Setting up a homestead can be expensive but smart homesteaders are able to get started the right way and live their homestead dreams.
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HOW TO START YOUR HOMESTEAD
One of the best things you can do to get your homestead off to a great start is to tackle your finances. A homesteading hobby can get expensive quickly if you are buying things like pre-made coops or lumber to build a coop or even raised beds made from wood or metal can get expensive. And don’t even get me started on the price of seeds!
So how do you tackle your finances? Let us walk it through, step by step, together.
EVALUATE YOUR FINANCIAL STATUS
Just like you take a walk in the garden to check for problems and plants which are ready to harvest, the same is true for your finances. You need to know where you stand with your money.
Are your money choices calling the shots, or are you? By that I mean, are you losing your paycheck to paying debts?
To evaluate your financial status, you are going to need to grab your bank statements, paystubs and any other statements like credit cards, loans, car financing, bills, receipts etc.
Go grab them, I’ll be right here waiting for you.
THE MONEY MONSTER
I know you might start to feel anxious about checking on your finances. I had a lump in my throat the first time we did this as a family because I knew there was debt. I just didn’t know how much there was going to be.
People can get defensive, aggressive, and ashamed of their spending habits and where they are with their finances. If you feel like this, then just know:
It is normal to feel like that.
Millions of other people feel like that too about their money monster.
The best news is that you can tackle your money monster. I like to think of it as like a medieval knight in armor taking on a mythical beast.
It feels scary, it’s worrying. But, my friend, you can come out of the other side, and you will be so much better for it!
TRACKING YOUR SPENDING
Now you have gathered your statements and bills together. Or maybe just logged into your bank’s app. Either way, it is now time to dig in and see what is going on with your money. We need to locate that money monster’s lair to be able to plan how you will slay it.
HOW DO YOU UNCOVER YOUR MONEY MONSTER?
Your money monster is debt. It robs you of security if things break down or go wrong. It steals your future. It creates stress, anxiety, and worry. I can hurt a relationship with a loved one. It tries to have power over you and your life.
It doesn’t have to be like that though.
Being free from debts is life-changing and freeing. And I bet that’s one of the reasons you want to homestead – to be free!
I found that the best way to find where the money monster hides is to see what debts you have.
Look at the paperwork you have gathered and in your bank statements for those payments to credit cards, store cards, car financing, medical bills, student loan, home improvement loans, other financing like on toys like 4 wheelers, boats etc., and any other debts you are paying.
You are going to need the full debt balances. So if you only know the minimum payments you are making, you are going to need to call the company that you are paying to find out the total amount.
List your total debts all out, one by one with the total balance and the monthly minimum payments so you can get a handle on where you are on the financial scale.
I know this is hard to look at if you have a lot of debts, I want you to know that a life that is debt free is completely possible and you can do it!
The last thing you need to do for your money monster is to list them out smallest to largest. Ignore the interest rates. List them based on the total amount owed, smallest to largest.
Now you know your money monster, it’s time to meet the knight and come up with a plan. Meet your Monthly Homestead Budget.
CREATING A BUDGET
A budget does not mean that you are going to lack. It really can open up creativity and bring joy in ways that you didn’t think were possible.
This is the tool that is going to help you conquer those debts that you listed. One by one.
A budget helps you decide:
- what you must spend your money on (the Essentials, debts, etc)
- if you can spend less money on some things and more money on other things
A budget also helps you see where you are spending money and put it to better use like saving or paying down debt.
HOW TO START CREATING A BUDGET
Your Monthly Homestead Budget is going to account for every dollar that comes in and every dollar that goes out (or pounds if you’re back in Blighty).
Your budget is basically going to help with a math problem. It will help you track money coming in a.k.a. your income and money going out a.k.a. your expenses.
Your budget is going to be different for every person and every family in terms of expenses and income. There isn’t a one size fits all budget.
TOOLS OF THE TRADE
There are lots of free tools and apps available to create a budget with. I use a spreadsheet that I can fill out with the family and we can print it out and put it on the fridge, or the microwave, or above the coffee pot. Somewhere that we see it every day for accountability and to keep on track. I got fancy and charted a graph that showed our debts and the progress!
You can use an app or a spreadsheet, there are even templates available for free within applications like Google Sheets and Excel. Or you can write it out on paper or in a notebook.
Whichever is right for you and your family.
GRAB YOUR PAPERWORK
You are going to need your paperwork again. So, grab your pay stubs, bank statements, bills and receipts for the last 3 months.
