Budget Lesson, Part 1

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Over the next few weeks, I will be going over my budget in detail.

The first section is income, but that’s straightforward.¬† A line for each income source, bi-weekly, monthly and annual totals.¬† Simple.

Before we start, a word on the organization.  There are five columns:

  • Category – This is the description of the line item.
  • Cost – How much do you pay for this item?
  • Time – What is the frequency of the payment?¬† Valid values are ‘m’, ‘q’, ‘y’, ‘w’ for ‘Monthly’, ‘Quarterly’, ‘Yearly’ and ‘Weekly’.
  • Monthly – Cost and Time are combined to calculate the monthly expense, to make it possibly to budget.¬† If this is $100, I need to set aside a C-Note each and every month to make the payment when it comes due.
  • Yearly – This column is mostly informative.¬† It’s helpful to see this in comparison to my annual pay.

The first section I am actually going to address is discretionary spending.

  • Groceries/Dining¬†¬† ¬†$475.00 – We don’t budget heavily for groceries, which would be a surprise if you saw me.¬† At the smallest I have ever been, fit, I was never small.¬† We shop smart, buy in bulk when it makes sense, and rarely eat out.¬† We also keep cooked rice and beans in containers in the refrigerator as a cheap and healthy way to stretch almost everything we eat.
  • Discretionary¬†¬† ¬†$250.00 – This gets used for household items, like toilet paper and soap.¬† It also get used for the odd book or movie, or to cover the gaps between the other categories and reality.
  • Baby stuff¬†¬† ¬†$60.00 – We have two children in diapers.¬† ‘Nuff said.¬† This category does get progressively smaller as the baby items are outgrown and the children get potty-trained.
  • Gas/oil¬†¬† ¬†$200.00 – Gas and auto-maintenance.¬† This is actually higher than monthly costs, allowing us to set some aside for larger maintenance issues.
  • Clothes¬†¬† ¬†$15.00 – All of our dressers are overflowing, so this is strictly replacement cost for the time being.¬† Our kids wear a lot of hand-me-downs.
  • Blow Money¬†¬† ¬†$50.00 – Occasionally, habitual shoppers need to shop.¬† If they don’t do it on-budget, they will do it off-budget and kill the whole idea.

Initially, we used a “virtual envelope” system.¬† We had a spreadsheet and every time something was spent in this category, we entered the amount and stopped when the category was spent.¬†¬† Didn’t work.¬† We are going on a pure, cash-only system as of the first of the year.¬† No money, no spendy.

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Don’t Screw Future-You

A conversation between me and my temporally displaced self.
Future Me: Excuse me, Jason?
Me: Yes?
FMe:
Me: May I ask what that was for?
FMe: Of course.
Me: What was that for, jerk?
FMe: That was payback for all of the hell you have put me through.
Me: What?!? ¬†I’ve never even met you, before.
FMe: Of course you have. ¬†I am future-you, and I’m sick of getting screwed by past-me, that is, you.
Me: Huh?
FMe: Listen close. ¬†You’re not ¬†the sharpest brick in the box and I don’t want to explain this twice.
Me: ???
FMe: A long time ago, when you first met our wife, you were dumb.
Me: I don’t appreciate….
FMe: Shut up. ¬†I was dumb then, too. ¬†Remember? ¬†You…err…we bought a new truck, built an addition on our…err…your…err…whomever’s house, got married in the same year. ¬†On top of many other expensive decisions. ¬†Do your recall?
Me: Yes, I do.  So what?
FMe: If that wasn’t enough, you and your smoking-hot bride are still shopping like you’re rich. You drive a new car. ¬†Your kids wear new clothes. ¬†You’ve got a house full of new furniture. ¬†How did you pay for all of that?
Me: Naturally, I charged it.  Zero payments, zero interest for a year!  Pretty smart, huh?
FMe: What happens in a year?
Me: I don’t know. ¬†I’ve got a full year to figure that out.
FMe: ¬†I’ll tell you what happens! ¬†Future-you, that’s me, gets screwed! ¬†¬†Your raise didn’t come through. ¬†You had a baby. The truck broke down. ¬†Your wife took maternity leave. ¬†A roommate moved out. ¬†You took a loss in the stock market. ¬†You didn’t plan! ¬†You had no savings to cover any of those problems because you were too busy servicing debt to pay for your current life.
Me: How was I to know?
FMe: ¬†Life happens! ¬†You never know what is coming next. ¬†You need to plan and save for what might happen. ¬†Otherwise, you’ll just accumulate more debt to be serviced by yours-truly. ¬†That is not acceptable.
Me:  So?  What are you going to do about it?
FMe:
Me: Really?  Again?
FMe: ¬†I’m struggling to pay your debt. Your son starts college next year, but you’ve left me completely unable to help. ¬†Your daughter wants to get married in a couple of years, but the Father-of-the-Bride can’t afford a tux. ¬†My wife, your beatiful bride, wants a vacation that I can’t afford. ¬†¬†You’ve screwed me, dude.
Me: I’m sorry. ¬†What can I do to fix it?
FMe: Buy me dinner, first.
Me: Huh?!?!?
FMe: Stop the excess spending. Spend less than you make, for a change.  No credit.
Me: None?
FMe: None. ¬†Nada. ¬†Zip. ¬†Zilch. ¬†Only spend what you can afford. Budget. ¬†Pay off those nasty bills. ¬†Don’t leave me hanging.
Me: So, what you’re saying is that, if I don’t have the money, I shouldn’t buy it?
FMe: Exactly. ¬†That’s the path to wealth, freedom, and financial independence.¬† Live in the real world.
Me: Gee, thanks, Future-Me!  Now I know.
FMe: And knowing is half the battle.

