I’ve Paid For This Twice Already…

Archive for the ‘budget’ Category

I have two children, which most of you already know.  My son is 4, and has been eating us out of house and home (yes, I know, it only gets worse from here ) for a very long time.  Longer than I’ve been writing this blog, so he’s always been a factor in my grocery budget here.  My daughter, on the other hand, is not yet 2, and when I started this blog was not yet 1 and nursing was her major form of nutrition. She did eat solid foods, but I made them from the food we were eating and the volume of it was so insignificant compared to the whole, she barely added a dollar to our grocery bill a week.

Not anymore.

I’ve been going over the numbers again and again in our grocery budget.  I’ve been shopping using the circulars to buy what’s on sale at the right time, I’ve been cutting coupons, carefully looking at our purchases and keeping impulse buys to a minimum, and yet, our grocery spending continues to go up.  Part of that is the continual rise of grocery prices.  I know that, and I’ve been tracking it.  But it seemed like I was missing something else.  And then it hit me.  My daughter.  She eats.

Not that she’s never eaten before, but over the past 4 or so months, she has certainly upped the volume she’s eaten considerably.  Looking over my purchases in more detail for the past several months, I’ve been consistently buying a larger volume of food each week, almost all attributed to my daughter.   She eats kid-sized snacks, she eats kid-sized portions of dinner, and realistically, we’ve gone from shopping for three to shopping for four.

Sometimes the answer is staring you right in the face, if only you can see it.  Time to think a little more about the grocery budget.

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For a long time, I didn’t give much thought to the frequency or method of my paying for things.  As long as it was paid, I was fine with it.  Because we didn’t budget and we lived in extreme paycheck to paycheck mode, I never once gave thought to paying for something annually instead of monthly if I had the option.  Monthly was my friend, and monthly was the way to go.

But by and large, paying for things monthly was costing me money.  Not just the obvious things like credit cards or other loans that charge interest, but other things I never gave any thought to, especially insurance.  When I started to really examine our spending and take a look at where we could cut back, it became glaringly obvious.  Paying a fee every month for the convenience of paying monthly?  That was costing me money I couldn’t afford to spend.  The fees seem rather innocuous by themselves, but add up a $3 fee here and a $3.50 fee there every month and it starts amounting to a significant amount.

I couldn’t immediately switch to paying annually for everything.  Without any money saved up, coming up with 6 months or a year’s worth of payments at once wasn’t an option.  But little by little, I’ve been converting those monthly insurance payments to options that don’t cost anything in extra fees.  First was the life insurance, which I have already started paying annually.  Next is our car insurance, which I can pay semi-annually for no fee, so I will be making our payment for 6 months in October.  Last but not least is our newly-acquired disability insurance, which I signed up for a monthly payment plan because I couldn’t pay ~$750 right now to pay for a year’s payment.    But my goal is that by the time we are out of non-mortgage debt, to be on an annual payment plan with that payment as well.

But monthly payments vs annual wasn’t the only thing that was costing me money we can’t afford to waste.   I also, in the past, would pay my bills in the way most convenient for me, which often was on the phone.  Most every company I deal with charges a convenience fee for phone payments.  If I pay 4 bills a month by phone, and pay an average of $2 in fees per payment, that really adds up!   Don’t pay convenience fees!  With a little investigation, a method can be found that is convenient for you and also free.  For me, by and large, that is online banking.

Be aware of how the choices you make about bill payment methods, be it timing or execution, affect those payments.  Don’t increase your bills by paying fees if you can find a better solution.  It’s your money, after all.

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Here in the US, things aren’t necessarily looking so hot.  I don’t know if recession is the word, or if the powers that be actually acknowledge that things, economy wise, aren’t doing so great, but in my little corner of the world, it is basically a given.  Ask a friend, ask a neighbor, and most likely they’ll say that things cost more and their dollar doesn’t go as far as it used to.  I haven’t collected quantitative evidence but it sure feels like the economy is in a downturn from here.

How things are now are giving me flashbacks to another economic downturn that directly affected my family - the so-called “dot com bust”.  Around that time, the company my spouse then worked for went through a huge downturn and ended up laying off almost all of its employees.  My spouse was one of them.  It didn’t come without warning, his losing his job, but we were naive and didn’t read the signs.  We were completely unprepared for my spouse to be out of work, and that period of time put us in an economic tailspin of our own that took a long time to recover from.  So now, I’m starting to become mentally and financially prepared for the worst, so to speak.  There aren’t any signs of my spouse losing his job - in fact he’s in a much better position now with more seniority and job security than he’s ever been in - but you never know what might happen.

So I’ve started to seriously consider what our bare bones budget is, what we absolutely have to pay for, what we want to keep but isn’t essential for survival, and what we would like to keep but can go if need be.  I’m doing this to determine the very lowest bottom line that we can get by on if we had to.  This isn’t an exercise on how to reduce our fixed expenses (although that is a future step to consider) but just to understand what those fixed expenses and necessary variable expenses add up to.  It is easy to say “sell your car” or “sell your house”, but when disaster in the form of a job loss or other large financial change occurs, it isn’t always possible to lower those fixed expenses immediately.   Especially in a down economy.  Understanding what your current bottom line bare bones budget is is the start to preparing to avoid a financial disaster.