Urgh, why 3 months? So, you can get an average of expenses that fluctuate like gas, electricity, water, grocery etc. or if your income fluctuates you will need to see how much it changes.
FINDING YOUR INCOME
Income or money coming in is everything coming into your account from your job or jobs if you are working more than one job, side hustles like delivering pizza, child support, money for your birthday. Whatever it is, if it is money coming into your account, it is income.
Add all of the money coming in for your monthly total income. Keep note of this amount.
YOUR MONTHLY EXPENSES
Start with the Essential Things you need to live and I’m not talking about the payments on the boat. I’m talking Home, Food, Utilities and Transport. The basics that you and your family need.
HOME
This might be rent, or mortgage payment, and council tax if you are in the UK. It also includes HOA fees, renter or homeowner insurance, private mortgage insurance and property taxes. Record these amounts on your budget.
FOOD
This is your grocery spend. Not eating out expenses. Look at your last 3 months of bank statements and see how much you are spending on groceries. Your grocery budget is going to depend on where you live and how you eat. Luckily, there are lots of ways you can stretch your grocery budget like batch cooking.
Record your average grocery spend. There isn’t a lot of good in slashing your budget on groceries from let’s say $400 a month to $100 you will struggle to stick to your budget. It is better to average the amounts spent over the last 3 months then work your way to reducing the expense.
UTILITIES
Your basic utilities include electricity, gas or propane, water, garbage, and recycling. They are not the phone, internet, cell phones, Netflix, Hulu, or cable subscriptions.
Record the average spend on these basic utilities in your budget.
TRANSPORT
The last but by no means the least of the Essential Things. Your transport is how you get to your job unless you are lucky to be working from home. Average your last 3 months of gas or diesel for you budget but also account for expenses like license renewal, plate renewal, vehicle insurance, or the MOT and tax if you’re in the UK.
Now you have taken care of the Essential Things it’s time to review all the other stuff.
THE OTHER STUFF
The Other Stuff is other expenses you might have such as alimony, childcare, prescriptions, insurance, fun money, emergency fund, birthdays, the minimum payments on the debts, clothing, shoes, school supplies, allowances or pocket money, entertainment, contributing to savings, all of that good stuff.
BUILD YOUR BUDGET
Get all of your expenses into your budget. If costs vary for items, average them from the last 3 months and place them into the budget.
Once everything has been added to your budget, it’s time to run the math!
ZERO BUDGET
If you calculate your total income minus your expenses and you are bang on zero great job! That’s exactly what we’re looking to do!
If your income is higher than your expenses, that’s a great place to be in. You’re living below your means like a happy homesteader! The extra money you have could be put into paying off any debt you have. Remember to start with the lowest total amount of debt first to pay that off first.
No debts? Awesome! Start saving those extra funds towards retirement or a goal that you might have for your homestead. Maybe it’s to buy lumber to build a chicken coop or perhaps it’s to start beekeeping!
If your expenses are more than your income and you are coming in with a negative balance on your budget, this means you are living beyond your means and you need to make some changes.
ADJUSTING YOUR BUDGET
If you are finding that your outgoing expenses are higher than your income, you need to find areas in your expenses that you can cut to reduce spending. Some ideas are:
- reducing your grocery spend
- eating out less
- spending less on entertainment
- cutting the cable
- turning off appliances like the TV, DVD player, game consoles to use less electricity
- thrifting rather than buying new
- shop around for better insurance deals
- canceling gym membership
- canceling subscriptions like magazines, movies, or membership sites
You might need to pick up a side job like delivering food, being a driver, running errands, cleaning houses, and other side jobs you can squeeze in after your normal job. Or see about selling items you no longer use or need think local classifieds, Facebook marketplace, eBay, or a good old-fashioned yard sale!
You want your income and expenses to be equal so when you calculate your income minus your expenses you get zero.
USING YOUR BUDGET
Record your actual spending next to the budget item so you can track how well you are doing against your budget. I track every day I make a payment. If I end up saving money (spending less) then I put that additional money towards paying off a debt I’m working on.
Recording your spending will help keep you on track and help to identify problem spending, patterns of overspending or underspending. As you use your budget, keep an eye on how much you have spent in a category. Once you have reached your spending limit in that category, you will either need to stop that type of spending for the month or move money from another category to cover the additional costs.
What’s your favorite money saving tip? Let me know in the facebook group
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