Debt-Free Forever by Gail Vaz-Oxlade (best english books to read for beginners txt) 📗

still not enough money to get to the end of the month. That means you don’t make enough and you’re going to have to find a way to make more money. (We’ll talk about that in Chapter 9.)

DON’T SKIP SAVING

You can’t sacrifice savings in the name of balancing your budget or paying off your debt. Sorry, that’s cheating. You have to set aside some money each month for your emergency fund and for long-term savings, so that you’re working with a balanced plan.

The rule of thumb for saving is to set aside 10% of your net income. Take your net monthly income and calculate 10%: if your net monthly income is $2,875, the amount you put into Savings will be $287.50 a month. Never mind that you can’t imagine where you’ll find $287.50 right now. That’s your goal and that’s where you’ll start.

If you have a whack of debt and not enough cash, getting to 10% may take some time. It doesn’t matter how little you start with, you must start to save: something must go into your long-term savings and something must go into your emergency savings every single month.

I know there are a lot of people who believe you should pay off all your debt before you start to save, but I don’t agree. If you have nothing set aside in an emergency fund, the first time you run into a problem, you’ll go back to using your credit, which will be emotionally defeating. And if you don’t start the habit of long-term savings TODAY, you won’t ever start. I’ll help you figure out some saving strategies that will work for you later in Chapter 7.

USING THE MAGIC JARS

All over the world, people have rinsed out their jam jars and are now using them to manage their money. Perhaps it’s because putting money in the jars where you can see it coming to an end makes money management really concrete. When the jars are empty, you’re done spending.

The jars aren’t actually the “magic” in making money work; the budget is. The real magic is the fact that people seem to want to use the jars—people hate to budget!—and I think it’s because the jars make the process so tangible. You decide how much to put in the jars, you put the money in, you live on it, you can see when the dough’s running out so you have to stop spending. People seem to get a real kick out of having money left in the jars at the end of a week.

GAIL’S TIPS

While many people have embraced the Magic Jars eagerly, some people seem to have difficulty figuring out where the money for the jars comes from. It’s as if they think this is “extra” money, not money they would have been spending all along. The Magic Jar money is money you’re already spending on things like groceries, clothing and gifts, gas, car repairs, and pet food. So finding the money to put into the jars isn’t a test. Of course if you’re in overdraft 27 days out of 30, you may think you don’t have the money for the jars. Hey, if you planned to eat this month, and you were going to stay in overdraft to do it, then that’s where you’ll get the money to start the jars. Once you’re on a budget and have a plan, you’ll work on eliminating your overdraft.

FIXED AND VARIABLE EXPENSES

I divide my budgets into two parts: fixed expenses and variable expenses. Fixed expenses are the things that you must pay every month; the amounts tend not to change (much) and the money usually comes directly out of your bank account either through an auto payment or through some other form of bill payment (like online banking or writing a cheque). Categories like rent/mortgage payment, taxes, child care, utilities, auto loan payments, and the like fall under the title of fixed expenses.

Variable expenses are the things that are less rigid, that we pay for in cash, by debit or credit card, and that tend to get away from us if we’re not paying close attention: grocery shopping, gas, clothes, entertainment, the discount department store, gifts, travel, sports … you get my drift. These are the expenses I go after first when I’m cutting back to the bone on a budget. That’s not to say the fixed expenses may not need some trimming. But having trimmed, they usually stay pretty much the same from month to month.

The money that goes into the jars is the money that you will be spending on your variable expenses. So you can’t actually make the jars work for you if you don’t start by making a budget that balances.

GAIL’S TIPS

People sometimes want to debate with me whether an expense category should be fixed or variable. I get long letters from people telling me why a budget category on my interactive budget is in the wrong place. If you want to make the expense a “variable” expense, feel free. Want to add categories, subtract categories, move categories, you should. When I created my Budget Worksheet, these are the choices I made. But you should feel free to make your own. The only way you’ll be able to live with your budget is if you make it exactly what you need it to be. And remember, it’ll take some fine tuning to get your budget working just right, so don’t cast it in concrete. Let it change to meet your changing needs.

FILLING THE JARS

Want to use the Magic Jars? Get yourself five jars (boxes, envelopes, tin cans all work too) and label them:

• Groceries & Personal Care

• Transportation

• Entertainment

• Clothing & Gifts

• Other

If you use the Interactive Budget Worksheet on my website, the amount that goes into the jars is automatically calculated for you. So you can do your own budget and then transfer the numbers to the online budget to see how much goes