I split up our expenses into three categories - essential, needed, and wanted.  Essential are things we can’t go without, such as shelter and food.  Of course, we could do things to reduce those expenses, but that’s for another post.  Needed are things like our newly purchased disability insurance.  We need these things, but if it is choice between that and eating, eating wins.  And then come the wants.  For example, my kids are starting a session of tumbling in September.  They can live without it, but I want them to have the experience.  But if our situation drastically changed, they wouldn’t be tumbling.  Here is what I came up with for my essentials list (per month) :

• Housing:  $950
• Groceries:  $300
• Gasoline:  $100
• Utilities:  $200 (gas, water, and electric)
• Diapers:  $30
• Medicine:  $30
• Car insurance:  $80
• Phone:  $10
• Minimum debt payments:  $610.40

Kind of depressing that the second biggest thing is minimum debt payments, but, we are working hard to correct that.  But that’s where it stands now.  So I came up with our bare bones budget as $2310.40.  Which seemed higher than I expected, given our actual monthly budget (before extra debt payments) is only slightly above $3000, but I guess we don’t budget a lot for extras after all.  There are many other things I consider important that I didn’t list here - this is the very bare bones that for the short term, we could get by on.  And of course, there are always the inevitable emergencies.  This is the short term, first line of defense preparedness concept.

After our non-mortgage debt is paid off, that drops down to $1700 a month, which I like better. 

So now, I know where we stand.  If we can’t bring in at least $2310 - we need to have some kind of fallback plan.  Which leads us to the emergency fund…

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As I mentioned Friday, my spouse and I have gone forward and purchased a long-term disability policy for him.  This is an expense we deem necessary, but one I didn’t predict at the beginning of the year when I came up with our monthly budget.  Therefore, I have to tweak our existing budget to absorb the expense for the rest of the year until I do a complete budget reassessment in December.  The expense isn’t that huge, only about $69 a month, but since I do zero-dollar budgeting, where every dollar is accounted for and assigned a purpose, there isn’t $69 left unless I take it out of the debt elimination money I earn above and beyond our budgeted income.

That isn’t the option I want to go with, because the entire point of earning those extra snowflakes is for them to be for debt elimination - not a normal part of our budget.  Once you start budgeting with “extra” money, it is no longer extra and becomes something you depend on to make ends meet.  So ideally, the $69 needs to come out of our budget somewhere.

And how to do that, is to look over our budget and figure out areas we might be spending less than we’ve budgeted, and can find $69 per month for the next 5 months.   In our budget, the area I found it was our annual expenses fund.  We put away $50 per month each month for annual expenses, and right now that fund has about $70 in it, but we only have one annual expense left this year, a car registration that is about $40.  Looking at what we budgeted as our annual expenses, I quickly determined why we have extra there - we replaced our furnace this year, and usually we pay about $180 a year for the annual maintenance on the furnace, a/c and water heater, but we have a one year service contract included with the furnace.  Since we don’t have to pay that $180 this year, that is where the start of the money for the disability insurance is going to come from.  The extra money in that fund plus the money we put away every month will cover the next 3 months of disability insurance payments.  By then, we’ll have hopefully adjusted for the expense (or paid off my spouse’s student loan) and will continue paying it from there.

The key to absorbing a new expense?  Look for places that you have wiggle room, and take advantage of them.  Ours right now is our annual expenses fund.  Keeping track of your spending and knowing where your money goes makes it possible to reassess mid-course and adjust.

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One of my strategies for lowering my overall grocery bill is to shop at several stores.  For many people, this would be a waste of gasoline, but I have access to 3 different chains simply driving to work and back, and if I drive to Aldi (my main shopping place, which is not on my route to work), I pass two other branches of those stores on the way there and home.  So for me, it doesn’t cost me extra gasoline to go to a number of places.  It does add a little more time, but I feel my time is worth it.  Mileage may vary on that one. 

The problem I’ve encountered is that keeping track of the normal prices at all these stores and then comparing them against each other on the fly becomes a little more than my brain can handle.  I do use a price book - in that I record the prices of the things I buy every week and compare them to the prices I paid in the past.   But when I look through the sale circulars it isn’t always apparent to me if something on sale is actually a good deal compared to what it might cost at other stores because of the different unit sizes and the myriad of different prices I might have paid for that item before.

To help figure this out, I’ve started a list of per unit “buy it now” prices.  These are prices on items that if I see anything below that price (or can use coupons to get it there), it is a very good deal and I should stock up.  For example, I frequently see boneless chicken breasts on sale in store circulars.  I’ve done my research, and decided that $1.70 a lb or less is a price rarely seen for that item, so if I can get chicken for that price, I generally buy it.  Keeping that one price on a single sheet, versus pages and pages of prices over time, helps me to streamline my shopping preparation.  Yesterday at Walgreens, I used a combination of manufacturers coupons and a $5 off $20 one day only store coupon to get Pampers Crusiers diapers for about $0.22 per diaper.  My buy it now price on those is $0.25/diaper (for those of you whom that seems way expensive, realize my daughter is in size 5’s, not size 1 or 2 where the cost per diaper is much lower).  Knowing what I usually pay per diaper and what I consider a good bargain cut out a lot of the hassle of deciding if it was a good deal or not.

Creating the buy it now list did take some effort.  I made a detailed list of everything I have bought in the past 6 months or so, and then looked at all the prices I have paid for those items and decided what the bargain threshold was for each item.  The bargain threshold was usually close to but not the rock bottom price I have paid for the item in the past - because I may never see some of those prices again with the rising cost of food.  Then I put that single price next to each item.  In a few months, I will re-evaluate the list, comparing it to what I have been actually paying for items over that time period and decide if some of my buy it now prices are too high (I can always find that price) or too low (I never ever find that price any more).  And I can adjust when needed.  Maintaining the list should not take too much more effort than just keeping track of prices does - and for those who don’t want to keep track of prices formally, you can just save all your shopping receipts.  that is how I started my price book in the first place, just saving my receipts.

For now, I will stop at Meijer on the way home from taekwondo tomorrow and pick up some organic milk for my kids.  $2.50 for a half gallon is an unbeatable sale price for me. 

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