I’ve Paid For This Twice Already…

Archive for the ‘budget’ Category

In uncertain economic times, we all want to be in the most prepared position possible.  Today is not too late to start improving your financial future.  Even if you have to trick yourself into doing it.  For the 1000th published post on I’ve Paid For This Twice Already… , I’m sharing my favorite five mental money hacks all in one place.

1. Every time you spend money frivolously, put the same amount towards your financial goal.  Be it paying down debt, building an emergency fund or other savings, investing for the future - whatever it is, make it as important as those purchases you just “have to have”.
2.  Make it a habit.  Move money every day at the same time.  Maybe only a dollar.  But for thirty days, every day move money from checking to savings, or to whatever the financial goal.
3. Write it down.  Writing has power.  What is it you’re looking for?  What do you want to accomplish?  Make it concrete and put it in writing.
4. Paint yourself a picture.  Maybe you’re a visual person.  Put a picture of your goal somewhere you can see it every day.  Maybe it’s a zero debt balance.  Maybe it is a spectacular retirement home.  Maybe just a wad of cash.  Whatever it is, picture it.
5. Share your story with someone else.  Talking about what you want and how to get there makes it real.  Thinking through how to share it with others makes it a part of your life.

Thanks for being a part of my journey and I can’t wait until we go from the “debt elimination” phase to the “hoarding a wad of cash” phase!

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A comment on a previous post, which I cannot at the moment find (edit:  Mandi emailed me to let me know it was her on this post) mentioned how they follow the idea of meal planning out of their pantry vs out of circulars, because they shop in a way that they know they’ve spent the least amount possible for everything in their pantry.  They buy items when they are the least expensive, and then look to their pantry and what they have stocked to decide what to make that week for meals.

This is exactly what my goal is with the unit price comparison shopping I discussed yesterday.  I stock up on items when they are on sale so that I never “have” to buy those items when they are at full price.  A simple concept but one it has taken me a long while to catch onto and effectively put into practice.

Our grocery list used to have 25-30 items on it every week.   Last week, before I added the sale/stock up items, the number of items on the list we needed to buy was 7.  Milk, grapes, apples, cheese, yogurt, potatoes, and wheat pitas.    I bought more things than that, because I bought a number of items on sale paired with coupons (I always enjoy Mini-Wheats cereal for $0.50 per box).  But the list of things we were out of and needed was only 7.  This is my goal.  Buy what’s on sale, and what is perishable and needs to be replaced weekly, and plan my meals based on what I have stocked.  And I stocked up on potatoes this week.

And then maybe once everything is stocked up - buy some chocolate. 

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Next in my “You can get out of debt - give yourself some peace of mind in this crazy economy” series this week is the idea of budgeting.  I’ve written about budgeting and how I budget in the past, and you can get caught up here:

• Basic Budgeting Overview Part 1, Part 2, and Part 3
• How I Budget
• Budgeting on an Irregular Income (more on that later too)
• A Good Budget Is Not An Iron-Clad Contract

Today I don’t want to talk about the specifics of budgeting as much as I do the specifics of the budgeting software I use, and some tips and tricks for using it most efficiently.  This isn’t for everyone - no matter what your budgeting software preference, the important part is that you budget (or devise a spending plan, or whatever you would like to call it).  But for those who have never tried budgeting before, I thoughtinsight into the hacks I’ve devised for the budgeting program I use may be helpful.

I use the spreadsheet version of PearBudget.  It is a free downloadable spreadsheet that you can use to keep track of all the money flowing in and out of your household.  I like having something on my computer that I enter the data into.  There are other programs that will automatically download your bank and credit card transactions, and if that is what you like, that’s great.  I like doing things the old fashioned way, it makes me feel more connected to my spending.  This is an excel worksheet (I use it in OpenOffice, a freeware program) that has done all the coding work for me as far as making numbers go to the right places.  That makes me happy.

When you download the PearBudget spreadsheet, the first thing you’ll do is create your monthly budget.  PearBudget uses a monthly system and a yearly summary.  There are categories for regular expenses, variable expenses, and irregular expenses.  Regular expenses are those that are the same every month - mine are things like our mortgage and car insurance payment.   Variable expenses are those that vary per month, such as groceries and gasoline.  Irregular expenses are those that aren’t every month but need to be accounted for - I include all our annual expenses as well as things like clothing, medical, and haircuts.  You have ten slots for each category - it isn’t necessary to fill up all ten slots, but try to remember all the different categories in which you spend money.  If the total comes out higher than your monthly income, you’ll need to adjust some categories downwards.

