To get to your destination of Financial Freedom after divorce you need to go through the towns of Saving and Budgeting to get there. (Paraphrasing what Christina Lynn said.)
This is part two of a three-part series about how to financially survive divorce.
As a young adult, I met with a financial mentor after ruining my credit and getting threats from creditors. She gave me a budget sheet to copy and reuse every month (similar to the budget sheet in my Single Mom Tool Kit). But I still had a lot to learn about saving and budgeting.
Now that I make all the financial decisions after divorce, I’m free to try new things and make my own rules. I’ve learned from my mistakes and am currently on the road to Financial Freedom. 🙂
Most Americans don’t have enough savings to cover a $1K emergency. (Source)
I drive a 2008 van; purchased used. My van has needed many repairs since my 2013 divorce, most of which were “emergency” (couldn’t wait) repairs. Because I keep a budget and have an emergency fund (as Dave Ramsey teaches), I no longer panic when those repairs came up. Just last week, my battery died… again! I had just replaced it a few years ago. But this time, it was just a matter of where was I going to take my vehicle and how soon they could fix it.
When I used a budget sheet.
I used that sheet from my financial mentor for many years, including on and off in my marriage until my (now ex-)husband took charge of the bills. After my divorce, I made several copies and start using them again – until my graphic designer updated these printables.
Here’s what my monthly budget sheet looked like:
- Rent: $900 (at the time, needing a 3-bedroom, this was the best I could find – I know some pay a lot more!)
- Van Payment: $350 (overpaying to pay off early)
- Electric/Gas: $125-170
- Phones: $87-99
- Internet: $40
- Groceries/Household Items (including water softener salt & sidewalk salt): $500-600
- Eating Out: $50-70
- Debt: $100-300
And to be totally honest, probably like many of you, we’ve always had more bills (more months) than income. On paper, things always looked bleak, which caused me a lot of anxiety about money. God has always provided, but I was always trying to find more income. And I didn’t turn any income source down so I could keep up while paying off debt. I also cashed out my 401K and took out extra on student loans when I was finishing my bachelor’s degree, just to survive. Not always the best choices but in my mind, this is how God provided for the last 7 years of my life.
Things got more stressful when the no-so-monthly bills would pop up every few months or twice a year. I was always thrown off a little on how to deal with these, although, I knew they were always coming. Trash and life insurance every 3 months, car insurance every six months (after I stopped paying $100+ a month), and AAA and renter’s insurance yearly. I’d try to save for them every month but then I’d look at my account register, and sometimes spend that money forgetting I needed to save it.
Like Christina said last week, sometimes we choose to make sacrifices for the greater good of our kids and our own peace. This is just how my kids and I lived for many years… by God’s grace and with that emergency fund. It’s been rough at times but I know there is a goal in mind… financial freedom.
A new way of budgeting.
In early 2018, after hearing about YNAB (a.k.a. You Need a Budget) for creating a business budget along with my long-term financial business plan, I thought I’d take their 34-day free trial and check it out. I started using it for this ministry (we have business expenses and I take a salary) and since YNAB allows you to create multiple budgets, so I created a personal budget at the same time.
Immediately I started falling in love! It’s like the “cash envelope system” except the cash stays right in your account (no need to carry all that cash around). It keeps you accountable in the same way – by not spending money you don’t have. I have found it’s the best budget program for me and the yearly fee has paid for itself both for my personal and business budget.
Each time I receive income, I distribute it to Survival (groceries and gas), Monthly Bills, and Yearly/Bi-Yearly Bills. I make sure our survival and monthly bills are covered first, then cover the sinking funds at the end of the month.
Four “new” budgeting rules.
1. Stop living paycheck to paycheck. I have thrown out my account registers! And a funny thing happened when I went all-in with YNAB and stopped looking at my account balances, I actually spent much less. I no longer run out of money before my next check because I plan for everything (even things I didn’t budget for) every single month.
My current balance includes the money I’ve put into sinking funds (a term Dave Ramsey uses for future expenses). YNAB calls them “true expenses” which include car insurance, yearly memberships, vehicle registration, clothing, haircuts, and even my (much needed) self-care.
