Budgeting (a.k.a. What I've Learned Recently)

Carole said:

I wonder how many of you are in the same rickety boat with me. ...

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My boat's not rickety, well not much anyway. I spend way too much on beer and restaurants. I think we have all gotten into the habit of spending without thinking. It has become so routine we don't even notice it.

My two pennies(not that I have any to spare)

Richard

My boat's not rickety because I spend way too much on painting it, remodeling it, redecorating it, maintaining it and loving it. Along with similar unneeded purchases (how many bottles of shampoo, deodorant, kitchen d/w liquid and Comet do we need? How many bars of soap? How many pairs of socks? How many flashlights, batteries, cans of tuna, bottles of salad dressing?)

I'd write more, but I need to go shopping...

::sigh::

I am in the same boat. The problem I have is in going out to eat, renting movies, and buying books, DVD's etc.
I don't even go out to eat in nice restaurants either, just fast food.

The problem is, being single, I can't stay cooped up inside all weekend because I go stir crazy. If you go out anywhere, you spend $

and Dating? There's no way I can even afford that right now.

It's not the big purchases that sink me. It's the many little purchases that add up.
The ones that you think 'Oh, that's only $4? that's no big deal!'
At the end of the weekend, you see that you spend $2, $3, or $4 twelve times.....

Don't sweat the stuff that you will eventually use, like the yarn or soap or Lysol. They don't go bad. I do the same thing. Buy in bulk, but when they're on sale.

Now here's where I go wrong with the money: We hardly ever eat out or do take out. When we do, we go to a mid-priced restaurant, as opposed to a fast food place. I order the appetizer as a main course, patting myself on the back for being thrifty. BUT I'm enjoying being out and I order a glass of wine (even house wines are about $5), dessert (about $4.50), and coffee ($2). Then there's the 20% tip. And tax. So if I could just ask for a glass of water with ice (not bottled water), and skip dessert, or share it, I'd save about $10. Saving that $10 a month adds up. Then I think, wait a minute--can't I enjoy myself once in awhile?

So, Carole, yeah, you're not alone!

He even goes to movies for free because he works at a theater.

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Very best job in the world. (Most of the time, anyhow...)

A number of people both on and off this board have recommended a book called The Complete Money Makeover. I've yet to check it out, but I thought I'd put that in for what it's worth.

Carole, I think you've taken the critical first step, though--finding out where your money's going. Keep keeping track, and you may find that that's all you have to do.

Not that I'm in any shape to give advice. I know where my income goes--to the restaurants. So I bought a Crock Pot on the weekend, and now I can put stuff in it and know that I'll have dinner waiting when I get home from work. At two in the morning. (Because working in a theatre does have it's down sides. )

Every year I sit down and do a budget. It's really a good idea what you're doing, Carol. Apart from the essentials such as mortgage, etc. often we'll find ways to cut down on waste and discretional spending.

My biggest "wastes" are dining out and movies. Well, I have to watch movies (I review them) but I now try to go to matinees instead of evening shows. I also get on a list for advance screenings and so far I've seen six movies for free (as long as I reviewed them). I also usually end up eating at home a lot soon after I do the budget, but eventually go back to old habit because I do really need to go out often with friends, etc. -- it drives me crazy to be home all the time.

I also have huge bills on the Internet, cell phone, etc. But I've cut down already -- only subscribing to the cheapest plans. Other than that, it's the occasional big item purchases such as a new iPod, Mac software, etc. My car has a 35 mpg fuel efficiency so it's not too bad -- but I do enjoy taking a long drive once in a while (by long I mean like over 100 miles each way).

Ever since I watch my spending I've discovered ways to minimize it:

- I only buy what I need and I make sure I really have run out of something before I buy it. I'm also the kind of shopper who grabs what he needs and gets out anyway.

- I don't grocery-shop when I'm hungry; otherwise, that's when I buy all the crap I don't need or normally eat... like hot pockets or big bags of potato chips

- When I really want something (like a new HD TV or something), I won't impulse buy. I do my research, then look at the thing for at least a couple of weeks, then walk away. I think about if I really need it (vs. I just "want" it). If after a few weeks I still think I "need" it, then I'll buy. Most often, though, I find that I end up not buying because I realize I just "want" it. I used to have $thousands worth of gadgets and gizmos. I don't really anymore.

- I subscribe to Netflix. Saves me $hundreds if not $thousands. Often I realize I don't really need to own the DVDs I watch. Sometimes I do want to own something -- but if I wait a few more months, I can sometimes find them in the bargain bins.

