Change Your Money – Change Your Life

by Kimberlee Stokes

© 2014 by Kimberlee Stokes

All rights reserved. No portion of this book may be reproduced, stored in a retrievalsystem, or transmitted in any form or by any means – electronic, mechanical, photocopy, recording, scanning, or other – except for brief quotations in critical reviews or articles,without the prior written permission of the publisher.

1 Introduction

2 Let Me Tell You A Story

4 Day 1 – Know Your Destination

9 Day 2 – Change Your Mind

16 Day 3 – Set Yourself Up For Success

20 Day 4 – Be Bossy

24 Day 5 – Grab An Umbrella

27 After Your Breakthrough

28 Appendix

Do you ever feel like you're on a financial treadmill, doing the same things over and over, and getting nowhere?

At least with a real treadmill, you are burning calories and actually exercising. When you're on a money treadmill, you aren't getting anywhere financially.

If you're tired of continuing in the same cycles of over-spending and debt, it's time to try something new!

In this short e-book, I'll tell you our family's story of achieving budget breakthrough and I'll give you real-life, steps you can take to achieve your own breakthrough. (Yes, YOU!)

I am not a financial counselor, financial planner or professional anything, just a real mom with a real family of six (including four teenagers) who is a recovering spend-aholic. After years of stupidity with money (yeah, I'm not afraid to say it), I have finally learned to make life work with a less-than-average income and without a second full-time job, credit cards or pay day loans. We are not wealthy by the world's standards, but managing our money better has given us a different kind of wealth. It has enabled me to quit my full-time job so that I can be more available to my children, increased the communication in our marriage (we actually talk about money without yelling) and given us a peace regarding our finances that we did not previously have.

The good news is that you can change the way you handle money too. It will take a little work, but I promise that it will be minimally painful.

I have broken down the steps into five “days” with tasks for each. If you're like me, you will read through the entire book before doing any of the tasks. I know, you can't wait to get to the end. On your second time around, take the time to complete the daily tasks and you will start to see improvements in the way you handle money right away.

Depending on your situation, it may take longer for you to work the steps, but don't worry. This is not a timed test, you can work at your own pace.

Please note that if you are in an emergency situation, you need to take immediate action. Please read my post How to Handle a Money Crisis for practical steps that you can take in your situation.

Let's get started!

KimberleeThePeacefulMom.com

Let Me Tell You A Story

Once upon a time there was a land far, far away where everyone talked about money, but very few people talked about their own money.

Wait a minute! That's no fairy tale. That's where we're living right now.

Well Honey, I'm putting a stop to that! I'm about to put the “personal” back into personal finance.

And let's just start out by acknowledging that everybody's got an opinion – your mama, your cousin and the guy on that news show. Yeah, I watched him too. The only problem is that those people don't know my situation, and most of the advice didn't apply because we were living on way less that then “experts”. Investing wasn't on the radar and helpful tips like, “You need to save for retirement” felt frustrating. Well, duh! Of course we need to save for retirement, but we're struggling to pay the power bill here people!

What the experts don't tell you is that finances are way bigger than your 401K or your checkbook balance. Money is related to everything in our lives, and because money touches on every area, we can't solve our money issues by simply doing math. If we could, the price of calculators would go way up, believe me.

To really gain control of our money, we have to integrate all aspects of our life together, and align our everyday actions with our true values. I know what you're thinking, “That sounds nice, but what does that mean?” I'm going to show you.

I think most people have some vague financial goals in the back of their minds (save for kid's college, go to Italy one day, buy a Porsche, etc.). We did too, although we never really talked about them or wrote them down.

To be honest, our financial “goals” were really more like “nice financial thoughts.” We never made any real effort to move toward them because they were distant and fuzzy, kind of like those dust bunnies under the bed. As Zig Ziglar says,”If you aim at nothing, you’ll hit it every time.” Living in the moment seemed like fun, but we were just floating along without any purpose or direction. We were definitely “hitting nothing” and we were essentially wasting our resources and our lives.

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Without a clear vision, we failed to realize that the small decisions we were making each day either moved us toward those goals or prevented us from reaching them. Buying a new electronic gadget or eating out were impulse purchases which seemed fun at the time, but we had a disconnect in our brains (or as my kids call it, a “brain fart”) between what we were doing in the moment and what that action meant for our future .

Then a few years ago, I was hit in the head by a brick. Well, not literally, but I definitely had a “light bulb” moment, or to use a fancier word, an “epiphany”(note the impressive three syllable word). I had wanted for some time to stay home with my children because juggling home life and the demands of a full-time teaching position overwhelmed me and I felt I never succeeded at either. The final straw came when our son was diagnosed with Asperger's Syndrome (an autism spectrum disorder).

It occurred to me for the first time that if I wanted to actually reach the goal of quitting my job, we had to find a way to truly live within our means, not just say that we wanted to. I could keep doing whatever I wanted to do in the moment, or I could make some sacrifices in the short-term in order to achieve what was truly important to me. (I am the big spender in the family.)

