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A Budget Isn’t Enough
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You know exactly how much you make, to the penny. You’ve listed all of your bills in a spreadsheet, including the annual payment for your membership to Save the Combat-Wombat. You know exactly how much is coming in and how much has to go out each month. Your income is more than your expenses, yet somehow, you still have more month than money.
What’s going on?
The short answer is that a budget is not enough.
A budget is not…
…a checkbook register. Do you track everything you spend? Are you busting your budget on $10 lattes or DVDs every few days? Is the take-out you have for lunch every day adding up to 3 times your food budget? Are you sure? If you don’t track what you spend, how do you know what you’ve actually spent? You have to keep track of what you are spending. Luckily there are ways to do this that don’t involve complex calculation, laborious systems or even proper math. The easy options include using cash for all of your discretionary spending(no money, no spendy!), rounding your spending up so you always have more money than you think you do, or even keeping your discretionary money is a separate debit account. That will let you keep your necessary expenses covered. You’ll just have to check your discretionary account’s balance often and always remember that sometimes, things take a few days to hit your bank.
…a debt repayment plan. You may know how much you have available, but if you aren’t exercising the discipline to pay down your debt and avoid using more debt, you not only won’t make progress, but you’ll continue to dig a deeper hole. Without properly managing the money going out, watching the money coming in is pointless.
…an alternative to responsible spending. Your budget may say you have $500 to spare every month, but does that mean you should blow it on smack instead of setting up an emergency fund? I realize most heroin addicts probably aren’t reading this, but dropping $500 at the bar or racetrack is just as wasteful if you don’t have your other finances in order. Take care of your future needs before you spend all of your money on present(and fleeting) pleasures.
A budget is a starting point for keeping your financial life organized and measuring a positive cash flow. By itself, it can’t help you. You need to follow it up with responsible planning and spending.
Clearing Up Social Debt in 3 Steps
Debt can be thought of as a disease–probably social. Most of the time, it was acquired through poor decision making, possibly while competing with your friends, occasionally after having a few too many, often as an ego boost. Unfortunately, you can’t make it go away with a simple shot of penicillin. It takes work, commitment and dedication. Here are three steps to treating this particular affliction.
1. Burn it, bash it, torch it, toss it, disinfect. Get rid of the things that enable you to accumulate debt. If you keep using debt as debt, you will never have it all paid off. That’s like only taking 3 days of a 10 day antibiotic. Do you really want that itchy rash bloodsucking debt rearing its ugly head when you’ve got an important destination for your money? Take steps to protect yourself. Wrap that debt up and keep it away.
2. Quit buying stuff. Chances are, you have enough stuff. Do you really need that Tusken Raider bobble-head or the brushed titanium spork? They may make you feel better in the short term, but after breakfast, what have you gained? A fleeting memory, a bit of cleanup, and an odd ache that you can’t quite explain to your friends. Only buy the stuff you need, and make it things you will keep forever. If you do need to indulge, hold off for 30 days to see if it’s really worthwhile. If it’s really worth having, you can scratch that itch in a month with far fewer regrets.
3. Spend less. This is the obvious one. The simple one. The one that makes breaking a heroin addiction look like a cake-walk(My apologies to recovering heroin addicts. If you’re to the point that personal finance is important to you, you’ve come a long way. Congratulations!). Cut your bills, increase your income. Do whatever it takes to lower your bottom line and raise your top line. Call your utilities. If they are going to take your money, make them work for it. If they can’t buy you drinks or lower your payments, get them out of your life. There’s almost always an alternative. Don’t be afraid to banish your toxic payments. Eliminate your debt payments. This page has a useful guide to debt and how to clear it off.
Update: This post has been included in the Festival of Frugality.
5 Pain-Free Ways to Save Your Money
Everyone needs an emergency fund. More than that, you will eventually need retirement savings, a new car, a big-screen TV, or maybe just a new kidney. Whatever the reason, one day, have a comfortable savings account will make your life easier.
