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Posts Tagged ‘Budget’

It’s So Easy. Or Is It?

January 19th, 2009 No comments

Ralph Kramden of the Honeymooners

This week, I was home on Friday (it was literally too cold to go to work,) so I filled the envelopes with cash for the next two weeks instead of my wife completing the task.  I was determined to show her how the envelopes should be managed and that she just wasn’t being diligent enough.

Fast forward to Saturday night, barely 24 hours later, and, just like a worn out sitcom plot, most of our envelopes are empty, even faster than usual.  I’m trying to decide if I’m Jackie Gleason or more of a Reginald VelJohnson.

To be fair, I did let her buy a new dutch oven pan, because the last time she saw it I promised she could get it next time they were on sale.  And I bought a USB hub (which I’m still trying to figure out if I really needed — it did help clean up and organize the desk.)  But now I have to, once again, reconsider the amounts budgeted in our envelopes.  I still think they are adequate, and we’re still feeling the after effects of the holidays, catching up on groceries, especially since I gave them a slight increase already for the new year, and would be depleted despite their level.  Spending always seems to increase to consume the amount of money present.

Misadventures in Budgeting

January 6th, 2009 No comments

If you are a numbers nerd, you’re going to be constantly tweaking your budget numbers, and if your spouse (assuming you have one) is not also a numbers nerd, it will drive them crazy.  It’s very important that you sit down with them and discuss the amounts for each category, and not make heavy handed decisions on what should be spent.  I was adamant that we should be able to get by on $250 a paycheck for groceries, easily.  My wife was sure we couldn’t.  So the first budget, we ran out of grocery money before the end of the second week.  What do you do then?  You blow your budget and that money has to come from somewhere else.

It’s one thing to estimate how much to budget for a category until you get some data, but it is another to force a category to be lower than you need to spend. Not that you want to spend, that you need to spend.  Some categories are pretty inviolable: your rent or mortgage, insurance, gas for your car, etc.  But others can vary, such as restaurants, clothing, blow.  If you cut too deep, your better half will resent it, and either resent you, or ignore your stupid budget  that isn’t workable.  If you don’t put any money into clothing for too long, somebody is going to need shoes and, once again, you will have blown your budget.  We actually set up a separate category for shoes (there’s five of us) that we save each paycheck and build up. Quicken’s savings goals work pretty well for this.

Communication and give and take in the budget are important.  If it’s all one-sided, you are destined to fail.

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When is Frugal Really Just Cheap?

January 5th, 2009 No comments

I’ve been trying to reflect on some of the things I do, or have done in the past, to save money and decide if they are frugal, or if I’ve gone over the edge into being a cheapskate.

One of the things that prompted this was my reading of The Millionaire Next Door.  Dr. Stanley’s found that a good percentage of millionaires bought a good, expensive (but reasonable) pair of shoes and then had them resoled several times.  I have always bought cheap shoes, and, being cheap, they fall apart and I have to replace them.  I used to think this was better than buying expensive shoes, but now I need to reconsider.  If I can buy one good pair and get them resoled, in the end I will probably save money.  The fact that I now budget money for shoes and could afford to buy more expensive shoes helps.  I’ve never had a pair of shoes resoled, and I wonder if there is even anybody locally that can do it.

Another thing that I have always done is cut my own hair.  I let it get longer in the winter to try and stay warm, and buzz it off (or even shave it completely) during the summer.  I think I have been to a barber twice since I was sixteen.  My mother-in-law was a hairdresser, and whenever I needed a haircut, she’d haul me to the shop and just do it.  When she passed away, my hair got pretty long for awhile, and I just took care of it myself.  This has worked out okay the past several years as I worked from home and didn’t have much in-person contact with customers or fellow employees, but now that I go to an office, I’m starting to wonder if I am being frugal or being cheap.  Perhaps I’m being frugal, but to the detriment of my career.  I’m not capable of cutting my hair any way except with a big pair of clippers.  If I had a professional looking hair style, would it help me to advance?

One area that I am very stubborn about frugality is clothing.  I am not paying $50 for a pair of blue jeans.  I don’t think I could pay that much for a pair of dress pants.  I can go to the Goodwill and get pants for $3-$5 and sometimes they still have the original tags on them!

What ways do you find yourself being cheap instead of frugal?

Baby Steps: Baby Emergency Fund

December 28th, 2008 No comments

An integral part of your plan to get out of debt is your emergency fund.  Life is going to throw curve balls at you, and, no matter how well you plan, expenses are going to come up that you either don’t have enough money set aside for, or didn’t even consider!

Most people seem to use credit cards for these types of expenses, but that will leave you with a number of problems:

  • Credit cards are evil.
  • You might be tempted to run up the balance on the card and not have enough for emergencies.
  • You are going to pay interest, why not have the money and possibly receive interest?
  • Credit card companies are lowering credit limits, increasing interest rates, and even closing accounts due to the currently in-progress monetary apocalypse.  Will that card be available when you need it?

Let’s face it, most people who are in debt wouldn’t be without credit cards.  They make spending too easy.

So, once you get your bills current, using whatever is left from your budgeted items (you do have a budget already, right?), start socking that money away until you get $1,000.  You could go lower, but a grand is going to cover most things.  If you have a deductible on your car insurance, make sure your emergency fund is at least as much as the deductible.

