay cash. So, we make a house payment, to ourselves, each month. Even though I could buy name brands, I still buy generic, because getting out of debt was just the first step of a very, very long journey.
It’s never easy to go against the grain. When everyone else is buying new cars and upgrading to the latest and greatest, it takes a certain inner strength to be content with what you already have. As recent events have shown, however, most Americans (and most politicians) would do well to learn a little fiscal restraint. So, the next time everyone in the office goes out for lunch, proudly produce your brown bag. When the newest cell phone hits the market, be content with the one in your purse that still works just fine. If you can’t afford your lifestyle, make the changes necessary to bring your expenses into line with your income.
Side Note: I’ve been living without borrowing money for four years. I’ve also avoided using credit cards. If you choose to use credit cards, and many do, just remember to pay them off at the end of the month, so as to avoid those pesky interest payments. As credit card companies look for more ways to make money, in tight times, I’m sure that they’ll get more and more aggressive with their fees and charges. If you must use them, be careful!
I’ve written about this subject before, and you might be interested in some of those articles.
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Edit: I just reread this post, and I think I want to write a little more about combining the budget with short and long-term plans. I’ll write about that in my next post. If you haven’t done so, consider subscribing to No Credit Needed and you’ll receive all updates and new posts.