How to be financially responsible

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How to be financially responsible

Things you learn when living on minimum wage

I have always been a big believer of living within your means. What does that necessarily mean? It means you aren’t living paycheck to paycheck. There is still money left over. Even when I was making minimum wage and lived on my own, I still had 2k in the bank for those emergencies. Of course, I wasn’t able to live fancy. At that time of my life, I didn’t even have the internet. I would walk down the street to the library to use the internet. It is free there. But I was still able to pay my bills and still save. I only paid for things that I needed not wanted. I’m glad I lived that way, because it taught me self discipline.

There are plenty of people who spend their whole paychecks and spend more they make. I’m not saying living on minimum wage was easy at all, but it does teach us to appreciate the small things in life. Most of us spend money on doing things, but when you work on minimum wage you can’t. So instead, you focus on doing free stuff such as going to the park and taking a walk, and building relationships with others. I feel like that is the stuff that matters most in life anyways. When we start making more money then those start to slip out of our lives.

How I manage my money

How I manage my money

Even though, how I have managed my money has changed through the years, I still hold the same concepts about it. Now I have all my expenses written down on paper. Writing my bills down was not something I did in the past. I would just do that stuff in my head. I’m glad I do it this way, because it is more clearer what I really have. I spend about 13K per year on my bills. What does this include? Mortgage, food, gas, Netflix, doctor, dentist, car insurance, I even include things like salt for my water softener, ect… It is those necessaries that have to be paid. I also update this every year. Prices change, things get added and things get removed.

Know your expenses

Knowing your number for your expenses can help you plan out what to do with the rest of your money. I make about 42k a year, but after taxes and health insurance is taken out that means I’m left with about 31k. So that means I have about 18k left over to do what I want. Most of that right now has been going to my mortgage so I can pay it off faster. Right now, I just made another payment on my mortgage, so it is at $25, 900. Once that is done, I plan on maxing out my Roth IRA, some will go to vacation and the rest will go to my emergency fund.

know your expenses

Even though I have a healthy emergency fund right now, I’m also thinking ahead. Right now my furnace and A/C is 11 years old and my water heater is 12 years old. If anything should go out, I can cover the cost of 1 of these, but not all 3. My mortgage should be paid off by the end of next year, so I will be able to save for these. A life of a furnace is on average 17 years, A/C is 15 and water heater is 8-12 years. I also have these inspected once every 6 months. If there is any indication that one of these could go out at any moment, I plan on switching my plans and stop putting extra for the mortgage and put more into saving. I also plan on my mortgage to be the very last loan I will ever take, and wish to pay in cash for everything here and out.

Does this necessarily mean I’m not living my life the way I want? NO. If something comes up in my life I want to do, I might not put as much down on my mortgage. Last year, we did a lot of traveling. This year, I wanted to focus on the mortgage more. My mortgage payment is 422 per month. Usually, I will put anywhere between 1422-1800 per month just depending on what is going on with my life at the moment. I don’t need very much to make me happy either. Just going to the park with Jason to walk and talk is usually good enough for me.

2018 Niles haunted house

You don't need to be rich to get ahead

Why am I sharing such personal information? Because there are a lot of people who do believe that you have to be rich to make it in this world. I believe it is all about how you manage your money not how much you make. There are people who make 6 figures, but still are broke, because they spend more than they make. I want to be living proof that an average pay can make it in this world. I want to bring you hope that yes, you can do this.

Stronger relationships when you live below your means

My husband and I relationship is so much stronger, because of it. Since we don’t go out much, we just stay at home and have talks instead. We have a strong communicate system between us. It has made us really close to each other. Every so often, we will go travel some where, but most of the time, you will find us at home. Isn’t that one of many reasons why people aren’t happy in their relationships and often end in divorce anyways? Communicate is super important! My husband is the closest I’ve ever felt to another human being. I feel very comfortable being myself and talking to him what is bothering me. He does the same for me. There is nothing he doesn’t know that I haven’t told him.

Just being silly
maintaining a strong relationship with each other

I know what you are thinking. Do we ever run out of things to talk about? Yes, but when we do, it usually means we stopped growing. That is when I will pick up a book, watch a documentary, learn about something interesting or that will benefit me in some way. Then bam, now I have something new to talk about! Relationships are a two way street. We both have to be growing and both have to meet each other half way. They don’t work if one person is doing the work and other isn’t.

Can you really afford it?

Enough about relationships, lets get back to those finances. There are a lot of people who buy on emotions, but don’t be realistic about what they can afford. People buy cars they can’t afford, houses they can’t afford, kids they can’t afford and other stuff they can’t afford. There is nothing wrong about buying something that you like as long as you can afford it. Don’t trap yourself in a hole and have no way of getting out. What you can afford really depends on how much you make and what are your expenses. If you don’t know what you are spending each year on your expenses, you probably will have a hard time figuring out what you can afford.

What I did when I bought a house

We bought a house

When it came to buying a house, I knew we couldn’t afford a brand new home. Those start at about 170k. I’m sure we could have made it work, but that means we would have to stop living for the next 30 years. I didn’t feel like it was worth it plus I didn’t want a 30 year mortgage. They up the interest rate on a 30 year mortgage. You can get a better interest rate going 15 years, and that is what we got. Plus another down fall is if you buy a new home at 170k and have the mortgage for 30 years, you will spend about 100k just in interest! Screw that, I want 100k to do other things and not give it away to the bank. That is like throwing your money in the toilet.

So we looked into homes under 100k who also had cheap property taxes. The property taxes had to be 1000 or less for me to look into it. Online, you can find out how much your payment may be. It will not be the exact number since property taxes and home insurance will make it more or less.

We ended up buying our home for 62k and put about 30% down payment. We took out a conventional loan. If you put down 20% or more, you don’t have to pay for mortgage insurance with this type of loan. Right now my property taxes is $737, so I ended up with what I wanted. The home needed a little TLC, but over all it was in good condition and also in a good neighborhood.

Down payments are a good thing. They lower your monthly payment, and spend less in interest. Plus it builds equity in your home faster.

Conclusion on how to be financially responsible

I really truly believe in order to be financially responsible, you have to educate yourself on what you are getting yourself into and have a plan. Buying a house on impulse, because “well everyone else is buying a house” will lead you to disaster. I have seen it happen so many times. Buy a home, because you are financially ready for it and not because “the interest rates are low”. And the same for anything else whether it is a car or to have a baby. When you are actually financially ready for something, you can enjoy it more and stress less. What a great benefit to have! 😉

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