If you read the Living on Less Than $28,000 a Year series, then you know that for me to stay home, we would be living on one less-than-average income which meant that there were some unpleasant consequences to our decision such as having only one vehicle for many years, living in a smaller house, etc., but we made those sacrifices with a higher goal in mind.

Things were going well, when we decided to have a mid-life crisis and live out a long-time dream of working overseas with a non-profit organization. We sold and gave away most of what we owned and in December of 2010 we moved to another state for job training. Unfortunately, we realized during the training that the organization was not a good fit for our family and we essentially had to start over.

In the following pages, I will share with you the lessons we learned in going from almost homeless to fairly stable. We don't do everything perfectly and we still have problems just like anyone else, but overall we have a good life and much to be thankful for. By making better daily choices, we are able to live our priorities with less money rather than chasing after more and more with the illusion of one day living the “good life”.

So let me share with you the secrets that we have learned along the way so that you can change your life with a budget breakthrough as well.

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Day 1: Know Your Destination

Where Are We?

Imagine for a moment that you are driving across the country to visit relatives for the first time. The trip should take about three hours, but you are well into the fourth hour now with no sign of the town you are looking for. You would probably ask, “Where are we?”.

In reality, you have been on a financial journey for a while. If you look up and realize that you are not where you thought you would be, you should probably be asking, “Where are we?”.

When we hit the restart button on our life in 2011 after the failed job training, we knew where we were – ground zero. We were starting over from scratch. We had to find everything from beds to dishes to laundry detergent. Thankfully my husband found a job and we were able to rent a small condo, but when the bills came due, we had to pay them with my husband's check for that week and pray that we had enough money for gas and groceries to get us to the next week. We were just trying to make it, and life was stressful.

Over the next few months, however, our situation became more stable and we had money coming in, but we had no plan. In January of 2012 we looked up and asked, “Where are we?”.Our first step was to write down all of our monthly expenses and to take an honest look at our spending. While we were in survival mode, we had formed some bad habits and we made excuses:

“Who cares if we spend $4 on sodas? We won't have enough money anyway.”

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“Spending $10 at the drive-through isn't much, and it will 'save my sanity'.”

To get our family back on the road to the right financial destination, we had to keep track of where we were “driving” by taking an honest look at our financial decisions. Knowing what our spending habits were would enable us to address the bad ones, and create some new, positive habits.

For the first part of your Budget Breakthrough, you are going to check the GPS and find out exactly where you are.

Task 1: Discover Your Location

Today you are going to discover exactly where you are financially by looking at your monthly expenses. Hey, I warned you there would be some work involved.

To make this as fun as possible, turn on your favorite tunes and enjoy a tall beverage (preferably non-alcoholic because you need to stay sharp.

Now take a deep breath and sit down with a sheet of paper (or print this FREE Printable Budget Worksheet) and with the help of your bank and credit card statements, or online banking information, write down what you normally spend in a month. Each month will be a little different, but your basic expenditures should be about the same.

Once you have a summary of your monthly spending, compare it with your income. Don't panic! If your spending is greater than your income, you are probably making up the difference with credit cards, but we are going to do something about that.

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Task 2: Track Your Mileage

The second part of today's “Let's Get Moving in the Right Direction” project is to start keeping track of your “mileage” - your spending each day. Ugh! So boring and nerdy, right?

Just bear with me and figure out an easy way to record where your money is going (snacks, drinks, gas, groceries, fast food, shopping trips, gum – yes, even gum!).

You can write each expenditure on an index card you keep in your wallet, make a note on your phone, use an app like Evernote or a service like Mint.com. I like to keep all of my receipts in a specific place in my wallet and take time each night to record the individual transactions on a sheet of paper with categories like clothing, groceries, eating out, gas, entertainment, etc.). I actually prefer to write the amounts in rather than entering them in the computer, but if you are more technologically inclined, create that Excel spreadsheet! Whatever method you choose, the key is to find out where every dime is going so that you can capture those rogue dollars and cents to make them work for you instead of partying all the time. You may be surprised to find that you spend one third of your paycheck on eating out, or that your monthly grocery bill is roughly equivalent to the entire GDP for the nation of Guam. This is a good thing to be aware of. Knowledge is power my friend.

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Where Do We Want to Go?

Once you have an accurate picture of where you are financially, as depressing as it may be, you are empowered. You are empowered because now you can decide where you want to go, and you can see exactly what will be necessary to get there.

Maybe you have a specific destination in mind like having a million dollars by retirement, or maybe you want to look at all of the options and choose a few nearby destinations like saving $5000 to buy a car with cash. If you don't know where you are headed, you will have a very difficult time getting there.

Sometimes we just “do life” and take care of whatever is in front of us, usually by choosing the easiest option. We put everything on cruise control and spend our free time watching television or interacting with social media rather than making conscious choices that line up with our true priorities and values. Hey, if you're a fan of the Kardashians or Duck Dynasty, I'm not a hater, but I do want to encourage you to think about what you want your life and your finances to look like in the future. Taking a long view not only gives you direction, but it can help you manage your money more wisely day-to-day because you have a vision, something to work for.

