"Personal Finance is 80% behavior and only 20% head knowledge" Dave Ramsey

Money is not just about math.  Its not just about making $20,000 a year and living off of it, its also about behavior on how to handle that money.  Is it difficult to live off $20k a year?  No doubt.  Can it be done?  Yes, it can. How comfortably depends on your behavior. While living on $20k a year cannot really be described as 'comfortable living', it can be a lot less stressful if you have a working budget and make good choices in where your money is spent.

Do you have a budget, a name for ever dollar of that $20k a year?  When you get your paycheck, do you know where every dollar is going before you get it?  Working off a zero based budget helps with that.  Having a name for every dollar before you spend it, helps stop the flow of money out the window of 'I will just get McDonalds tonight' knowing that its not in the budget; and that it may affect the rest of the grocery budget.  While living off $20k a year is obviously not the paycheck people want to live off, or the lifestyle they want to live; it is possible to do with a budget and the right behavior.

There are baby steps in becoming debt free, according to Dave Ramsey's book "The Total Money Makeover'.  I was on baby step 2, but an emergency happened and I had to use my $1k emergency fund.  Now, I am back to baby step 1, which is save up $1000.00 for an emergency fund.  Fortunately, I had that saved away, or I would be in a bigger pickle than I am right now.

I am getting ahead of myself though, so let me back track just for a minute.  Before you can start your baby steps, first you must assess the situation.  Do you have any extras that you can cut?  Satellite tv?  cable? do you have a house phone and a cell phone?  do you really NEED both?  Are you eating out 3 nights a week because you are too tired to cook or don't have the groceries in the house (because you couldn't afford to buy groceries last week because you ate out three nights a week) ?  There is a big difference between a 'want' and a 'need'. Think about that for a minute.

 Before I was able to really start figuring out what to do with my money, I needed to figure out what I was already doing with it.  I found almost $400 that was being spent uselessly on wants, or conveniences that were not necessary.  That money could be redirected to paying off debt and making better choices.   Dave calls it 'building your four walls'.   Before you can building an emergency fund (baby step 1) and working the debt snowball (baby step 2), you need to make sure that you have your 'four walls' taken care of.  Is your rent/mortgage current?  your electric bill? the car payment? gas in the car? car insurance? renters/ homeowners insurance?  do you have food in your house?  In reading the Total Money Makeover, I was really surprised to see that people before they started their journeys to becoming debt free were paying the credit card bill before they'd buy groceries.  What?  you NEED to eat?!  I am not talking about eating filet mignon or lobster, but eating is a basic need!  Making your debt payments on time is obviously a good thing, but eating is essential!

There are several steps that Dave recommends that you take before you start the debt snowball, that are part of the Total Money Makeover, and that is to also ensure that your 'four walls' are stable and secure so that as you tackle debt, you can breathe knowing that the roof over your head is ok.  Living by a budget is definitely making it so I can sleep better at night, because I know where my money is going because I am making it behave.   While I still have to start over on my baby step 1, I know that the three months it took me to get my 'four walls' in place has already made a difference, because instead of panicking about rent, electricity, food or car insurance, I know that I have that budgeted.  I will press 'pause' on paying the debt snowball, and rebuild my $1k emergency fund.   I am finding that budgeting can actually be FUN!!!   Have you started your budget yet??