2. Roll with the punches because things happen – Murphy’s Law. You need an emergency fund of at least $1K! An emergency fund is for when the vehicle stops running or needs a major repair to keep its road safe/legal. Or for emergency home repairs if you own a home (when the furnace won’t run – although $1000 might not be enough in those cases).
When we unexpectantly moved last year (and downsized), I used part of my emergency fund for deposits (electric meter and security) while waiting for my previous deposits to be returned to me. Beyond that, my emergencies have been vehicle-related. I don’t use this fund for anything else – not vacations, not new furniture, or bills! Only for emergencies.
3. Age your money for comfort and peace. This means when I receive income I’m putting enough money in my groceries and eating-out fund until I’ll get paid again. Then, I’m paying as many bills as I can, often a month ahead. My next check will fund next month’s bills instead of the bills that are due over the next two weeks.
This also helps when emergencies happen or when I don’t get paid (lose a job – government shut down anyone? – or child support just stops). I know I can still cover my bills for a few weeks because I’ve paid ahead rather than paying what is right in front of me. How old is your money?
This is exactly how I do it (plus Hannah is way funnier than I am!)…
4. Only use credit cards if you have the money to cover it right then. The YNAB program doesn’t allow you to underfund a category on which you’re using your credit card (it turns bright red). That means when I use my credit card for the rewards on gas, groceries, restaurants, and other items, I need the money in my gas or grocery budget (with the money currently sitting in my checking account). This allows me to pay off my credit card immediately, weekly, biweekly, or monthly without ever paying interest on the debt – yes, the credit card companies hate me!
These rules keep you out of debt and from spending money you don’t already have. Also, this program, and the Facebook Group, have helped me to find ways to lower my current bills – putting more money back into my budget. I’ve called every service company and credit card, asking how can I lower my bills. Many said if I automate my payments, taking right from my checking account every month, that I’d save anywhere from $5 to $20 a month – so I signed right up!
I currently only write two checks per month because everything else is automated. Not only am I saving time but I’m less stressed – as long as I’ve followed the rules – paying monthly bills first, aged my money, and don’t overspend.
[socialrocket-tweet quote=”How I went from Money Anxiety to Financial Freedom using these 4 budget rules. #YNABCommunity” tweet=”How I went from Money Anxiety to Financial Freedom using these 4 budget rules. #YNABCommunity”]
Update (July 2020): After driving my paid-off van for almost 10 years, while saving, I sold it to my mechanic – who paid me and didn’t require me to fix any of its needed repairs. I took my savings and the cash and put a huge (over 40%) down payment on a new to me, one-year-old, a vehicle with low miles. I’ve also automated that payment to every other week and with the low interest rate and extra payments, I’ll have it paid off in no time.
My next goal is to pay off the $57K in student loans that I have. I know I can do it because I have a “budget” (YNAB) and a plan.
Do you have any questions? Do you have a budget that works for you or do you need one? Feel free to share in the comments.
May God bless your restoration journey,
I’m currently living with my parents trying to save money. I do have a question. When your kids come home from school and suddenly need supplies, how would you budget that?
Jen Grice says
Since you know it will happen, you create a “sinking fund,” cash envelope, or category for that expense in YNAB and put a little bit in there each week or month (as you can so it’s funded when the money is needed). I have a client who created a category for each of her adult children – great idea if you have the money! – and when they ask for a loan that’s all she has to offer (whatever is available in that fund). I choose to make my children cover these types of expenses themselves since it teaches them to learn to budget early and not depend on parents or others, but everyone should do what they think is best. 🙂
Yes I need a budget and learn how to save. I’ve been divorced for almost 2 years but didn’t really have a budget before. I am a single mom of a 17 year old and the extra income of child support for her will end in a few months. I only have a very small emergency fund now.
Jen Grice says
That’s why I wrote this post. There are many women just like yourself who want help. There are links (underlined) in this article to resources (several Dave Ramsey links) and the YNAB program (try it for FREE for 34 days) to help you! YNAB wants to see you succeed so they offer forums, articles, webinar videos, and so much more to get you on track and keep you there – worth the money. I wouldn’t suggest it if I didn’t use it and love it myself – I don’t like spending money if I don’t have to). Also, Christina Lynn and I will be doing videos soon. Or you could get coaching from either of us. (My coaching can be purchased in my online shop.)