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In the spring of 2012, our family was enjoying some stability in our life and we had started to gain a little momentum in our finances, so we started thinking bigger. We began to see that maybe we didn’t have to live in an either/or situation. Maybe we could make some extra money without me going back to a full-time job. We started looking for ways to increase our income through part-time jobs, selling things we owned, and through advertising and selling e-books on my blog.

I created vision boards with words and pictures representing the kind of life we wanted to live. I began to think about how I could help others and imagined us making more money and giving more money. Keeping the vision visible enabled us to make wiser spending decisions and to even increase our income. So what about you? Where do you want to go?

Task 3: Choose a Destination

The last task for today is to think about what your destination. What would you like to happen in your life in the next month, six months, year? Where would you like to be in five years? Ten years? When you look back, what will you be glad that you did today?

Make a written list or a visual board with pictures and words that represent where you want to go in life. Post your list or board in a location where you will view it daily. Decide in your heart that you want this vision to become a reality and that you are willing to pursue it.

Now, it's been a long day, so get some rest and come back tomorrow for a task that will require less time and fewer numbers.

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Day 2: Change Your Mind

Now that we've taken a look at the big picture of your monthly income and expenditures, and you've agreed to become a nerd by recording your spending (no cheating – really start keeping a record of those coffee and gum purchases), it’s time for something less math related – your mind.

What does your mind have to do with your money? As it turns out, quite a bit. Most of your money issues are all in your head. So let's take a look at a couple of those detrimental thinking patterns.

The Denial Mindset

“Money problems? I don't have any money problems. We're doing alright.” That, my friend, is denial. If everything were rosy you wouldn't have picked up this book, right?

Just so you don't feel so badly, you should know that I have a long history of living in financial denial. For the first twelve years of our marriage (and all the years before I was married), I did whatever I wanted with money. In my mind money was for spending. If there was $100 in the checking account and I wanted new clothes, I bought them. Of course, I told myself it was okay because I was purchasing them at a deep discount and I “needed” those jeans (shoes, jackets, blouses...).

Surprisingly a few days later when the power bill was due, I didn't have enough money to pay it. (Hmm... I wonder how that happened.) I would feel desperate, try to figure something out and end up paying the bill late or borrowing money from my mother. The crisis would be averted, and I would continue in my financial misbehavior undeterred.

Of course this denial created turmoil in our life and marriage. It seemed like there was never enough money because I spent it all. Small amounts of money seemed insignificant because they would not fix our “huge” financial problem. Our thinking went something like this, “We’re doing the best we can today and we don't have the time or extra money to think about the future. What's the point?”

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About a decade ago, Jeff Foxworthy popularized the “You May Be A Redneck If...” comedy routine. Well, you may be in denial if:

• You have bank or credit card statements unopened or stashed in a drawer somewhere to “look at later”.

• You have credit card debt, but don't know how much you owe.

• You have less than $500 in savings.

• You spend money immediately when your paycheck hits your bank account so you can buy what you want before the money “runs out”.

• You often pay late fees or overdraft charges.

I don't know your situation, and I'm not pointing any fingers here, but I can tell you this: You can learn 1000 tips for saving money and read hundreds of books about budgeting and money, but the only thing that will bring lasting improvement in your finances and your life is to change your mindset. You have to decide once and for all that you want things to change because what you are doing now isn't working.

For me, the wake up call came when I had to return to full-time employment for the third time (even though I felt very strongly that we should home school our children) and I saw the consequences in my children's lives. I finally realized that money wasn't the problem...

I was. (Cue dramatic music.)

I realized that I was making excuses rather than taking responsibility for my choices. I had to break through my denial, acknowledge that we had a limited amount of money and stop spending everything I had. In other words, I had to grow up, and since I am pretty sure that being over 30 qualified me as an adult, it was about time I started acting like one.

If it turns out that you are living in financial denial too, why not be a super hero, fully face the reality of your situation and decide to use your financial powers for good, not evil.

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The Poverty Mindset

Once you break through denial and realize that you can't spend money on whatever you want in the moment and still meet your financial goals, it’s easy to form a mindset of deprivation. The feeling of deprivation when we have to go without something is often rooted in a poverty mindset. Poverty isn't just someone sitting on a street corner begging. Poverty is also a way of thinking.

Do any of these statements sound familiar?

“We can't afford that.”

“There is never enough. We need more money.”

“We have to go without.”

“We can't make it.”

Impoverished thinking makes people discontent, always striving and never arriving. No matter how much money they make, they can never be at peace. A poverty mindset is based in fear and makes you feel out of control and helpless.

So how do you overcome a poverty mindset? What if we change those statements to:

“We choose not to buy that because we have other priorities right now.”

“We have exactly what we need.”

“We choose to make do with what we have.”

