3 Simple Ways Keeping Your Spending Organized

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On of the biggest problems we had with controlling our finances was knowing where the money went.   Have you ever said “Honey, do you realize we spent $900 eating out this month?”   I have.   The amount we spent on some categories was mind-blowing.    Maybe some people don’t see $900 at restaurants, $400 on clothes, or  $300 on books and movies as a problem, but I do and it was ridiculous!  We’ve dialed back hard on the unnecessary spending and the first step was to understand our spending habits.  That was a painful self-examination.

Here’s what we did:

  1. Have a Budget. This is quite simply the most basic step in organizing your finances.  If you don’t have a budget, you don’t have a plan for where your money will go.  Without a plan, your money goes on about its business without consulting you.  Your money does not like you. It will do its level best to get as far away from you as fast as possible.   A good budget is like shackles for your cash. Never underestimate the value of a good pair of shackles.
  2. Use a Spending Journal. Before we went cash-only, I was a no-cash spender.  Every purchase was with my debit card and every receipt went into my wallet.  That’s a disorganized, but effective spending journal.   When it was time to balance the checkbook, I could look through my receipts and no exactly where the money went.  It was nice to have a chance to wave good-bye and send it a postcard as it ran away from home.  Other people use a small notebook or even–for the truly cutting-edge–the register that comes in a box of checks.  Whatever system you choose, make sure you use it.  If you don’t know where your money has gone in the past, how can you plan for the future?
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  4. Use a Ledger. Most people call this the checkbook register.   I use Quicken.   About once per month, I sit down with any receipts we’ve generated and the list of transactions on the bank website and I balance the checkbook.   I note everything we’ve spent, flag everything that has cleared the bank, and make sure all of the numbers match.   This gives me a chance to review everything we’ve had incoming and outgoing and address any abnormalities while there is still a chance to get the bank to address problems.

How do you track your spending?

Update:  This post has been included in the Carnival of Personal Finance.

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Free Tivo

Vintage TV set, pt. 2
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TV is causing problems in my life.

We watch too much TV. Often, we’re only watching because there’s a crappy show in between two shows we do want to watch.   In the winter–during the new seasons–my son has wrestling practice 4 or 5 nights per week, which means I miss the new shows I like.     We recently downgraded our service provider, so there’s no functional guide button in the house.

That all makes me sad.

Then I found out that Tivo’s lifetime service is attached to the unit.  If you sell a unit with lifetime service, you can transfer the service to the buyer.   You can’t, however, transfer the service to a new box.   That means that everyone who upgrades and sells their old box is selling the lifetime service with it.  If you don’t mind having older equipment, you can pick up a used box with full lifetime service for less than the cost of a new box.

After reading Erica’s method of finding 750 extra hours per year, we decided to give it a shot.  We are taking back control of our TV. No more rushing home to catch a new episode.   No more mindlessly channel-surfing to kill time between good shows.  No more commercials.   And a guide!  I like having a guide button.

I started shopping.  My goal was to get a Series 2 Tivo with full lifetime service for about $100 before shipping.  I came close a few times, but always lost the auction, in the end.  I wasn’t in a hurry, and I didn’t actually have the money budgeted, so it was good to lose.

Then, a friend found himself in a situation that didn’t work with a Tivo and decided to sell his heavily upgraded, heavily accessorized Tivo HD for $100 + shipping.  A quick call to my wife resulted in just one objection:  Where were we getting the money? We don’t have an opportunity fund, yet and I needed to take advantage of this quick if we were going to get it.

I decided to make it free.

When I automated all of our bills, I rounded up. If a bill was for $63.50, I paid $64.   If a bill wasn’t exactly consistent, I paid enough to cover the higher amount.   For example, I didn’t have a text messaging plan on my cell phone until December.  Before that, I’d get about a dozen texts each month, so I budgeted for paying for the texts.   If I didn’t get the texts, I’d get a credit on my bill.   I never lowered the automated payment.   All of my bills were set up like that.   My insurance company dropped my rates, but I left the payment alone.   I slowly started accumulating a credit on a number of bills. My intention was to skip a month when the billed amount got to $0, and apply the money to debt.  It was just a mind-game to play with myself to make the debt easier to pay.

I flipped through the bills, looking at the credits.   I adjusted the payments to match the bills this month and found more than enough to buy the Tivo.   This is a purchase that doesn’t influence my budget in any way.   Almost.   This unit doesn’t have lifetime service, so I will be paying for the monthly fee, but that’s been more than balanced out by  reducing our television service.

This is a recently-high-end model for free, as far as my budget is concerned.   I used money that wasn’t even on the table before I went looking for it.  It’s like searching the couch cushions for money to catch a movie.

Now,  I’ll have control of my TV–with a strong measure of convenience to boot–for $13 per month.  The time savings is yet-to-be-determined.

A free Tivo simply because I rounded my bills up when I automated last year.   That’s a pain-free opportunity fund.

Update: After I wrote this, I found out that I dropped the ball in budgeting for child-care now that summer is here and my oldest won’t be in school.   These costs are going up $350 per month.   I spent an hour scavenging the couch cushions of my budget this week.   I had to adjust some savings and repayment goals, but I’ve effectively paid for a summer worth of care for my boy the same way.  Free.