Now for the hacks.  Move on to a specific month, like October.  Just because, well, it is October.  :)  You’ll see that on the left side are the days of the month in number form, and on the right side a column that you can enter your income into as it comes in too.  In the middle and on the bottom are the categories you entered on the first page.  I had one problem.  The irregular expenses don’t have any monetary amount associated with them on the monthly sheets (the variable does, and the regular should be regular so you don’t need to remember them necessarily).  I wanted to be able to track how I was doing as far as spending the irregular categories.  Enter the “note” function.  If you right-click on any cell, you can enter a note that will be associated with that cell.  I love notes.  I use notes all the time.  I put notes to describe:

• What did I spend that money on and where?  For example under groceries, a entry might have a “Kroger” note on it.
• How much is left in that category?  Under irregular expenses I track what I budgeted per month with a note, as well as what gets carried over from the past month.  So if I had $30 left over from the last month I add that to whatever I budgeted per month and I enter that in the next month’s cell note.

My next hack is in regards to dealing with the monthly budget.  My first month using PearBudget went swimmingly, and I matched my ending balance on my budget sheet to my bank balance.  I continued with the next month, and something went wrong - I couldn’t match the bank balance and the budget remainder at the end of the month.  After a lot of pondering, the solution was simple - because this is based on month to month, I need to enter the remaining balance from one month as income on the next to carry it into that month.

The last hack I use is highlighting in regards to income.  I use not only notes, but the cell color to make sure our different sources of income get allocated correctly.  I snowflake all of our extra incidental income (from surveys, the blog, my part time jobs) towards debt, and to make sure it goes to debt and not anywhere else, I change the cell color to purple until it is applied to debt, and then to yellow once it is applied.  that way when I look at my snowflake savings account, I can figure out where all the money in it came from quickly, and keep track of when it gets moved to paying off debt.  I lose track of less incidentals this way.

Those, in a nutshell, are my three PearBudget hacks to make using it suited to my needs.  Play around with the program - don’t be afraid to mess with things and see what happens.  Like budgeting itself, a good budgeting tool is flexible and adjusts to your own needs.

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The price of everything is going up.  This is an inevitable fact of life, but it seems lately, things are going up faster than pay increases can keep up with it.  Sometimes, even when we’re buying the exact same things we bought the month or year before, they cost significantly more.

So what can you do when the price of everything is more, but you can’t afford to spend more?  Like my post yesterday, I am going to use our grocery budget as my example of ways to control spending.  I, in fact, did increase our grocery budget.  However, I limited the increase to 5%, while the increased consumption from my kids coupled with the increased prices indicated a 20% increase would have made more sense from the data I collected.  I used many of the following strategies to help bridge the gap between rising costs and not enough money to go around.

1.  Identify wants versus needs.  When looking at my grocery spending, I would put purchases into categories based on being on my list versus being an impulsive purchase.  But with the belt-tightening in face of rising costs, I had to go further.  I started analyzing the list itself and determining what we truly needed versus what we just preferred to enhance our quality of life.  Then I had a better idea of what I could start cutting or coming up with alternatives for.

2.   Meal plan.  Having an actual set 7 day meal plan gave me a much better grasp on what we were actually spending each week on our meals.  I could calculate the per serving cost of each meal, and get a realistic idea of what I was spending per person and per day.  Then I could look at which meals were beyond our budget.

3.  Shop for staples vs shopping for meals.  This might sound contrary to #2, but really it is not.  Limiting your meals to just what is on sale can be a good short term strategy, but what happens when the circulars don’t have any meal combinations you can afford?  Being able to be flexible and stock up on staples when they are on sale, and use them over time, will yield more long-term savings than being tied to only buying what you need in a particular week.  Then, going forward, you can combine these staples you have with what is on sale and come up with inexpensive meals.

4.  Know the unit prices of everything.    The only way to really recognize good deals is to know what a good price is.  Every box has a different amount in it lately.  Calculate your per unit prices, and then you can compare across brands and stores.