“We can make this work.”

Empower yourself by recognizing your freedom of choice. You can choose to think differently about your situation and about your money. Rather than saying,”We have to eat macaroni and cheese because we can't afford good food.”, you could say,”We choose to eat macaroni and cheese once a week in order to save money for something more important.”

Using your power of choice enables you to take responsibility and to avoid a victim mentality (thinking that you are powerlessly suffering at the hand of circumstances or outside forces). Choosing to save that money to use for more important objectives ultimately brings financial freedom to your family and enables you to do more things that you want to do later.

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Along with recognizing your power to choose, another potent weapon against the poverty mentality is gratitude. When our family has unpleasant choices to make we try to be thankful for what we have rather than thinking about what we are missing, or feeling trapped because we are giving something up. When we are grateful we can be content, and we actually become free to change our circumstances. If we are thankful for what we have and manage it in the best way we can, we feel a sense of excitement about the future because we see the power of a little bit of money used well.

The “Little Things Don't Matter” Mindset Maybe you are familiar with this way of thinking:

“It's only five dollars.”

“I'll just put it on the credit card this one time.”

“Going out to dinner this once won't make a difference in our financial situation.”

Meanwhile your money is flying right out the window. It turns out that spending $100 looks suspiciously similar whether you spend it all at once, or spend $5 here and $25 there. The money is still gone, you just didn't register the amount of money you were spending because it seemed insignificant. Just like the frog who never jumped out of the pot as the water slowly warmed up to the boiling point, you've been cooked. Your $5 here and $10 there has added up to thousands of dollars of debt.

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When our finances were the tightest and we looked at the overall picture we realized that we didn’t have the luxury of spending even $4.00 frivolously–every little bit counted because once the money was spent, it was no longer available. This revelation was discouraging until we realized that we could spend $4 (or $10) on something fun if we kept the other areas of the budget lower. We simply needed to be aware of those small expenditures and make them consciously.

If you have been fooled by this mindset, start paying attention to those “little bits” of spending and redirect them toward your overall financial goals. Stop making excuses and make your money work for you. “Little” expenditures are still expenditures.

The “I Am Not My Parents” Mindset

Another area that you may need to address is the way that your family of origin handled money. Many of us grew up in homes that were financially confusing. Our parents may have spent too much, or hoarded out of fear. As adults we live in reaction to the way we grew up, whether we realize it or not.

I grew up in a home where my father had more credit cards than photos in his wallet and spent into oblivion, and my mother was a super saver with money stashed in multiple locations. As a young adult I chose to emulate the crazy spender and racked up thousands of dollars of debt in only a few months.

Maybe you grew up in a home where there was never enough food, so now you feel compelled to keep a well-stocked pantry. There is wisdom in having extra food in your house, but if you are driven by fear to stockpile and you are spending money that is needed to pay other bills, you have a problem. (You can read about how I overcame a fear of not having enough in my e-book Save More–Clip Less.)

Whatever the situation was in your home, it is helpful to consider whether your financial decisions are being directed by those influences, or by your own conscious choice. Don't let the ghosts of the past determine your financial future.

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The “Keeping Up Appearances” Mindset

The last mindset that you may want to address is a need to impress others by achieving and acquiring more than they have, or looking like you do. Much as been written about the effects of peer pressure on children and teenagers, but we are less aware of the peer pressure felt by adults. We feel the need to dress in the “right” clothes, drive the “right” car and attend the “right” social events. We feel a need to keep up with the Jones Family, whether we actually know them or not.

To overcome the “Keeping Up Appearances” Mindset, you will need to make your financial decisions based on what is best for your family, not what the neighbors (family members, co-workers, friends) think.

I admit that it's difficult to live differently. Some people will think you are weird, and you will have to be okay with that. I have a friend who has experienced this first hand. Her husband is a successful executive and they make a very nice income, but she still chooses to use coupons and participate in other money saving activities even though it isn't “acceptable” in her social circle.

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At a recent baby shower she hosted, she nicely folded the tissue paper after the guest of honor opened her gifts. Her well-to-do friends started making fun of her, but she kept folding the paper. She told me later,”You know, I may have only saved a few dollars by recycling the gift bags and tissue paper, but that’s one reason we have savings instead of debt.”

Her friends think she has a poverty mindset, but it’s just the opposite. My friend is not afraid to spend or save her money in a way that brings financial freedom to her family, in spite of extreme peer pressure to stop her money saving activities. She is choosing to live on less in order to fulfill a higher priority in her life.

Interestingly enough, those people around you who look “wealthy” probably aren't. In the book The Millionaire Next Door: The Surprising Secrets of America's Wealthy, author Thomas J. Stanley reveals that most millionaires drive older used cars or trucks, wear non-designer clothes and aren’t really that noticeable in society. Why? They are putting their money where it counts, not spending money to impress people they don’t even know.

By the way, the people who “look” wealthy are most often the ones who are deeply in debt. So why are you trying to keep up with them?

