We can nickel and dime ourselves into debt.
I wonder if most people in considerable consumer debt got there by drips and drabs, not by deluge. I bet it started with a few missing dollars here and there in their checking account or charged to a card. Those tiny amounts of money can eat big holes into your finances. How many times have you heard people say they're drowning in debt but they have no idea what they bought?
I almost tried to explain that to my little cousin, who couldn't understand my brow furrowing over $4 I couldn't account for.
I am visiting my family for the holiday weekend and, as is typical, I've already spend a wad. I was hosting my mother, brother and grandmother in D.C. for a few days and they wanted to eat out each day. I paid for one meal, paid for myself another and then insisted we eat breakfast at my place where we could eat for pennies instead of dollars.
After that, we drove up to visit the rest of our little clan, and I went to the mall to do some tax-free shopping. So, this morning, I sat down with my remaining cash and receipts to check where I am on budget for the month (yes, just four days into the month!). As I added everything up, I couldn't account for $4. So I recounted, readded, rechecked and still couldn't account for the $4. My nosy little cousin sat down beside me at the table and, all up in my spreadsheet, started reading off some tallies. He saw me muttering to myself and checking my accounts.
"What's the matter?" he asked. "I'm missing $4," I said. He said, "Four dollars? What's the big deal?"
I turned to him with a sharply raised eyebrow. Four dollars?! What's the big deal about four dollars?!
I'm sure some of you are asking the same question: "Calm down Debt Hater."
Four dollars isn't the point. As I climbed my way out of debt, there were two things I learned the hard way:
1. You MUST have a budget.
2. You really HAVE to know where every dollar goes.
Lesson one taught me lesson two and vice versa. I tried several times to go without a budget (Suze Orman even said in Young, Fabulous & Broke, the first personal finance book I ever read, to forget about budgeting because no one sticks with it anyway and we don't need it. She didn't have to tell me twice!).
I really wanted to skip the budget to get out of having to keep track of
every penny. I was never a fan of numbers and handling money that way was akin to handling dirty diapers. I didn't want to do it. But each time I tried, there would be $4 missing here, $10
there, $2 here and by the end of the month it'd be a shock when I
didn't have the cash to cover a simple, and expected, expense.
I got in the habit of getting receipts for absolutely everything and writing down any cash that I spent. If I was off by a dollar at the end of the month, I didn't trip, but I made sure to be careful. I didn't always get it right (I have many posts about how I screwed up my budget in a given month), but the habit of keeping close track is ingrained now. I know where every dollar went. Except, this $4 I couldn't quite figure out at the moment.
So I turned to my nosy little cousin and asked him what he planned to buy with his recently acquired birthday money. He was deciding between a new i pod nano and some Teen Titans figures. I said to him "Suppose you took your money to the mall, got to the Apple store, whipped out your cash for your nano and then the cashier said 'You're short $4'. Would you to him, 'Four dollars? What's the big deal! I have the rest.' Do you think he's say Ok and give you the i pod?"
He smiled. "No," he chuckled.
"That's the big deal."