What would your future-you have to say to you?

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How have you improved your situation today?

Every day, in some small way, it’s important to do something to improve your situation. ¬†Whether it’s paying down debt, researching inexpensive alternatives to your existing expenses, or something as simple as hugging your spouse or playing games with your kids.

Educate

I was once told that every day, you either get smarter, or you get dumber.¬† Don’t do the latter.¬†¬† Never pass up an opportunity to educate yourself. ¬†¬† Make the day good for you.

  • Read a book.¬† There are hundreds of personal finance books available.¬† Dave Ramsey’s Total Money Makeover is a great place to start.
  • Read a blog.¬† Once again, lack of choice is not a problem here.¬† There are thousands of choices.¬† My favorites are in my sidebar, to the left.
  • Find a mentor.¬† Failing that, get a PF-Buddy. Find someone you can call when you need the moral support to make an appropriate or difficult financial decision.
  • Take a class.¬† Whether it’s a personal finance class, or some other way of improving yourself, do it.¬† Many cities offer affordable community education classes. Ad Hoc college courses are another option.

Elucidate

It’s incredibly important to understand your situation.¬† If you don’t know where you are, how can you control where you’re going?

  • Examine your finances.¬†¬† I heartily recommend Quicken to track your finances, but Mint is a great place to see where your money has gone.
  • Know your debt.¬† It’s important to know your debt. Own it.¬† Know your fees and your rates.¬† Know every cent you owe.¬† Get a spreadsheet or a notebook and write it all down. Keep it updated.¬†¬† Mint is great for this.¬† I update my debt-sheet monthly.
  • Know your spending.¬†¬† This is another plug for Mint.¬†¬† There’s no better way to see where your money has gone in the past.¬† I use Quicken for the present and future, Mint for the past and snapshots.
  • Find your waste. Do you have the cheapest plans that meet your needs for television, internet, phone service?¬† Do you have AAA and roadside assistance through your insurance company?
  • Talk to your spouse.¬† Discuss your finances. Make sure everyone is on the same page and there are no surprises or hidden bills.¬† Plan together.
  • Eliminate problems early.¬† If you see a problem, eliminate it before it gets out of control.¬† The earlier you identify a problem, the easier it is to eliminate.
  • Family meeting.¬† Get the family together so everyone can participate, even the children.¬†¬† Young eyes sometimes have a clarity that a lifetime of habits has clouded. If your kids understand the concept of money, they are old enough to participate and even help.¬†¬† Brainstorming means that no idea is a bad idea.¬† It may not be implemented, but everything is worth hearing.

Eradicate

What’s left? Eliminate baggage.¬† Kill your bills.¬† If you’re paying for something you don’t want or need, get rid of it!

  • Unnecessary items.¬† Do you have an extra cell phone or an insured motorcycle in the garage?¬† Time to cancel.
  • Unused items. Do you really use the movie package in your cable bill?¬† Are you saving money with Netflix, or would Redbox be a better option?
  • Forgotten bills.¬† Did you sign up for an identity protection scheme or an appliance repair plan for an appliance that no longer exists?¬† Cancel!
  • Fees.¬† What fees are you paying?¬† Do you have an annual fee for your credit card or minimum balance fees at your bank?¬† Find new institutions.¬† Loyalty to your bank may be costing you money.

Unused or unnecessary bills are nothing but unhappiness generators. They don’t provide value so trim the waste and get rid of what you don’t need.

 

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The Lord Will Provide

Debtors like to make excuses.

When I used to work collections, I’d try to work out a payment plan to get people out of debt, and I often heard “The Lord will provide” as their only excuse for not paying the money they owed.

That’s crap. ¬†It’s not a financial plan. ¬†It’s not a life plan.

It’s a crappy excuse to make you feel better about why your life sucks, has always sucked, and will–most likely–continue to suck.

Over the weekend, I got to spend quite a bit of time with family, including some that we don’t get to see often. ¬† One couple in particular really stands out. ¬† Neither of them are employed. ¬†She’s got some medical problems and has several major surgeries recently. ¬†I’d give her a pass for that, but she was unemployed for many years prior to that. ¬†He used to have a job, but lost it a couple of years ago, and is now milking welfare with his wife and daughter. ¬† They recently lost their house and had to move in with his mother.

Neither one is looking for work. ¬†Between the two of them, they smoke 4-5 packs of cigarettes a day. ¬†They want to buy a house soon, or rent an apartment, or something. ¬†They aren’t very clear in their planning because, “It’s in God’s hands.”

No plan, no ambition, no goals. ¬†I don’t understand how anybody can go through life with no intention of improving it. ¬†How can you try to hide behind platitudes instead of making things better?

Here’s the bumper sticker that can actually improve your life: “Good things come to those who bust their asses and make good decisions.”

It’s not the easy path, but in the long run, it’s a better path and one of the few paths that doesn’t lead to royal life-suckitude.

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