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The Virtues of Blow Money

When we initially developed our budget, we built it tight.  Every penny was accounted for and had a place to go.  I was so proud.

Money, money

Money, money

Unfortunately, there were some problems with habitual–even compulsive–shopping in our house.   The change from “whatever we wanted” to “it’s not budgeted” was too much, too fast.

After a few months of arguments, we agreed to set up a “blow money” line item in the budget.   That’s money that is absolutely unaccountable. When a purchase comes out of that fund, no questions are allowed.   Whether it’s a new pair of shoes for her, or a new book for me, nobody gets to fight over it.   Sometimes, it’s a nice dinner out, other times it’s another gadget for the entertainment center.   It’s never a problem.

This provides two major benefits.

First, it balances the feeling of sacrifice.   If my wife never gets to buy anything, while at the same time, she’s watching our friends and neighbors flaunt their rampant consumerism, it makes her feel like she is giving up the good life.   We aren’t lacking for anything, but the trappings of middle-class “success” can be expensive.    Having an opportunity to participate in that horrible rat-race lessens the feeling that we are missing out.    Rationally, we know that the right thing is not to spend that money, but emotionally, it’s a necessity.

Second, it’s a safety valve.   Our finances are under tight control, which can cause pressure.   Finances are, after all, one of the leading causes of divorce.   Having a way to release that pressure makes everyone happier.    Habitual shoppers experience shopping the same way drug addicts experience their “high”.  That includes withdrawal.   The safety valve turns this from a “cold turkey” method of quitting to a weaning of the addiction.

Another minor benefit is that the blow money can serve as an opportunity fund to bridge the gap between the discretionary budget and a desired purchase. Last week, we ran across a curio cabinet that exactly matches our living room, but we didn’t have it budgeted.   Out comes the blow money, which, combined a portion of the discretionary budget and some negotiating, made the new cabinet affordable, without busting the budget.

This isn’t a system that works for everybody, but it keeps us on track.

How do you handle the stresses of a household budget?

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Budget Lesson, Part 8

This is a continuation of the budget series. See these posts for the history of this series.

This time, I’m looking at our discretionary budget. These are the things that don’t have a fixed cost. Any individual item is largely optional, and, ultimately, we don’t track these purchases closely. At the beginning of the month, I pull this money out of the bank in cash, except for 1 category. When the discretionary budget is gone, it’s gone.

  • Groceries/Dining  – At the beginning of the week, we sit down with a meal planner and (Can you guess?) plan our meals.  The planner we use has a weekly calendar with a checklist below each day to build the grocery list.  At the bottom of the page is another checklist for staples that don’t apply to a specific day’s meal, like milk or snacks.   We build the list, then transfer it to another sheet, broken out by grocery department.  That keeps me from having to criss-cross the store.   I make one lap.  When I go to the store, I only bring that week’s grocery budget in cash,  so I keep close track of how much is going into the cart.    Recently, we’ve gotten so good at making our meals cheaply from scratch that I reduced our monthly food budget by $50.   I enjoy good food, so I wouldn’t reduce this budget item if it was a sacrifice in quality.   For example, the Rainbow Foods store-brand chips actually taste better than Lay’s for half of the price.    We stock up when things are on sale and cook creatively.   Sometimes, if time has been too tight to make a meal plan, we eat solely from the pantry for a week, buying nothing but bread and milk.   By sticking to the list, and not fearing the store’s brand, we are able to feed our family of 5 1/2 for $450 per month and still eat well.
  • Discretionary  – This is for the random things that come up, and some of the not-so-random.   Toiletries, activity fees, admissions, and fund-raisers all come out of this fund.  At the end of the month, whatever is left gets tucked into a box and forgotten.   When the box gets full, it goes to the bank to be applied to debt. There isn’t a lot to cut here, since this line-item is only $200.
  • Baby stuff  – This category is continually shrinking.   Our middle kid is recently potty-trained and our youngest is trying.   There is no baby food and no formula, just 1 pack of diapers every month.   In 6 months, this category will be eliminated.
  • Gas/oil  – This is the single category that isn’t cash-based.   It makes no sense to take the kids out of the car to pay inside, especially in the winter.    Also, all of the temptation is inside. It’s much better to spend the money at the pump.    There isn’t much we can do to reduce this, at the moment.   Our next car won’t be a full-sized pickup, but we are several years from that purchase.    We’ve started clipping oil-change coupons to keep this down to the minimum amount possible.
  • Clothes  – We only allocate $15 per month for clothes.   In a good month, we don’t spend it.   We can’t eliminate it completely, because things do come up.   Over the summer, I’m hoping to completely leave it alone to save up for a new(used) winter jacket for our older daughter, who doesn’t get hand-me-downs.
  • Blow Money  – This is the safety valve.  It can’t get reduced and still work.

We’ve now addressed out entire budget, including what we can do and have done to keep our costs under control.  Looking back, I don’t see too many cuts I’ve missed.

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