Task 1: Manage Your Money Mindsets

Now that we've taken a little tour of the museum of the mind, it's time to do some work. Today's task is to take some time to think about your money mindsets and which of them you need to change. Print the Money Mindsets worksheet in the Appendix and write your thoughts.

The key to changing these harmful money mindsets is to become aware and actively replace those thoughts with positive, helpful money messages. Begin to view money as a tool that you can use wisely to produce good things in your life and rise above the mentality of “just getting by”. Decide your priorities and start to make financial choices based on those priorities rather than being controlled by others' expectations or mindsets developed in childhood. Direct your money instead of allowing it to slip through your hands and disappear.

If you'd like a little motivation, read my post Meet Future You.

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Day 3: Set Yourself Up For Success

Be Specific

Remember those dreams and goals that you wrote down on Day 1? Now that you have a vision for your future, it's time to make some specific plans and goals to make your vision become a reality. One thing that we have discovered is that in order to live intentionally, we need to not only have vision for our life, but we also need a detailed plan for reaching that vision.

Having a vague thought that “someday” we want to take a trip to Europe doesn't mean that we will actually be able to get there. Ideas that are “out there” in the future have to be brought into the present by our daily actions. A positive future doesn't just arrive, we build it day-by- day through intentional effort, or we arrive at an unintended destination through negligence. As Antoine de Saint-Exupéry said, “A goal without a plan is just a wish.”

Let's say, for example, that you want to run a 5K, but you have never run before. After purchasing your running shoes you will need to make a plan such as running a certain distance each week and joining a group for support. If you want to write a novel you might devise a plan that begins with jotting down ideas for your novel, then writing an outline for the plot, taking a writing class and writing a certain amount of time each day or week.

Your financial goals are no different. Once you decide your goals (your destination), you will need to break the journey down into smaller pieces and then set aside time daily or weekly to work toward your goal, one tiny step at a time.

As I mentioned previously, in 2012 my husband and I started looking for ways to make more money for our family and through each of the avenues that we pursued, we were able to increase our income. We found, however, that because the money came in a little at a time and we did not have a concrete overall plan, much of the money was spent in ways that didn't really help us advance our true goals.

To ensure that we reached our intended “destination”, we had to translate goals into smaller steps that we could integrate into our daily lives. If we want to be generous givers, diligent savers and wise spenders, we have to translate our values into every day actions.

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If, for example, we want to save $1000 in six months, we will be much more likely to reach the goal if we break that $1000 into a weekly amount of $42 and work to save that money out of every paycheck. Working toward the smaller amount is motivating because it seems more doable, and taking action weekly makes us more likely to actually save the money.

Task 1: Break Your Goals Into Smaller Steps

Today's task is to take the goals that you created on Day 1 and break them into smaller weekly or daily steps. Write these steps down and post them in a highly visible location. Commit daily to work on the steps.

Find a System That Works for You

Once you have made the decision to direct your money in specific ways rather than letting it slip through your fingers, you will be much more likely to stick with the plan if you have set up systems to manage your money.

A very basic way to manage your money is to use the envelope system. To use this method, you withdraw the cash for each of your budget categories and place it in separate envelopes. Ideally, you spend only what is in the envelope for its designated purpose and never “borrow” money from other envelopes in order to overspend in a category. The responsible side of your personality will have to police the impulsive side to prevent this embezzlement of funds.

Peaceful Mom reader Jessica says:

“After a few years of tracking expenses on an excel spreadsheet, we finally switched to cash envelopes when I became a stay at home mom. I just use the ones that come from cash withdrawals at the bank with the category written at the top, and we are finally sticking to our budget!

I do most of my shopping at the beginning of the month and then separate the rest into four paperclips (one for each week- now no more running out of cash the last week of the month). I had a major breakthrough several months ago when I switched my mindset from, “How can I spend all of this money wisely?” to “How can I not spend this money?” Mindset is everything!”

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Our family uses a combination of the envelope method and something called a “Freedom Account.” The idea for the Freedom Account originated with Mary Hunt and you can read exactly how we use it here, but basically we opened a second checking account where we transfer money from each paycheck in order to pay upcoming bills and irregular expenses. Transferring the money to a separate account keeps us from thinking that the money in our primary account is available for miscellaneous spending, such as buying that cool new power tool in Home Depot or taking the family out to dinner because a certain person doesn't want to cook. (I'm not naming any names, but I know someone who resembles that remark.)

By simply being faithful to put the money into the second account a little at a time instead of spending it, we are able to pay each bill when it is due and still have money left in the account. We use this Freedom Account Spreadsheet to track the money in each category, so we know exactly what the money in the account is designated for.