- I go through my fridge once in a while and throw out the "bad" or expired stuff. That way I know what I buy but don't eat. Also, that way I'd know what I don't have and what I have. So when I go shopping I don't end up buying extras.

- I buy clothes maybe twice a year. Enough styles to mix and match. So don't be surprised if you see me wearing the same thing when you see me. But I don't really care. They still look good on me. My clothing budget every YEAR is like $300.

- cut up all your credit cards except for one, with a lower credit limit. That way, you will only use it for stuff you really need or must have. Also, try to pay the balance off or down every month. I also have a HELoC (home equity line of credit) to consolidate my credit cards -- the interest rate is only 7.5% now and the interest is tax-deductible.

- every year go through all your utility bills and figure if you can cut down. Do you need all those cell phone minutes? Do you need 500 cable channels (and still nothing to watch)? Do you need the 4-out-at-a-time Netflix plan? Do you need that XM subscription? I usually find myself cutting down at least $100 by eliminating or lowering my plans.

That said, I tend not to think about money or stress. That's why I do a budget every year or so to remind myself, but I don't stress about it every day. I don't conscientiously dread about money -- I just make the above into habits... second natures. When I go out I don't stress. The "do I need it" thing has become a second nature to me now. And I feel that the more you stress about money and the more you "want" to have more, the less you seem to have. I don't usually stress about it and so far I'm doing very well, even when the stock market tanked for months -- well, it came back.

It must be the economy or that time of year or something. I keep meaning to sit down with all my receipts and see where my money goes. I'm thinking I only need a nice little spreadsheet to track everything, as we don't have much in the way of complex financial data. Our house really needs to buckle down and get rid of the credit card debt.

One of my biggest issues is the grocery store. Generics are your friend, as most of them are really good nowadays. However, my husband was raised that generic=bad by the Grandmother-Who-Spoiled-the-Living-Crap-Out-of-Him. So he insists that his stuff be brand name, and of course these are way more expensive. So a bunch of my money goes to pay for his crap.

I am so in need of a deep declutter and organizing festival. I should make a party out of it.

Screw it, you can't take it with you. I have more important things to do than counting the pennies. So long as I still have a roof over my head and food in my belly, I'm not spending too much, and that's as far as my budgeting goes.

It's amazing how much money you save (and how much more conscious you are of spending) when you sit down and write it out (or put it into excel--which is what I do).

I read some advice last year that has REALLY helped me curb unnecessary spending and that is to earmark how ever dollar is going to be spent BEFORE you get your paycheck.

And yes, make sure you earmark some money for "entertainment" purposes. Don't punish yourself, but if you are conscious about where your money is going, you'll spend less.

Carole said:

ISo this morning, sick of being broke and filled with inspiration to turn our spending practices around, I sat here with my favorite program of all time - Excel - and started an honest look at our finances.

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I did that. Excel lies to me and says we should have several hundred EXTRA dollars a month after bills, groceries, and all the other necessary expenditures.

Have no idea where that money goes. I think someone is tapping into our account without our knowledge.

James81 said:

And yes, make sure you earmark some money for "entertainment" purposes. Don't punish yourself, but if you are conscious about where your money is going, you'll spend less.

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I agree.

Shadow_Ferret said:

I did that. Excel lies to me and says we should have several hundred EXTRA dollars a month after bills, groceries, and all the other necessary expenditures.

Have no idea where that money goes. I think someone is tapping into our account without our knowledge.

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They're called kids.

I budget a certain amount of money to spend on groceries and necessities every pay period, and I take that money in cash. Unless it's an unplanned expense, I use cash for everything. That way I can see my pocketbook dwindling. To make sure I don't use up next week's money this week, I place that cash aside and only pull it out the following Friday.

Food: I buy it when I'm going to cook it. If I buy more at once, I require myself to use it. It can be a pain to have to run out to the grocery store after getting home late from work, but I've found it actually saves me a few dollars (only buy what you need, then get out like the store's on fire!).

Wants: If I want something, I have to assess if I have the cash for it. If I'm desperately wanting to shop, I check my credit card balance first (I only retain a balance on one card so any debt is consolidated and in my face every month). When I find something I want, I walk away, run the item around in my head for a marathon with my money goals, and then decide if it's worthy.

Set a savings goal, whether it be per paycheck or per month. I have an account set up for automatic deposit that I never touch.

If you save money at the grocery store through coupons, pull that money out of your pocket along with the change you got back from the bill, and place it in a jar. It adds up faster than you'd think.

Don't feel like you have to rigidly maintain a money regimen like this. It's okay to eat out once in awhile or go see a movie. Take saved money from the grocery store or money you have leftover at the end of the pay period (it can happen!) and set it aside in an envelope, hidden at the bottom of a drawer you never go into. Then when you want to do something fun, you've got some cash on hand.

