Learn how to budget if caregiving ruined you financially so you can tell your money where to go, and always know where it went.
If you’re like most people, your finances were just another area of your life that took a major hit when you were caregiving.
According to a Forbes article, 68% of family caregivers provide some form of financial support for caregiving. This results in many caregivers having to reduce living expenses to provide care, while 63% have to withdraw money from savings or sell assets to provide care. In addition, many find themselves having to reduce or stop entirely contributing to their savings. And, if you cared for someone with Alzheimer’s or dementia you probably spent 54% more than the average caregiver.
Sobering statistics of which I know many of you can relate.
So today if caregiving ruined you financially, I want to help you create a budget and learn a simple system to tell your money where to go, so you know where it went.
HOW TO BUDGET IF CAREGIVING RUINED YOU FINANCIALLY
The purpose of a budget is to tell your money where to go instead of wondering at the end of the month where it went.
It’s more than likely that while you were caregiving you found yourself neglecting your budget. Let’s face it if you could make ends meet you felt pretty good. You might have worried about the future, but your present circumstances took the bulk of your attention. But your future is ahead of you and it’s time to get your money situation in a better place so you can finally have financial peace.
YOU NEED TO WANT FINANCIAL PEACE
Here’s the thing though, no budget in the world will work until firmly decide you WANT financial peace.
Back in 2002, I lost my job. Actually I was fired from my job. At the time I had no savings, was over 50K in debt, had another 28 K in student loans, a kid in college, and two parents who relied on me to fill the gap for them each month. I was in a really tough place with no job in sight.
At first, the reality of my financial situation didn’t really hit home. But all that changed the day the foreclosure notice arrived in the mail. What a wake-up call that was. I was determined to figure a way out of the mess I had created and so I started a business because I felt that was my best hope of bringing in more money than I could possibly make in a regular full-time job. And I was right.
By the end of my first year in business, I was grossing over 100K a year and within three years I was pulling in 250K a year. Starting my business was the way I was able to get out of debt. But a funny thing happened. Once I was debt-free, I found myself reverting back to old spending patterns – buying in excess, wanting more than I needed, and being lured by pretty shoes (I always had a thing for shoes).
Thank goodness I was able to see this before I found myself right back where I started. And while I was contemplating my circumstance I realized what was lacking was my desire to be at peace financially.
You see, there’s a difference between being debt-free and being financially at peace. It’s a subtle difference but one that bears mentioning here. And as Dave Ramsey has said, “Financial peace brings a sense of hope and freedom. Not only are you not worrying about bills, but you have a plan for the future.”
So if you’re ready to “stop spending money on things you don’t need to impress people you don’t like”, and are ready to go from financial ruin to financial peace, keep on reading.
Meeting your needs is at the core of most successful budgets because it ensures you’ve taken care of you first.
By planning your monthly expense before they happen, you eliminate the vagueness of planning without one and the subsequent chaos that follows when you don’t pay attention to your spending.
You’ll follow these guidelines each month BEFORE the start of the month so you have adequate time to develop a well thought out spending plan.
You can grab my monthly budget (spending plan) worksheets here or use an excel spreadsheet to track your spending and update your information.
Step 1: Gather What You Need
You’ll need to gather bills, bank statements, and credit card statements together. Make sure you find a comfortable place to work on your budget, free from distractions so you can focus on creating a spending plan that works for you and your family.
Step 2: Create your Income and Spending Categories
You’re going to start by generating a list of all the ways in which you make income or spend money.
Income: Include any income that comes into your home including any income from self-employment, part-time work, pensions, or aid and assistance.
Spending: Think about all the spending categories you have for your family. You can use the spending plan worksheet I developed or use your own. Create subcategories for each category you create.
Step 3: Plan Your Spending
Go line by line and plug in your expenses and areas where you’ll spend money. Don’t forget special occasions and events like birthday parties, weddings, etc. Some amounts in your spending plan will be fixed, and some will be variable. Some will occur each month and some won’t. And because of this, your spending plan allows you to create a flexible plan that bends to your unique circumstances.
Step 4: Determine If Your Plan Is Balanced
This is where the plan really starts to come together and you see if you have a workable plan or not. If you’re using a program that does the math for you – great. If not, you’ll have to do the calculations yourself.
The Calculations:
1. Add up the amounts in each expense category.
2. Add up the totals for all the expense categories.
3. Total the amount in your income category.
4. Subtract the total expense from the total income.
So, does your spending plan work? Is it balanced?