Reader Devin writes:

”I read your “Living on Less than $28,000/year” series last year when I had just started being a stay-at-home mom. My husband and I adapted your version of the freedom account to meet our own needs. And now we are thriving! I tell everyone about your plan whenever possible. You have been such a great inspiration to us! It is so rewarding to have control over the money, rather than letting the money control our lives. Thank you so much!! “

Just like any other money management system, the Freedom Account is just a tool and the real issue lies with my husband and me. We have to CHOOSE to abide by the regulation we have set up, or they won't work. I can easily make an excuse and break any rule in order to meet my immediate wants. The key is to have a longer term goal for which I am willing ot make sacrifices. I have to have the desire and motivation to make my money work for me instead of being a slave to my whims (which is MUCH easier said than done, by the way.).

Whatever method you choose to use, the key is to keep track of how much money you have in each category and to determine that you will only use the money in those categories for the intended expenditures (monthly bills and savings for future irregular expenses). The spreadsheet enables you to see the balance in each category rather than your overall account balance, which reminds you that this money is for designated purposes and is not available for spending.

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When you choose to manage your money well you are in control of your financial destiny. You no longer have to use credit cards in case of an “emergency” car repair, because you are fully aware that car repairs will be needed and you save ahead of time for them. You don't have to run to the store immediately when one of your dishes breaks, because you realize that you can manage quite well with only 7 plates instead of 8 (or 19 instead of 20). You don't feel the need to purchase new shoes just because the heels are slightly worn on the ones that you have. You acknowledge that those shoes can still be worn for a while and you choose to wait until you have money in the clothing category of your account.

Using your power to choose how you spend your money brings peace and contentment.

Task 2: Find a money management system that works for you.

You can read a more detailed explanation of the Freedom Account here and print the Freedom Account Page here if you want to try our method, or read the comments on this post to get some ideas of how others manage their money. Your task for today is to choose one method and try it.

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Day 4: Be Bossy!

Do you ever feel like you just want to tell someone where to go? Well, now's your chance. The Day 4 challenge is to tell your money where to go … and mean it!

Now that you have specific goals that you want to accomplish, you need to whip that money into shape and make it do what you really want, not just what seems easy for the moment.

I have had to learn this trick myself. My old way of “managing” money went something like this:

Step 1 – Check bank balance.Step 2 – Spend money.Step 3 – Repeat.

Whatever I felt like doing in the moment, I did. Once we were paid, I tried to buy whatever I could before the money “ran out”, like I was in a race with some alien being trying to see who could get the money first. Guess who was the alien?

The new plan is to actually decide before I spend $1.00 where the money needs to go. To accomplish this feat I make a morning appointment with myself EVERY pay day. Then I sit down with my Brain in a Binder, my checkbook and a calculator and do a little math.

Here is an example from one week:

1. Record paycheck deposit amount in checkbook. Our paycheck was $600 this week.

2. Add deposit amount to checkbook balance to get total amount of money available.

$600 paycheck + $25 (already in checking account)= $625 total amount of money available to work with. 3. Subtract gas money ($100), and buffer* money ($20) for the week from the total amount available. This amount will stay in the account.

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*”Buffer” money is the amount we keep in the checking account so we don’t overdraw it. If you are new to budgeting, you will probably want to make this amount higher, but be careful not to think of this as free spending money in your account. This is “non-existent” money.

$625 total – $120 staying in account= $505 left to budget

4. Subtract grocery money ($125) and household necessities money ($20). This includes toiletries, toilet paper, laundry detergent and any other non-food items we need for the week.

I record this $145 as a withdrawal in the checkbook because I take this money out of the ATM when I do my shopping and place it into individual envelopes in my wallet. Using cash gives me a visual reminder of exactly how much I have to spend and helps me stick to the plan. As I mentioned previously, I try to never borrow money from one envelope to pay for something in another category. $525 – $145 = $380 left to budget

5. Determine amount to transfer to our second account, the Freedom Account that I mentioned on Day 3. I divide the average monthly amount of our regular expenses by four to determine the weekly amount we need to put into the account. For example: 1/4 rent- $260 ($1050/month)

1/4 average utilities $75 ($300-$350/month)

1/4 monthly car insurance amount $15 ($60/month)

1/4 monthly life insurance amount $12 ($48/month)

Total: $362

This particular week, after adding the money to the bill categories, we had $18 leftover which I placed in our car maintenance fund.

$380 available to budget - $380 transfer to second account = $0 left to budget

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This is called a “zero-based budget”, which means that you tell every single dollar where it is going until there are no more dollars left to boss around. This particular week, we did not have enough to fund all the categories in the Freedom Account, so any extra money we made through selling items, or extra work would have been applied to that account first, then to our emergency fund. You obviously don’t have to do what we do (and hopefully you have more wiggle room in your budget), but you do need to find a method that works for you. Every dollar from every paycheck needs a “job” (a designated way to spend or save it) so that you don’t just blow your money because you see it sitting in your account. Although, speaking of “blowing money”, you should have at least a little bit of money each week that you can spend frivolously. Just make sure that your basic necessities (groceries, rent/mortgage, utilities, gas for your car, etc.) are met first and that you are using your money to meet your goals and priorities, not just spending it all on “fun”. Directing each dollar from your paycheck to a specific purpose will bring you peace and enable you to take control of your finances.

