I’m going to change things up a bit with the way I post, sort of along the lines of a series. Though, to be honest, I’m horrible at following through on series-based posts. So, to start my problem/solution posts out right, I’ll include a link in my navigation that will organize my series making it easier to find them (and a reminder to myself to keep it going!).

The Scenario

Every two weeks, your pay check gets deposited directly into your bank account and you’re flush with cash. You feel giddy at the sight of those dollars and cents appearing in your bank account. However, after paying a few bills, some which may be past due, your bank account is nearly on empty and that euphoric feeling you had just days ago has now turned to angst. Not only is your bank account precariously low, if any emergency were to pop up you’d be near bankrupt, or at the very least, in a financial pickle.

Confronting the Problem

It’s not uncommon to first blame a low paying job as the reason you’re constantly broke before your next pay check arrives. If you aren’t the only once accessing your accounts, you might even blame your significant other for being the spend-thrift.  But the real reason you’re broke between pay periods is that you haven’t been tracking your spending or income. Your cycle might look something like this:

  • Payday comes- pay all the bills that have been piling up. This might also include an overdraft or two and a late charge.
  • Payday goes – most of your money has been spent keeping up with your bills. You barely have two nickels to rub together, but somehow you can still afford to eat lunch out with the girls.
  • Reality sets in -you’re tired of feeling broke all the time. You know you make enough money; heck you’ve compared your income with your friends and it’s not all that different. It’s time to make a plan.

Finding the Solution

The solution doesn’t need to be complicated. It’s a matter of sitting down and figuring out what bills you must pay, what expenses you’d like to keep, and what needs to be eliminated. This is called making a budget. Using an excel spreadsheet works for me, but you might want to give Mint.com a try. By tracking your expenses, you see first hand where all your money goes each month. A few good steps to follow include:

  • Track your expenses – find out where your money is going. Are you eating out too much? Are you spending too much on your cell phone plan or on cable television?
  • Make a budget – calculate your monthly expenses, both needs and wants. If you’re not sure, estimate certain items, but once you’ve tracked your expenses, go back and revise the estimate to an actual amount.
  • Take your income into account – now that you know how much you need each month to live comfortably, add in your income. Will it cover all of your expenses? Can you increase your income by freelancing?
  • Start a savings fund – by having a few dollars saved up in an account helps alleviate some of the stress of an empty bank account.

This isn’t meant to be a one-size-fits-all plan, just a good starting point if you’re ready to begin working on becoming financially responsible. Look for my next problem/solution post on ways to start a savings account.

How have you overcome a financial problem? Did you ever feel broke before payday and realize it was because you weren’t keeping track of your expenses? What topic might you like to see covered in this series?

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