How can I remain calm, focused and accurate when dealing with personal finances?

June 10, 2011 5:19 AM

How can I get more organized about money and more on top of my budget when my brain freezes up at the sight of bills and bank statements?

I don't know if it's ADHD or anxiety or a combination of both. I've been evaluated for ADHD and told I don't have it, but I certainly have the chaos, disorganization, and distractability that are its hallmarks. I do have GAD.

I forget to pay my bills. I freak out because I don't have the money to meet my expenses. My regular job pays less than $20K. I'm looking for supplementary part-time work and plan to ask for a raise after I've been at my job a bit longer. My bills are all piled up in a box and just the thought of opening them freaks me out. I think I'm going to go broke just paying my utilities.

If I had the money to pay someone I'd get some sort of life coach/accountant for regular hand-holding while I sort through all this stuff, but I'm afraid I'm on my own. There's no one I trust enough to ask to do this with me.

I don't think of myself as a practical person. I don't trust my own ability to do math. Also, if I have to call creditors to ask about unexplained charges or payment plans or whatever, I freak out. I end up sitting on the phone waiting for a human to come on the line, and when they do I can barely hear them because of a bad connection or understand them because of their accent, and my cell phone will drop the call. I don't have the money to get a landline, and I have to make these calls from work because places are only open during business hours, and I have to use my cell for privacy. These things stress me out more than they should. I know everyone goes through this. How do people cope?

I am just SO bad at this practical stuff. Is there any way I can get better at it, or should I try to find some sort of free or cheap help with this? I've gone to Consumer Credit Counseling Services in the past, but my impression was that their purpose is to empower people to take control of their own finances, not to be an outsourced budget service. This simply didn't work for me. I'm embarrassingly old to be having this problem and I really think there's something wrong in my brain, otherwise I would already be able to sit down and make a budget, and remember when things are due, and keep numbers in my head.

posted by sucky_poppet to work & money (17 answers total)

First of all, chill. You make less than $20k. There are people who make ten times what you do who are rubbish with budgets. Almost everyone is naturally bad at this stuff, and getting over that takes work and time. Just no two ways about it.

Second, it sounds like you've got some outstanding unsecured debt. You don't go into details, but from your situation it may be time to consider bankruptcy. Doesn't sound like you've got much to lose, and getting rid of a bunch of debt that you're--let's be honest here--not terribly likely to be able to pay off on your own could really get you out of a bind.

Third, screw the paper. I pay three utility bills, rent, student loans, a car payment, and regularly use two credit cards, and I get zero statements in the mail. Who needs the hassle? Just do everything online. If you aren't doing online banking, sign up. Consider starting automated payments for your fixed expenses like rent. My bank automatically sends a check to my landlord every month, and my student loans and car payment are deducted from my checking account like clockwork. Internet and phone are charged directly to a credit card. I don't have to think about it, and I never have to remember whether or not I paid rent this month. The only bill I pay manually is my electricity bill, and I just do that as soon as the email hits my inbox.

Fourth, once you're set up with online banking, head over to Mint.com. It'll change your life. You'll need to spend a little time training it, i.e. categorizing your existing transactions and teaching it to recognize new ones, but once you do, you can get an incredibly detailed picture of where you're actually spending your money. Not only will you probably be surprised at where some of it's going, but you'll be able to set pretty precise budgetary figures going forward. Even better, since there's no paper to keep track of, you can't really lose anything.
posted by valkyryn at 5:43 AM on June 10, 2011 [3 favorites]

1. Write down all of your monthly expenses--the average costs of your cell phone, electricity, rent, insurance, etc.
2. How much do you have left over per month for other expenses, like food, gas, light entertainment, etc? Once a month (payday is good), make a visit to your bank and withdraw that amount in cash. Ask for three money envelopes. Split that money accordingly. Label one envelope "FOOD" and put your allotted cash budget inside of it. Label the second envelope "GAS" and do the same. Label your last envelope "MISC" and put your remaining money in there. When the envelope's empty, you're done for the month. Do not use credit cards.
3. I'm normally totally against this, but set up automatic bill pay for as many bills as you can. If one of your bills is the same every month (like your cell or your rent) but doesn't offer automatic bill pay, set up a recurring payment in your bank's bill pay system. If the bill changes every month, well, it's on you to set up the payment. Just make a routine out of it--the bill comes in the mail, you immediately take it to your computer and set up the payment. It will soon become muscle memory and you won't even think about this.
4. Watch your balance like a hawk to make sure you don't overdraw.