It might be hard to imagine, but knowing you have that money tucked away will be ridiculously comforting.  Now don’t touch it unless it is an emergency!  This isn’t going to be the end of it, this is just the first stage of your emergency fund, enough to tide you over until you retire all of your debt.  Once that is done, you are going to work on building up three to six months of expenses into a full-fledged emergency fund.

Baby Steps: The Envelope System

December 22nd, 2008 No comments

You are going to either love or hate the envelope system.  All of your spending you can possibly do with cash, you use envelopes.  The idea is that you know exactly how much money you have to spend on a category, and you know exactly how much is left.  It’s going to make you think.  Do you really need that item?  If you buy those Twinkies, will you have enough for milk left over?

Most of our envelopes we fund for two weeks (the length of our pay period,) but the groceries envelope we fund for a week at a time.  We found it just too easy to overspend the first week and then be worried the next week about having enough to purchase everything we need.

If you use my sample budget, the amount for your envelopes will not only be totaled, it will also do a breakdown of what denominations you need to fill each envelope correctly.  When my wife and I first started, we had trouble getting the right amount for each envelope, especially while tweaking the budget, so I did a bunch of simple formulas to figure out what bills went into each envelope and then totaled them in a box at the bottom of the budget.  We cut that box out and hand it to the bank teller with our cash check, which seems to please them, so it’s a double bonus!

Hundreds 1
Cash Fifties 2
for Twenties 5
Envelopes Tens 3
$336 Fives 1
Ones 1

Even if you don’t like the idea of the envelope system, give it a try.  Adjust your amounts or what you put in envelopes.  After the price of gas got up to almost $5/gallon, we quit using the gas envelope and just tracked our gas purchases via a virtual envelope, using a savings goal in Quicken.  I drive about 120 miles a day round trip, and I felt the amounts were getting unmanageable, not to mention tempting to misuse.

Baby Steps: Make A Budget

December 19th, 2008 No comments

If you don’t have a budget, you will never get out of debt.  Just winging it on how much you spend on things doesn’t work — otherwise you probably wouldn’t be in debt right now.  And you will not get your budget right the first time, or likely the second or third.  It will be frustrating, but the general consensus is that it takes close to three months to get a good, working budget.

Pencil and paper, or on the computer, either is fine.  I did our first rough draft on paper and after playing with it a bit, put it into a spreadsheet.  Google Docs is pretty good for this, as you have access to it anywhere and can share it with your spouse.

I set ours up with the following sections (borrowed from Dave Ramsey) :

  • Charity
  • Savings
  • Housing
  • Utilities
  • Food
  • Transportation
  • Medical/Health
  • Personal
  • Recreation
  • Debts

Under each of these sections you will want to have entries for specific things.  For instance, under food, I have Groceries and Eating Out.

Here is a sample copy of the budget sheet I use: Budget Sheet

Using this sheet, you get a running tab on how much you have left to budget, or have to cut.  There’s likely lines you won’t use (like domain names,) which you can rename to be something you would need.

Account for every dollar.  You are going to be wrong to start, but it’s better to not have a slush fund to pull from, except your blow money, which is what the name says; money you can just blow.  With extra money, you will be tempted to overspend your categories, and probably by more than you have left over.

Next up: The envelopes.

How Did We Get Into This Mess?

December 11th, 2008 No comments

As of a year or so ago, I had no idea how much debt we had, how much our bills were, or how much money we had in the bank.  And we hadn’t reconciled the checkbook in years (literally.)  I had two 401Ks that amounted to about a years salary and nothing in savings.  I knew we were having problems, but ignored them, letting my wife pay the bills (I worked, she didn’t; I figured that was fair,) causing her all kinds of stress.

It came to a head when I backed into a car, and, upon calling the insurance company, found out they hadn’t received payment and we were canceled.  We were in trouble and I couldn’t ignore it anymore.

Our church was signing people up for a Dave Ramsey Financial Peace University course and, while I was a little skeptical about it, I convinced my wife that we should try it out and it changed our lives.  Nothing in the course is rocket science, almost all of it is common sense, but the presentation is nicely done and it convinces you to try it and stick with it.

So, now we have a budget, we reconcile our checkbook (almost maniacally, my wife would say — I start jonesing if the statement hasn’t shown up by the 12th or so,) a $1000 emergency fund, and one small credit card payed off, leaving two others.

Coming up, I will tell you about how we hit each of these steps, and the things that didn’t work.

About

December 10th, 2008 No comments

Somewhere before my 39th birthday, I “woke up” and realized that, even though I have two 401k plans, I only have about enough money in them to support us for a year.  I had credit card debt, a mortgage, and not a dime of savings.  This wasn’t the way to live.  My church was getting ready to start a Dave Ramsey Financial Peace course, and, even though a bit skeptical, my wife and I decided to take the plunge.  It was life changing.

Now, we are on a budget, have a $1000 mini emergency fund, and are getting ready to start snowballing our debt into oblivion.

We live in a small town in the Midwest and have four children, three that still live at home.

Some Journey

December 1st, 2008 No comments

My wife and I first attended Dave Ramsey’s Financial Peace University over a year ago.  We’ve had our ups and downs trying to stay on track with a budget and we finally think we are at the point where we can pay off our debt and still live a reasonable, though frugal life.  As we go about this, I will be posting our progress and the things we have learned along the way.