Budget = BadCredit Cards = Good?

I finished reading Young Fabulous & Broke in two days!  I loved it!  It spoke to me, it speaks to our generation about financial problems we're facing.  "It most definately is not our parent's finince book."

While reading, I loved not only was this book helpful in teaching me about scary money words I hear used all the time, like Mutual Fund, Retirement, and Savings, but I realized that the financial advice I've heard my whole life is not geared for people my age.  Most [well known] financial advice is geard towards the baby boomer generation.  So imagine my surprise when I read two of my now favorite tips from the book:

Budgeting = Bad

Credit Cards = Good

Wha... what?!?

Budgeting is Bad

Let's be honest.  How many people have taken the time to sit down and create a budget?  How many people have actually stuck to their budget?  I have created numerous budgets, and I have never stuck to one for more than a month.  Operating under constant stress and worry and the constant monitering of receipt to bank account matchups, is more than I can stand.

Suze says that while it, "is a good idea to take a look at where your money is going... there are far faster ways to determine if you have cash flow issues."  To see if you have cash flow issues, check out these examples:

• You are finally makeing more money, but your bank account balance is the same as it always has been
• You hold your breath everytime you use your credit card waiting to see if the charge will be accepted
• Your credit card balance keeps rising
• You consider it a good month if you only bounce one or two checks

 Typically, most finance books would say, Oh you answered yes to one or more of those questions?  Great, here's a budget spreadsheet, now get cracking.  But Suze's answer is different.  She says, "budgets are about as successful fad diets where you lose a ton of weight at first and then gain back even more."  Instead of suggesting a financial crash-diet, she lists ways for you to "find" money to put towards your savings goals- no budgeting, now worrying.

Digging for Dollars

So how does someone who's broke "find extra money?"  It's almost insulting isn't it?  There are a few ways that I've heard before, and a few I've never thought of.

• Stop getting a tax refund.  Everyone with a job pays income tax, but most young people are paying too much.  We get so excited about our big fat refund check, and yet struggle to make it month to month.  Suze's suggestion is to change your withholding so that less money is subtracted from your paycheck.  Change your W-4 to change the number of exemptions you claim; the more exemptions you claim, the less money that is withheld, and the more money you have to pay your bills every month. 
• Loose the Life Insurance policy.  Because most of my peers are young and don't have anyone depending on them, there is no need to pay for a life insurance policy.  It's money down the toilet.  Most companies offer a free policy that is usually around $15,000; enough to cover your funural should something happen to you (Heaven forbid). 
• Raise your insurance deductable.  If you are accident prone, or have a bad driving record, this may not be an idea for you.  However, the majority of us don't need to worry about low-to-the-flo' deductables.  The lower the deductable, the more the monthly payment is.  If you need cash, raise your deductable and save yourself a ton in wasted monthly installments.
• Cell It.  Do you really need the internet on your phone, iPod, etc?  Did you know that canceling it could reduce your phone bill by 50%?  Wait until you're at home to check your Facebook.
• Look at your bank statements.  I never did this!  EVER!  Until one day I did, and noticed that there was a charge made to a surf shop in Utah for $60.00!  I called my bank to complain about fraud, and they denied my claim, because the charge had been occuring monthly for 4 months!  Money down the drain, all because I couldn't take 5 minutes to check over a piece of paper.
• Check your credit card statements.  Again, look at it, really look at.  It takes two minutes to check for inaccurate information or mistakes.  New fees, and charges magically appear on credit card statements all the time, and people pay them because they don't even know they should be there.
• Wait an extra week to get your hair done.  Instead of every 6 weeks, go every 8 weeks.  The extra growth won't be to drastic, and at years end you will have saved the cost of two trips to the salon.
• Dry clean less.  Use the washing machine, or laundromat.  The dry cleaner is convienient, but it adds up.
• Brown bag it.  Even lunch from a fast food restaurant costs just under $10.00/day.  If you brought your lunch to work you'd save a fortune on groceries and up to $2,600.00 a year!
• Stay home for the movies.  You could spend up to $40.00 for a movie date.  Wait a month until it comes out in the Redbox and pay just $1.00, or wait until its on TV.
• Get a roomate.   Living alone is the ultimate in "I'm an adult," status, but if you're trying to find extra money, a roomate is the best way to free up some dough.  Have them pay half your rent, and you'll be saving big in no time.

Even those of us who are "broke" are able to scrounge up a little extra money every month.  Take a minute to look over where your money is actually going, and then start making cuts.

Credit Cards are Good

For the 20-30 year olds out there, we have so much potential.  Our lives and our careers are just getting started, and this is the time of our lives to stop making mistakes start planning for our future.  Suze thinks the most important thing for us to do is get a jump on our careers.  If you find yourself in a job you hate, it's time to go, no excuses!  In this market, it is unlikely that someone with a decent paying job has the luxury of leaving and finding something pays more, or even the same!

This is where Suze says it is OK to use your credit cards.  If taking an entry-level position in a field you love is your only option, go for it.  "Many of you YB&Fers feel so much financial pressure that you're loosing sight on the long term.  You give up on your dream careers that may offer great long term opportunities because you can't afford to live on the starting salary." 

"This is where credit cards come to the rescue!"

Stay focused on your career goals, and don't worry about the paycut.  Obviously you need money to live on, so the credit cards are to be to supplement your income.  They will pay the difference between what your bills cost, and what you earn.  Notice I said what your bills cost, not what dinners out cost, or a new wardrobe costs.

However, this game is tricky, and requires you to be extremely responsible.  Saying credit cards are good is not a free pass to pile on extra debt by taking vacations, shopping, or going out with friends.  The credit card strategy is soely for the purpose of paying expenses that you need to live on.  If you are conciously doing everything you can to get by but are still coming up short, then this strategy is for you.

If you have to lean on your credit card for monthly expenses, keep it under 1% of your annual income.  For example, if you start your dream job making only $30,000 a year, use your credit cards, but for no more than $300.00 a month.  In the mean time, don't ask for a raise, and work your butt of so that your company realizes you are an asset, and they depend on you, not the other way around.  After doing this for two years, you should have proved yourself at work, and if they haven't offered, you can now ask for a raise.  By this time, your credit card balance will be around $7,200.  Stop using the cards and begin paying them down.  Don't freak out about the numbers.  Instead commit to a plan of paying $50-$100 on time every month and you'll have them paid off in no time.