One other thing is to try to trim your budget wherever you can. I'm sure you've already done this, but look at it again. Do you have unlimited texting on your cell plan? Are you sure you really need it? Are you paying for cable? Can you get by with Hulu instead? These questions may seem ridiculous right now, but they could mean the difference between being in the red and being in the black.
posted by litnerd at 5:44 AM on June 10, 2011

This sounds like an emotional problem with a lot of minor practical issues thrown in as rationalizing supporting characters. Dropped calls and foreign accents are annoying, but they're not making a mess of your finances. The math doesn't have to be complicated.

If your income isn't enough to cover your expenses, then you'll need to spend less until you can earn more. No organizational system can change that. But if you don't know where you stand then you also don't know how much you need to pare back. If you don't know what your debts are then you can't devise a plan for dealing with them. You'll have to open those envelopes and be able to read them without your eyes glazing over in terror. You need to find some way to manage your emotional responses to financial ideas.

It sounds as if shame over your circumstance is a big part of this (I have to use my cell for privacy). Hiding something like this from everyone in your life is really difficult and taxing. I think you might benefit from some sort of local support group or the periodic help of a trusted friend. You are not the only person to ever struggle this way. Others have been through it and will be willing to help.
posted by jon1270 at 5:48 AM on June 10, 2011

So, I see this as two separate but related problems: #1 - You don't have enough money to meet your expenses, which leads to #2 - "forgetting" to pay your bills because you're afraid to open them because you know you can't pay them.

When you have enough money to pay your bills (and it will happen someday!), actually paying them can be pretty trivial! You just set up automatic payments from your checking account where your paycheck is automatically deposited, and you never have to remember to pay a bill again. Yeah, you should probably take a look at your bills to make sure there are no funky charges, but there's no big rush. Automate everything. (On preview, what valkyryn said.)

OK, so how do you get from a place where you don't have enough money to pay your bills to a place where you do have enough money to pay the bills? If you're using credit cards, stop. That's one more bill you're going to have to deal with, and you know you don't want to deal with any more bills. Cut any expense you can, especially big, fixed things like rent (though when you're making so little money even little things can make a difference). And try to make more money if at all possible. If you have anything to sell, sell it.

Finally, really, really consider asking someone in your life for help with this. I know it feels really shameful (been there), but these are common problems you're having.
posted by mskyle at 5:53 AM on June 10, 2011

mskyle: Finally, really, really consider asking someone in your life for help with this. I know it feels really shameful (been there), but these are common problems you're having

This this this. At a similar point in my life, someone opened all of my bills for me and made me a spreadsheet of my current debt and sat with me while I called my creditors. He was very calm and non-hysterical about the whole thing and I will be forever grateful.
posted by DarlingBri at 6:32 AM on June 10, 2011 [2 favorites]

Okay, first thing -- take a deep breath right now.

Okay.

I have advice for right now, and I have advice for once the crisis has passed.

RIGHT NOW:

Get a friend to help you with this initial process. Preferably a friend with a land line, and also a friend who's good at helping calm you down when you're freaking out. This friend will first help you gather up ALL the financial papers you have at home right now -- bills, bank statements, credit card statements, everything. Then the two of you will sort everything -- all the cable bills in one pile, the electric bills in another pile, bank statements in another pile, everything. Then when everything's sorted into piles, your friend will help you open up and look at everything, and decide what you need to keep (the bills, and the bank statements) and what you can just throw away (those "use these checks to take a cash advance on your credit card!" things).

Then the two of you will look at everything again and figure out how much you owe everyone right now. You may find that you're a couple months behind on your gas bill or something, but you may also find that "hey, I'm not doing as bad on the rent as I thought." Whatever. You're just going to both get an accurate snapshot of what is going on at that minute. Then you're going to do the same for your bank account -- balance your checkbook and find out how much is in there right now.

Then you will take all that to your friend's house and use your friend's land line to start making calls. If you have a couple of bills that are past due -- say you're a couple months behind on your gas bill and your phone bill - you will call those two companies from your friend's house (so you don't have to worry about the cell phone dropping the calls, and also so your friend can hold your hand) and you will ask to speak to someone about working out a payment plan. The good news for you is -- companies want to work with you to help you pay them off. If you have a huge electric bill (say, $250) that you know you're never going to be able to pay all at once, the electric company can work with you to come up with a payment plan spread out over a few months (say, $75 a month for the next few months) until they're all caught up.