What About Irregular Income?

If your income is irregular, as in you don't know when you will be getting the money, you will need to make a list of priorities for your spending. Whenever money comes in, you apply it to the first item on the list, then the second, etc. until the money is gone. Then when you receive more money, you apply to wherever you are on the list.

Your list might look like this:

1. groceries2. gas for the car3. rent/mortgage4. utilities5. cell phone6. car payment7. insurance8. clothing

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If you receive $500, you might take out $100 for groceries, $50 for gas, pay any bills that are due and put the remaining money into your second account in the rent/mortgage category. When the next paycheck arrives, you will take out the money for groceries and gas, then apply the rest to the rent/mortgage category and the utilities category.

When we were in this situation, we actually put the rent/mortgage payment at the top of the list. You obviously want to make sure that your family is fed, but we found that if we would prioritize that big payment, our other spending would fall in line and there were always resources available for food if we ran out of money (like food pantries).

Task 1: Plan Your Next Paycheck

Today's task is to tell your money where to go! You are going to create a specific, written plan for your next paycheck. Set aside money to pay for your basic needs first and then add some savings for the future and some “fun” money to spend on whatever you want. Having some money to spend frivolously will help you to stick with the rest of the plan, but try to find a balance between being overly restrictive and spending everything on a whim.

“Stick to the Plan” Tip: If you choose not to take the money out in cash and place it in envelopes in your wallet, write your plan on small note that you tape on your debit card so that you have to see it every time you use the card to pay for something. You can also write the plan on an index card that you wrap around your debit card. Seeing your plan will remind you of your goals and help to prevent you from over-spending.

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Day 5: Grab an Umbrella

You may have heard your parents or grandparents talk about a “rainy day fund”. They knew something that our generation tends to forget, financial storms and hard times will come and if you don't have an umbrella you are going to get wet.

You may prefer the term “emergency fund”, but whatever you call it, you need some money set aside. Why?

Let me give you three compelling reasons to get started:

stuff happens. stuff happens. stuff happens.

Our most recent example of stuff happening occurred a few weeks ago when I made a payment of $200 using our debit card. Unfortunately the person processing the payment didn’t get the memo, and charged us $2000 instead!

5 Days to Budget Breakthrough 24

As you might imagine, this caused some problems with our account. Banks are not very understanding when a withdrawal is made from your account that equals more than your total balance. Even though I contacted the company and our bank, the money was not returned to our account for six days! Meanwhile, life continued. We still had to put gas in the car and food in the fridge.

Thankfully, we had a few hundred dollars in cash in our “at home e-fund” which we were able to use for the daily necessities until everything could get straightened out.

Reader Liz had a similar scare:

“One month, we were paying our energy bill online. The site was slow and clicking fingers impatient, so the button was clicked twice! We inadvertently paid our gas and electric bill for two months , not one.

Thank GOD we had $1,000 in an emergency fund to pay that bill by quickly moving it to the checking account. We then replaced the money that came out of the emergency fund, and it’s all set once again!”

Even if (or maybe especially if) you are “barely making it”, you can start your own emergency fund and create a “stuff happens” cushion with these three steps:

Designate a savings location.

You need a specific place to save your money. Ideally, you should set up a separate bank account, but at a minimum, set up an envelope, jar, corner of your sock drawer or some other location in your home to drop the cash. Having a place to put the money makes you more likely to actually save it because it keeps the money out of your wallet where you are likely to spend it, and it motivates you as you see the amount of cash increase over time.

Along with your savings location, you need a method to track the money you are putting aside. Some people use a phone app, some use an Excel spreadsheet and others make a thermometer graph that they post on the fridge. The important thing is to find a way to watch your money growing so that you can be motivated by your progress.

5 Days to Budget Breakthrough 25

Set a specific goal.

If you want to succeed at saving money, you need to decide on a specific amount that you want to save by a specific date. If you don't, you are unlikely to actually save anything. You can start with $500, or even $100, and then increase the amount over time.

If you need extra income to get started see the “Get Cash Fast” Section in the Appendix.

Commit to save the money for emergencies only.

If you're like me, having extra money lying around is an invitation to disaster. You know, don't give a drunk a drink. In order to keep the money in the mattress - I mean savings account - I have to use great self-discipline and a strict definition of what constitutes an emergency.

In the event that your definition of “emergency” is slightly fuzzy like mine, here are a few pointers:

Paying the plumber to fix leaking pipes – emergencyOrdering pizza because you are too tired to cook – NOT an emergency

Renting crutches when your child breaks a leg - emergencyBuying a new dress for the party this weekend – NOT an emergency

True emergencies are things like a car accident, job loss or extended illness. Commit to yourself and to your family to never spend the money for frivolous items.

Task 1: Set Up Your Rainy Day Fund

Today's task is to decide where you will save your Rainy Day/Stuff Happens/Emergency Fund. Open the savings account, wash out the pickle jar or decorate the envelope that you will be using and actually put something into it, even if it is only $5.