5.  Find substitutions.  Sometimes something you need just gets too expensive.  Be open to trying different brands, different stores, different options.  Try a different type of meat.  Try a meat-free meal.  Look at what you can substitute without losing health value.

6.  Become more self-reliant.  As far as shopping goes, our very first step in becoming self-reliant was to plant two tomato plants this year.  Next year, we plan a full-blown garden.  This is something I have only started to explore but could yield significant cost savings on produce as well as provide an enjoyable hobby for my family.

A combination of yesterday’s tips and today’s helped me understand my spending, know where I could be flexible, and ultimately keep the increase to a minimum.  And if I had to keep it from increasing at all, I think I could have done that (but with more sacrifice on our part than I was willing to make at this time).

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As prices of consumables increase, many are feeling a very real budget crunch as far as their discretionary spending categories.  I know we are.   The immediate answer is not to blindly raise your budget to meet rising costs, but there is a point where a budget adjustment may have to be made.  Today I’m looking at how to determine if your budget for an item needs adjusting, and how to figure out what needs to be changed without going overboard and breaking the bank.  Tomorrow, I’ll look at the other side of the issue - what if your budget isn’t working, but there’s no way you can increase it?

To illustrate my method, I am using a standard consumable budget item - the grocery budget.    For us, this has shown the most increase in spending over the past year.  We have had a few factors besides the economy in general contribute to that, including changing our eating habits for the better, and my children getting older and eating significantly more than they did last year.  But looking at your spending alone and then just increasing the budget to equal your spending isn’t the most frugal and thoughtful way to go about it.  Usually, the budget and the spending can come together and meet somewhere in the middle.  Here are the five steps that I went through to figure out if my grocery budget truly needed increasing, what factors I identified that contributed to our overspending our budget, and how I ultimately increased it.

1.  Analyze your receipts - and be honest with yourself.  Every week, I took each of our grocery receipts and marked every item on them as necessary, frivolous, impulse, or some combination of those.  This wasn’t to beat myself up, or completely eliminate anything from our grocery bill that wasn’t absolutely necessary. But knowing is half the battle.  Knowing what percentage of our bill I felt was necessary versus extra, it was easier to understand the divide between our budgeted amount and the actual amount we were spending, and how necessary that was (or wasn’t).

2.  Look over time and determine the real increase in prices of staple items. This may not be possible if you haven’t been keeping track of your spending or keeping your receipts.  But if you have, or save your receipts, look at those staple items you deemed necessary.  What was the price one month ago?  Three months ago?  Calculate the percentage increase over time, which will give you an idea of what percentage spending may be appropriate.

3.  Determine if you have other options you haven’t tried.  I looked at both coupons and playing the Drugstore Game to try and decrease our costs.  Both have had ups and downs.  At first I ended up spending more than I was, but as I refined my methods and worked at taking advantage of money-making deals, my costs on staple items did go down.  The key is to making a method work for you as opposed to against you.

4.  Determine a realistic goal to meet as far as an increase.  Once you are sure that you’re not just frittering your money away on unnecessary increases, look at what kind of an increase you need to make.  This is the percentage increase of those necessary items, plus a little wiggle room for an appropriate level of impulse buys.  only you know what “appropriate level” means.  For me the goal for my impulse and frivolous items is under 5% of my total spending per week.  If I try to make it zero, I get rebellious.  I frequently come in under that 5% mark, but having that small wiggle room makes it more manageable to work to stay within my budget.

5.  Look for places in the rest of your budget where you have wiggle room.  If you’re increasing your budget in one place, you may have to decrease it in another.  For us, we had some wiggle room I could take from as far as my spouse’s salary increase this year and my own increased income through taekwondo.

Ultimately, for us with a number of different factors contributing, I determined that if we were to keep the same food priorities we had already, we’d have to do some budgetary increasing to the tune of about 5% a week.  Luckily for us, it was possible to do that, albeit it a little painful for me to authorize increased spending.  But sometimes, there has to be another option, for the budget is set by more than desire, it is by necessity.  Tomorrow I’ll tackle ways to keep the grocery budget the same even when everything costs more.  It is more painful, but it can be done.

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