All that is just getting you through the initial "oh my god i have no idea what's going on with my finances right now" flailing you're doing. By the time you're done with this, at least you will know what's going on with your finances ("I have X amount of money right now, I owe Y amount of money to the electric company, but I can take Z number of months to pay that off, so that will just be an extra expense for a while but I can handle it because I know I have Q money coming in every week").

FOR GOING FORWARD:

There are two ways I've found that help me cope with staying on top of paying bills in a timely fashion, that may help you.

1. Pay it immediately as soon as it comes. Literally immediately -- when you get your mail and see there's a bill there, as soon as you walk in your front door with it, take off your coat, get out your checkbook, open the bill, write the check, stuff the envelope, stamp it, and put it with your coat or bag to go back out and into the mail the next morning. Done -- it's paid, you no longer have to think about it.

2. If you know from a week-to-week basis that some of your weeks are leaner than others (i.e., the week you pay your rent you don't have much money left over, but the next payday is better), then make up a "bills" folder that you carry with you at all times. When you get a bill, open it up -- then check the due date on the bill. Whatever day is a week before that date, write that date on the bill (for instance, if the bill is due on the 10th, I write the 3rd on the bill). Then it goes in the folder. Then whenever you have down time at work, check your bills folder -- if there is anything in the folder that's due at about that time, write the check and send it out. If you can afford to pay anything else coming up, then great. ...Carrying that bills folder with you all the time lets you take advantage of idle "oh, hey, I have a free minute, let me see if there's something I should take care of" moments.

I know how panicky this can make people (honey, I've got more money issues than a subscription to FORTUNE magazine), but these things have kept me not only financially solvent, but have helped me maintain a flawless credit rating, even two years ago when I was on unemployment and only made $17K for the year. The thing is, doing these things will give you information. Things just look much worse right now because you don't really know how big the problem is. But if you know how big the problem is, that's when you can finally make choices to solve it. Even if it's big, at least you know how big, and you know there's no way it could be even bigger -- and also you get to see it get smaller over time, and that's always good.

Good luck.
posted by EmpressCallipygos at 6:42 AM on June 10, 2011 [3 favorites]

"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

It seems much of your problem is anxiety a budget alone can't fix. If you're pulling in less than covering rent food and other necessities, it's quite understandable how you feel about paying bills. Where a budget can help people is on the margins, by avoiding finance expenses, and by identifying priorities. But I'll place my faith in you, that you'll find sufficient extra income that this will all work out. However:

sucky_poppet: "I'm embarrassingly old to be having this problem and I really think there's something wrong in my brain, otherwise I would already be able to sit down and make a budget, and remember when things are due, and keep numbers in my head."

Nobody remembers this kind of crap. Shit, I can't remember anyone in my family's birthday. If you asked me how much I had in checking right now, I can give you one significant figure, plus or minus 100 percent. I used to try the "just remember when things are due" in college and the truth is, it doesn't work and makes sleep at night unpleasant as the anxiety of things you might have forgot to do adds up. This doesn't work, and it certainly didn't help my GPA.

What you need is to outsource. A system. A calendar, and a database. There are many such free things. Most email systems come with a calendar now. Put in recurring events to pay all your bills in advance of their due date (might as well put in other important events you might forget!). I do this with my water bill (because it doesn't autodraft). Your goal: no more late fees!

In addition to a calendar it helps to have a database as a planning tool. I use GNUCash, but you might be better off using Mint. If you schedule all your expenses (ALL) ahead of time, you can see exactly when you go negative and adjust course. Mint's primary advantage is analysis; I'm told it can show you how your spending compares and suggest ways to cut back. For someone with money / math anxiety this is a blessing.
posted by pwnguin at 6:58 AM on June 10, 2011 [1 favorite]

Make it a challenge, or play a game with your budget. I started a Zero balance budget back in 2004. Here's something I wrote when commenting on a finance blog back in '06:

I’ve been doing a “Zero Balance” budget for about 18 months now, with a twist:
I get paid every two weeks, and I have found it easier to budget by breaking it down by pay period. For the purpose of this example, let’s say I make net $2000 every two weeks, and I’ll use the first pay period as an example.
1. Always pay yourself (savings account) first. I try to save $500 every two weeks. So $2000-$500= $1500
2. Divide mortgage by 2. If $650/2=$325, then $1500-$325=$1175.
3. Divide your recurring bills for the month into similar amounts (1.Cable+ CellPhones+ Insurance = about $300, 2.Water+ Electricity+ Insurance = about $300). Pick one that you’ll pay during each given pay period (in this case, we’ll pay 1. at the beginning of the month, and 2. at the middle of the month). So now, we’re at $1175-300=$875
4. Now, I get paid on the 1st and the 15th. So my $875 needs to cover me from the 1st until the 14th. So, $875/14=$62.50, so I have $62.50 allowed to spend for every single day until the next pay period (this is for groceries, gas, etc…).
5. If I go “over” on any given day, then I just re-compute based on the balance I have left. For example, if I spend $100 on Groceries and gas on the 1st, then I just re-calculate for the other 13 days ($875-$100=$775/13= $59.61 a day).
Screwing up at the beginning (going over), isn’t that painful, since the overage is spread out over a (relatively) long period of time. (I very rarely get an “overage”, it’s hard to spend $60 a day on just daily expenses) Towards the end, you’ll notice that the times you could only really spend maybe $40 or less, will boost your daily “allowance” significantly. Usually, by the end of the pay period (on Day 14), I’ll have like a $200 “allowance” for the day. On the 15th, I transfer over (to savings) whatever I had left from the beginning-of-the-month paycheck.
When you reach $5000 or so, transfer that money to a CD or investment.
Using my plan, I have completely paid off all my credit cards and car payments, and am now financially independent.
Try it for one month. It WORKS.
posted by Master Gunner at 7:37 AM on June 10, 2011 [5 favorites]

Thanks for the replies so far. My inability to ask a friend to help with this is not just from shame. It's because I moved and I don't know anyone here well enough to do that. Otherwise I would. In lieu of that, how can I calm myself enough to do it alone?
posted by sucky_poppet at 8:35 AM on June 10, 2011

sucky_poppet, if you tell us your location, perhaps a Mefite in your area can take the place of a friend?
posted by litnerd at 8:43 AM on June 10, 2011

Hmmm.

Maybe...okay, this going to sound counter-intuitive, but maybe having an impartial party come in may help even more so. You know, how sometimes it's easier to talk about deep stuff to a stranger because "hell, when am I ever going to see THEM again?"

I know there are volunteer organizations that help people with their taxes -- maybe there's a similar volunteer program to help people with their finances? Maybe reach out to the nearest college and see if there are any Future Accountants' Clubs or something, and some student could come for an afternoon and just sort through everything themselves and come back to you with a report of "okay, here's what your plan should be"?
posted by EmpressCallipygos at 8:44 AM on June 10, 2011

litnerd just had a better idea.
posted by EmpressCallipygos at 8:44 AM on June 10, 2011

The Dave Ramsey system is perfect for you. I know several young people in similar financial straits, and worse, who got on their financial feet following his advice. You can move on to more sophisticated gurus after that, but for a newbie, his method can be helpful. There are free workshops all over the place, and there's no hard sell. It's kind of an AA for people in financial difficulty who don't know where to start.
posted by Elsie at 8:51 AM on June 10, 2011

I have a spreadsheet in Google docs with all of the days of the month in a column. I know my rent is always due on June 1, and my credit card payment is due June 15, and my utility bill is due June 20, etc. I know I spend on average, X amount on food per day and X amount on gas per week. I also know when I'm going to get paid. So my spreadsheet looks like this, with a running total (these numbers are made up):

Balance at beginning of month ..... $1000
June 1... Rent.... $500... Food.... $10.... $490
June 2 ...Food ... $10 ......................$480
.... (repeat food costs for each day)
June 6 ...Gas.... $20 .......Food..... $10 ....$420
... (repeat food costs for each day)
June 10 ... Paycheck +$500...Food...$10 ...$880
June 11..............................Food $10 ......$870
June 12....Gas ....$20..........Food $10.......$860
... (repeat food costs for each day)
June 15 ... Credit Card $100...Food $10... $730
...

That way I know how much money I should have on a given day, as well as when my bills will be subtracted from my account. I set them up on auto-pay. If there is an un-budgeted expense (went shopping! $100) I put it as a line item for that day so my expected balance is still right. If my actual balance is more than $50 from my expected balance, I go through my statement to see what went wrong. Usually I forgot that I ordered Chinese food and went to see a movie, or something like that.

This has saved me a lot of sleepless nights wondering if I will make it until next payday.
posted by desjardins at 8:57 AM on June 10, 2011

I can't help but be amazed at whatever the phenomenon is...but, this is close to EXACTLY what I was preparing to post about. This isn't the first time this has happened either. Thank you ALL for this information and ideas. I love me some mefites!
posted by littleredwagon at 8:58 AM on June 10, 2011

I worked in retail banking for a few years so I can tell you that your problem is a pretty common one even among bankers themselves. Tons of people have the same issues. To me, there are really two issues here. One is budget management and the other is cash-flow management.