Now, doesn't that feel better?

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Congratulations! You've completed your 5 Day Budget Breakthrough! Hopefully you have been able to make some changes to turn your financial “car” around and get headed in the right direction. So now what?

Continue Your Spending Record

Now that you have been recording your spending since Day 1, you are beginning to form a habit. Have you noticed that you think more about what you are spending when you have to make a record of it? This small action can help you to break the habit of spending mindlessly and thinking that it doesn't matter. Sure it's a pain, but it's an awesome way to stay on track with your money plan.

Find Your Budget Leaks

One of the benefits of recording your expenditures is that you can begin to see patterns in the way you spend money. One of my biggest budget “leaks” is spending a few dollars at the drive-through because I am “in a hurry” and I haven't planned well. I was able to see just how much of an impact this has on our budget once I started writing down the cost of all those fast food trips, and I started to carry snacks in my car in the event of a food “emergency”. You have spending patterns as well and you can begin to change those habits once you see exactly what is going on.

Renew Your Vision Daily

Many times when we start a new project, we go “gung ho” for a few weeks and then get burned out. To make lasting improvement in your finances, start with small changes and do them consistently. Look at your vision board and your written goals daily and re-commit every morning to do everything in your power to reach those goals. Don’t give up. Don’t let little mess-ups discourage you. Keep plugging away at your financial goals.

Acknowledge that YOU are the only one who can change your financial situation, believe that you can manage your money better and recognize that even small steps in the right direction can make a difference. Choose TODAY to make your money work for you so that you can accomplish your dreams!

5 Days to Budget Breakthrough 27

APPENDIX

Maybe you realized during your Budget Breakthrough that you have a short-fall and you need to infuse some extra cash into your budget to get things going in the right direction. Use the following ideas to jump start your Freedom Account to boost underfunded categories, or put the money into your emergency sock... I mean fund.

[Please Note: These are short-term strategies to help you get cash quickly in a short period of time, not rules to live by.]

Enter Emergency Mode

For one week imagine that you are in an emergency situation and you can only purchase absolute necessities – no entertainment spending, no eating out, no clothes shopping. If you run out of toilet paper, buy just enough for the week. Instead of buying the two pack of deodorant, buy the single stick.

Eat Cheaply

Have a week of super cheap meals (macaroni and cheese, beans and rice, quesadillas, pasta with sauce, tacos, pancakes for dinner, homemade or canned soup and grilled cheese, etc.). You can also eat food from your pantry rather than shopping. Take your lunch instead of eating out. Skip the coffee and soda purchases you normally make.

Sell Something

You know you have items lying around the house that you don't need, so why not turn those items into cash? Gather that extra stuff in your house and garage that and sell on Craigslist or use the Amazon Trade In Program (read more here). Put the money into your second account (don’t use it to go out to eat ).

Work More

Ask for over-time at work. Offer to do odd jobs for people like yard work or garage clean up. As a longer term strategy, you may want to increase your income by finding a part-time job or starting a home-based business:

bakinghouse cleaningdelivery servicemoving servicelawn carehand-made jewelrybabysitting/in-home child care

Most of these jobs can be done with minimal investment and word-of-mouth advertising (or some inexpensive business cards). Make sure that you check the laws and regulation in your state and city regarding small businesses run from your home. For more ideas, read the comments on 5 Easy Ways to Get Extra Cash here . *Just a note, don't let your belief that you need extra money prevent you from being more careful with the money you do have.

1. Do you recognize a poverty mentality in yourself? List some of the effects of that mindset in your everyday life (clutter, buying things you don't need, stocking up out of fear, etc.)

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2. In what ways do you feel pressure to “measure up” financially? If you feel that you have to attain a certain “level” or stature financially, why do you feel that way?

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3. How did your parents handle money when you were growing up? Did they talk about money? Did they fight a lot about money?

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How did their behavior affect you?

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What decisions have you made about money because of your childhood? Are these decisions serving you well today?

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4. What choices can you make now to avoid these mindset traps?

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©2014 Kimberlee Stokes – ThePeacefulMom.com

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Kimberlee Stokes is the creative mind behind the popular website ThePeacefulMom.com where she helps women with practical tools and encouragement to save money, get organized and enjoy life.

She has published several e-books including Save More – Clip Less: Cut Your Grocery Bill in Half Without Extreme Couponing, which has helped thousands of women slash their grocery budgets. She has also written articles for websites like Money Saving Mom, Huffington Post Home and Sacramento Parent Magazine, and has been mentioned in Woman's Day Magazine.

As a happily married mom of four children ages 13-18, she juggles maintaining a great relationship with her husband and children, homeschooling, running a household and a business and trying to get dinner on the table, and she admits that sometimes things get dropped.

In her “spare” time, Kimberlee also speaks to women's groups on the topics of parenting, organization, saving money, living intentionally and various spiritual topics. To find out more, please click the “Contact” tab on ThePeacefulMom.com.