A plan that does and doesn't work for me but at least gave me a better understanding of how to stabilize the financial situation.
About a year ago, I read Ramit Sethi's I Will Teach You To Be Rich. In his book, he lays out a 6-week plan with the hope of simplifying money flow, developing a budget ("conscious spending" as he calls it), and eventually growing to financial independence.
Week 1: Gain a variety of credit cards and keep them paid off every month
Week 2: Open a high-interest checking account and a high-interest savings account
Week 3: Open a 401k, a Roth IRA and strive to max out each per year; if elligible open a HAS
Week 4: Develop a "Conscious Spending" plan
Week 5: Link all accounts together and autopay regularly occurring bills such as internet, rent, etc.
Week 6: Become Financially Independent and Retire Early (FIRE)
While I'll let his book explain the details, I want to focus on his points about "conscious spending" or the idea that your budget should include guilt-free spending up to a certain extent. Sethi recommends creating a financial environment in which 50% of your take-home income goes towards fixed costs while the other half is distributed to savings, investments, and a few comfort interests.
What I value about conscious spending is the perspective that total self-deprecation isn't necessarily the way to growing into a financially secure environment.
Sethi's Conscious Spending Plan
Sethi proposes the following breakdown for money:
This will vary per person depending on context, and so I'll let his book and your own financial experts help you figure out the appropriate breakdown. While this doesn't apply to me personally as I'm a graduate student currently living on loans, it did help me gain some control over areas that I could control. So, while I crossed off each week that applied to me now, I kept a mental note that 1) paying of student loans is grueling but possible and 2) I can create goals as certain areas become relevant to my status.
The inescapable element to conscious spending, however, is the budget of fixed costs. Face it, if our fixed costs is actually something like 80%, the above plan looks like pie in the sky. Making a weekly or monthly budget can at least attune us to where we're at even if where we're at looks like shit hitting the fan.
So, areas I can recommend tracking:
Add/detract as necessary.
The idea presented is that if it isn't a fixed expense, such as the above, you would then consider if it's an investment, savings goal, or guilt-free spending. If the above goes over your desired threshold (Sethi proposes 50%) then it's time to cut back or find cost effective alternatives, e.g. responsible roommate(s), affordable transportation, etc. Of course, this isn't really that simple for everyone as the plan is presumptive that one is able and willing to pursue it.