JimmyB27 said:

Screw it, you can't take it with you. I have more important things to do than counting the pennies. So long as I still have a roof over my head and food in my belly, I'm not spending too much, and that's as far as my budgeting goes.

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Sometimes you do have to let go and have a good time -- life's too short -- and not worry about or count the pennies. But. You can't continue to do the grasshopper for too long. Yes, chances are we may die tomorrow so it doesn't really matter. But just in case we live to 100... well, we need to save money for our retirement and medical bills, etc.

I believe in some kind of balance. I don't live like a monk -- I play and I play hard -- but at the same time, I have a nest egg so in case I do live to 100, I don't have to stress about money either.

Carole said:

after 10 years together neither of us have any real savings. None. Yep, you heard right.

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Carole, I suggest an automatic deposit into a savings account that you both agree not to touch. If it never makes it into your hands, you can pretend it doesn't exist! Your spending will adjust around it.

It's very hard to make changes in spending habits. It takes a lot of discipline and self-correction. It eventually gets easier to maintain.

or addictions. In my house, that would include books (mine) clothes (brat #2) art supplies (brat # 1) and things to eat that are soooooo rotten for you but SOMEONE can't live without (husband.)

We also have pets. LOTS of pets.

We don't really go out to eat often--maybe 5 or 6 times a year. Working in the service industry cured me of that. Same for movies in the theater--there's only 5 or 6 movies I have to see on the big screen every year...and by the time you pay for gas to get there, tickets, soda, popcorn it's almost cheaper to go to the bar and drink a few beers instead.

Gas is what's killing us. My husband's work has him driving all over the place and it costs probably $180-220 per week to keep the gas tank filled.

Namatu said:

Set a savings goal, whether it be per paycheck or per month. I have an account set up for automatic deposit that I never touch.

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That's something I think everyone should consider doing. Take out the money before you even see or touch it. Out of sight, out of mind. Whether it's an IRA, 401(k) or an individual saving/investment account. Do a budget and determine how much you can save, then direct-deposit that amount. Before you know it, you have a nice nest egg growing (that's how I managed to save 25% of my income over the last 10 years).

Another thing I do, now that I'm a freelancer is to minimize my health insurance premiums. Granted, I don't have kids nor do I have a chronic health issue, so it's easier for me to do. Still, I don't need the fancy plans. I just need something to pay for the hospital bills in case I get really sick or have an accident or something. Otherwise, I have a savings account set up for the occasional doctor's visit and deductibles (put in what I otherwise would have paid for the health insurance).

My plan is $130 a month, with a $2500 deductible. Normally I probably would have to pay $350 a month for an individual plan, so that's almost $2500 I can put toward that healthcare savings account. I hardly ever use up that deductible so whatever is left over in that savings account goes toward the following year (or I can tap into it for other spending if I need to).

Carole said:

One thing that really worries me is what if something happened and I lost my job or Mr. Vagabond lost his? We'd have nothing to fall back on. Chances are, we couldn't even sell the house to save ourselves because the real estate market is so pitiful. And it's not like that is some unrealistic concern. People lose their jobs every day. People with years of seniority and a strong college education lose their jobs without any warning.

And then what if this recession really does turn into a full on depression? What then? I can already barely afford to fill up the gas tank just to get to work.

Geez - maybe I'll just worry myself into actually being responsible.

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Yeah.. Start saving. You should always have at least 6-12 months of cash flow as a cushion. Say if your monthly budget is $3000, that is at least $18,000 in case of emergency or if both of you lose your jobs. If you don't have that now, it's time to really fasten your belts and make it your goal.

Two personal finance blogs that might help motivate you:

http://www.getrichslowly.com
http://www.thesimpledollar.com

I actually just went through the same thing and discovered that even after having paid off my student loans and one of my ex-wife's credit cards, I still only come out $16 ahead on a month to month basis. And that's without any cushion for emergencies at all (which is why having to put 4 new tires on my car is stressing me out quite a bit right now). For now, I'm trying to live on cash only. I have my expenses broken down into monthly and weekly and every pay day, I get out enough cash to cover my weekly ones. Then I go home and put my ATM card in the freezer (where my credit cards already reside).

The key for me was to budget realistically on how I've actually been living recently and not how I think I should be living. There are definitely things I could cut out, but those are the quality of life things that I would feel very cheated by not having. Sure, I'm not entirely comfortable with the reality of the situation, but it's a start. And it's a much bigger step toward financial responsibility than I've ever taken before, so I figure I should learn to be comfortable with this before I try to do anything else.