Budget management is mostly a mental thing. Are you able to stop yourself from buying things you can get buy without and are you willing to look for ways to save money. Can you live on a budget and can you deal with your finances without feeling overwhelmed, anxious, intimidated, etc.

The cash-flow aspect has more to do with the mechanics of how you spend money, dealing with the timing of cash flowing out vs. flowing in.

In dealing with the budget aspect my main suggesting is always to work on a budget but don't try and go full-throttle right away. I've seen plenty of people try to go from constantly overdrawing their accounts to tracking their budget in really fine detail and fail. They usually do okay for a few months but they spend a ton of time trying to figure things out and just give. Furthermore, I feel like a lot of the plans for budgeting are workarounds and not solutions to budgeting. Putting cash in envelopes, for example, is a great way to force yourself to start thinking frugally but there are better long-term solutions. Once you've tackled the mental aspect you won't need to keep cash in envelopes to stay on budget, you won't even need to track your budget. You'll be able to eye each and every transaction you have through the lens of frugality and you'll stay under budget without even trying. You won't need to pay yourself first because you know that spending money you don't need to now is like robbing your future self and your future self will be mad you. You'll pay yourself last and end up paying yourself more. Start small, go slow, you'll get there.

Eventually, you'll trust yourself enough that you'll be able to really work on your cash-flow in a way that I think makes a lot more sense. I've seen a lot of people try and manage their money a lot of ways but this is the method that I think works best. However, it takes discipline to make it work.

First, figure out roughly what your monthly expenses add up to, round it something easy. I'll use $1,500. On the first day of the month, transfer enough money out of or into your checking account to bring the balance to $1,500 exactly. Pay your bills as soon as you get them. Personally, I like to use online bill-pay through my bank. Some bills I can see right through my bank's website, I can choose to have those bills paid automatically or I can pay them manually but I'm in control. If its a paper bill (which I try to avoid) I write "PAID" in marker on it and I forget about it. I usually schedule the payment so that it will arrive just a few days before its due but it won't really matter.

The other big component is that I use a credit card to make every other purchase. Gas, groceries, clothes, everything goes on the one card.

At the end of the month (or the 1st of the next month) I make two transactions. One is to pay off my entire statement balance on my credit card so that I don't pay any interest. Two, I transfer whatever money I need to between my checking and savings accounts to bring the balance back to $1,500. It helps if your credit card is with the same bank as your checking account and if you call and ask them to change the billing cycle so that it starts at the beginning of the month.

By using the bank's money for a month at a time for your variable expenses (IE everything you aren't sent a bill for) with the credit card, you're separating the timing of your cash-flows from your in-flows. Your checking account balance stays pretty stable. You only have a handful of withdrawals each month from your bills and deposits from your paycheck. Since a bunch of the money you're spending is on the credit card, it doesn't matter if that balance is higher than the current balance in your checking account as long as, and this is key, you're spending less than you're taking in.

The other nice side benefit is that it will be easy to figure out your monthly budget. You'll have your variable expense totaled for you on the credit card bill and can dig into that to find ways to save money. A lot of them will even categorize things for you based on the merchant codes of the places you used the cards (though Mint.com is much better at this). Then you'll only have a few more transactions in your checking account.

Or you can just add up your deposits, subtract whatever your transferred to savings to bring the balance back to $1,500 and that is what you spent that month. The nice thing about this system is that you don't have to give it a lot of thought but all the data is still there if you want to get elbow deep into analyzing your finances.

Once you've built up a solid six months expenses or more worth of savings, you'll be ready to ask mefi about investing your excess savings.

As far as talking to the people on the other end of the line when you call about your bills, let me tell you from someone who has been on the other end of that line (or the other side of the desk, in my case) they really don't care. It doesn't matter how bad things are, they've talked to someone worse and they won't care how bad you are at managing your money and they don't really make judgement. The good ones will want to help you solve your problems if you're inclined to let them but most of them just want to get through the day and go home.
posted by VTX at 10:59 AM on June 10, 2011 [2 favorites]

In the long run, a system like VTX's is a good thing to aim for. I do something almost as simple, though I use a homebrewed spreadsheet to smooth out the cash flow for larger annual and semiannual expenses like homeowner's insurance premiums, Christmas gift shopping and the like. Like he said, don't expect yourself to be perfectly disciplined right away; it's too big a change to make all at once. Ease into it. Make small improvements and allow yourself to feel good about them so that you'll want to make more.
posted by jon1270 at 1:12 PM on June 10, 2011