Money Reinvention Step One: Get Real

Photo Credit SueBarrPhoto

Every time I write a money post, I get a flurry of questions on Facebook or via email. All of them want to hear more and know what I did. I feel like people’s money stories are all unique, and I am by no means any kind of expert. But I do think there are a few universal truths and steps everyone needs to follow if you want to change and you want those changes to stick. The first step is to get down and dirty honest with your finances.

Often people seem confused by how they got to a financial low point. I know for us, we would compare ourselves to “spenders” and think, we’re not doing anything like them, so how are we so broke? We didn’t have fancy cars, we didn’t take exotic vacations and we sure as heck didn’t live in a big house so,  we wondered where all our money was every month.

The first step on the road to financial freedom is being honest with yourself about how you got broke and then forgive yourself and move on with a plan.

How do you get real? For me, it was a simple as a notebook and pen. I sat down and wrote in that notebook every dollar amount that I thought I spent in a month. First, I did it from memory, so it was mostly bills and expenses like groceries and gas that I could think of in that minute.

Then, I spent a month writing down every penny I spent.  Most people need a month, but I only needed to see a week to know how far in denial I was. In that week there was a doctor copay, a huge grocery bill because we hosted a little playdate party for some “really important” reason and The Husband’s dry-cleaning.

With the exception of the grocery bill, none of these were huge individual expenses, but you can imagine when you forget to include them in a monthly budget how quickly your cash is depleted. Later, when I sat with an actual credit counselor and did this again, the numbers were even more jarring. She confirmed what I had seen with my little notebook experiment. I was not including expenses that popped up, like new shoes and clothes for kids or special activities at school or, god-forbid, sports fees. The lovely counselor at the other end of the phone said in a sweet voice when we were finished, “Honey,  no wonder you’re stressed out. You are running your house at an $800 deficit every month.”

Holy Denial Batman.

I was budgeting based on bills and then just crossing my fingers and hoping to get through the month. Clearly, that is no way to live but I was refusing to face that fact and until I did there was no way to right the ship.

I was living my life ignoring my money. The mental BS that is behind that will be addressed in a later post. The important takeaway from it today is this:  if you want to get right with your money, you must start with facing the cold hard truth of how you are managing it and that can’t include the strategy of just trying to get by.

Want a Money Reinvention? Sit down today and make a list of all you spend in a month on bills and “budget items” like groceries, gas, laundry, etc. Then, take that little notebook (or any number of phone apps) with you everywhere you go this month and write down all that you spend. Then, on January 31st, combine all that information and put it up against money coming in. Only when you have the true picture can you move forward with your finances.

Next week come back for step two.