It’s been three months since I began working with four people – two single women and one couple – to help them achieve their financial New Year’s resolutions.
So far the challengers have progressed nicely. Carl and Tania Chandler, a married couple from Maryland who had $14,400 in credit card debt and no savings, have paid off two of their accounts and brought their debt down to about $12,000. The Chandlers have saved $3,200 by putting aside some of their tax refund and depositing $50 every time they get paid.
Carlesa Washington, a recent college graduate living in the District of Columbia, paid off two delinquent accounts totaling $1,565. She’s well on her way to paying off the remaining credit card, which still has a balance of about $4,800.
Anne Schleicher, a single 35-year- old associate editor for a news website who also lives in Washington, stopped using her one credit card and is paying $200 a month toward the $4,500 balance.
“It’s nice to see my statement, which says no activity this cycle,” Schleicher said.
However, the challengers have struggled with one major thing – budgeting. The hardest part of this challenge is getting everyone to realize that they have to delay the extras – their wants – until they’re out of debt. To do that, they have to establish a budget – and stick to it so they know when to stop spending.
Because they haven’t really kept to a budget, they’ve made a few missteps. Despite my request that Carl Chandler not buy a $600 Sony PlayStation 3, he purchased it anyway. The Chandlers also took part of their tax refund and bought furniture for their family room. “But we paid cash for everything,” Carl Chandler said. “I took on extra work to pay for it, and it’s the only thing I wanted.”
A budget helps you discern between a need and a want. The couple had furniture in the family room – they just didn’t like it. They spent about $3,000. It was money that could have been used to pay down their debt.
Everyone across all income levels struggles with budgeting, according to a recent CareerBuilder.com survey. When asked what puts them over budget most often, most people said dining out.
The thing is, to achieve your financial goals you can’t keep living above your means. You have to budget for fixed, variable and “unexpected” expenses. As for “unexpected” expenses, I believe there are few – if any.
So set aside some money for those expenses when they do arise.
Don’t view your budget as a fun-buster but rather as a way to bring financial peace and order to your household.
Contact Michelle Singletary at singletarym@washpost.com or c/o The Washington Post, 1150 15th St. NW, Washington, DC 20071.