If your estimated expenses exceed your income, don’t get discouraged. Step 5 is where you get to make decisions and figure it all out until it does work. Here is where you’ll see the answer to the problem does not lie in using your credit card to make up the difference, but in finding ways to make the plan work without incurring more debt.
One of the ways you’ll ensure this doesn’t keep happening is to start saving as a way to get out of debt. I explain the concept here, but if you don’t include savings in your spending plan, it’s almost a guarantee you’ll continue in the debt cycle.
Step 5: Make Adjustments
PLEASE don’t get discouraged if your spending plan doesn’t work right now. This is your first attempt, and most of us didn’t get it right the first go-around either. When you have more expenses than you do income, there are two questions you must ask yourself:
1. Can I bring in more income, and
2. Can I reduce my expenses?
Go back to your categories and subcategories and find places you can reduce your budget.
One of the biggest budget busters out there is your food shopping budget. This is a place where most people don’t recognize how they can save money by implementing a few simple strategies.
The second area you want to look at is canceling cable and using other alternative streaming services like Netflix, Hulu, and Sling. You’ll have to figure out your options in this area and see what works best for you.
A third area might be your cell phone packages. I know that any time I’ve called my provider I’ve been offered a better deal, particularly if they thought I might want to drop them altogether!
Go to your spending plan and figure out where you can make cuts. Ditch any paid subscription services or memberships you’re not using.
Can you bring in more income?
The ways in which a family can bring in more income are endless. You can sell things online, start a business, take surveys – and be paid for it, do overtime (if you have the option), find a higher paying job. These can be temporary fixes or permanent additions to your income streams. Either way, put your thinking cap on and see what you can come up with.
As you work your spending plan, certain emotions may surface for you. Maybe you’re angry at your circumstances? Or possibly you don’t like the idea of having to delay gratification because you can’t afford it? This is all a normal part of the process we all go through. Realize you won’t be here forever and eventually, you’ll have more disposable income available because your debt will be paid off and you’ll be in a better financial position.
Step 6: Keep Working Your Plan
The key to your budget is to stay connected to it all month long. Tweak it when it needs tweaking, add something you forgot, delete what you need to. It’s totally under your control. One of the best ways is to document your expenses and income as they come in. Recording what’s going on during the month is going to let you see where your money is going and if you need to make any adjustments.
Step 7: Wrap Up The Month
At the end of the month, you’ll want to sit down and take a good look at your budget. Here you’ll be looking at what was expected vs. what you actually spent in each category. This provides an opportunity for you to learn more about your own spending habits and to fine-tune your spending plan for future months. It’s also an excellent way to see how you may have veered off course a bit and how going forward you’ll course correct in the future.
What if your estimates don’t match what you spent? Usually, there are three reasons this happens:
1. You’re not sure how much to allow.
2. Something happened that you did not anticipate.
3. You spent impulsively and veered away from your plan.
As you begin to budget regularly you’ll get better at making these estimations and will find you get closer and closer to your expected amounts.
TAKE ADVICE FROM THE RIGHT PEOPLE
There’s no shortage of people who are ready to offer up their version of expert advice on how to spend your money and the scary truth is most of them do not have your best interest at heart.
And in this day and age of social media, we are bombarded with images of friends and family flaunting their nice homes, luxury cars, designer bags, and fairy tale vacations. After a while you start thinking, “if they can afford it, so can I.” We get so caught up in the image we fail to realize that many times, they can’t afford it either.
Don’t listen to the people who embrace the bigger-better-best mentality and tell you to spend more than you can afford or need. Instead, surround yourself with other people who will support your journey towards financial peace.
Finding financial peace is hard. It requires real sacrifice and real change, and can even feel slightly painful from time to time. Ultimately the reward is worth it.
What would it feel to know you have the money you need to meet all expenses each month because you have a solid budget plan in place?
Let’s recap how to budget if caregiving ruined you financially and the steps to move forward:
First, assess your desire for financial peace. If you’re ready to really make a change and you’re ready for the commitment follow the next seven steps.
- Gather what you need
- Create your income and spending categories
- Plan your spending
- Determine if your plan is balanced
- Make adjustments
- Keep working your plan
- Wrap up the month
Finally, make sure you take advice from the right people. I highly recommend Dave Ramsey’s book The Total Money Makeover and his corresponding workbook.
More great money advice:
Leave a Reply