But, Jason, you say, it’s hard to save money! How can I start saving when I can’t make ends meet? I’ve got rent, 9 kids, and a DVD addiction that won’t quit. My mortgage is underwater, my Mercedes still has 8 years on the loan, and the Shoe-of-the-Month Club only carries Christian Louboutin’s. What can I do?
Well, I’ll reply, since I am Jason and you asked for me by name, you need to find a way to make it happen. I’d never recommend someone give up their diamond-studded kicks, but something’s gotta give. In the meantime, there are some ways you can save money without feeling the sting of delayed gratification.
1. Save your raise. When you get your next raise, pretend you didn’t. Set up an automatic transfer to stick that new 5% straight into a savings account. Don’t give yourself an opportunity to spend it.
2. Find it, hide it. When your Aunt Gertrude dies and leaves your her extensive collection of California Raisins figurines, sell them and save the money. If you find a $20 bill on the ground, throw it right into your savings account. When your 30th lottery ticket of the week gives you a $10 prize, save it! Don’t waste found money on luxuries. Use it to build your future.
3. Let it lapse. Do you have magazine subscriptions you never read? Or a gym membership you haven’t used since last winter? Panty-of-the-Month? Crack dealer who delivers? Stop paying them! Let those wasted services fall to the wayside and put the money to better use. I don’t mean flipping QVC products on eBay, either. Save the money.
4. Jar of 1s. Roughly once a week, I dig through my pockets and my money clip looking for one dollar bills. Any that I find go in a box to be forgotten. I use that box as walking-around money for our annual vacation, but it could easily get repurposed as a temporary holding tank for money I haven’t gotten to the bank, yet.
5. Round it up. Do you balance your checkbook? If you don’t, start. If you do, start doing it wrong. Round up all of your entries to the nearest dollar. $1.10 gets recorded as $2. $25.75 goes in as $26. If you use your checkbook or debit card 100 times a month, that’s going to be close to $75 saved with absolutely no effort. It even makes recording your spending easier.
There you have it, 5 easy ways to save money that won’t cause you a moment’s pain.
Do you have any tricks to help you save money?
Totally Money Carnival #5, the Superbowl Edition
Welcome to the Totally Money Carnival #5, the Superbowl Edition. It’s my privilege to be the first outside host for this carnival.
I don’t watch the Superbowl. I’ve never been into spectator sports unless I have some skin in the game. If I’m playing, or have some money riding on the outcome, I’m watching. Other than that, I’ll usually pass. Yesterday, a bunch of grown men in tights earning envy-inducing amounts of money ran around for a few hours in front of people, some of whom paid 5 figures for the privilege of watching. Yay!
Editor’s Picks
http://www.youtube.com/watch?v=hpjaOUjUPUc
Mike Piper presents Protecting Your Private Files posted at Oblivious Investor, “How can you keep your sensitive documents (scanned tax returns, for instance) both backed up and protected in the event of computer theft?” Ed. I love this solution, and I use it. All of my tax returns, online receipts, and documents I don’t want to lose get treated this way.
Suzanne K. presents The Psychology of Why You Can’t Budget—And Five Tips to Help You Do It posted at PsychologyDegree.net. Ed. I’ve always been a fan of trying to understand what makes people tick.
Silicon Valley Blogger presents Prepare Your Tax Return: Tax Products vs Tax Pros posted at The Digerati Life, saying “If you don’t enjoy preparing your taxes, you’re not alone. There are various ways to get your tax returns done. How do you go about preparing your taxes: DIY or with the help of a pro?” Ed. Tax time sucks. If we abolished payroll deductions and made everybody in the country write a check to the IRS every year, there would be a revolt on the next April 15th.
Kevin McKee presents How To Know if Your Job is Expendable posted at Thousandaire, saying “When businesses start doing poorly, some people are at risk of losing their job, while others are safe. Find out which category you fall in with these simple questions.” Ed: I was given a demonstration that defines expendability in the workplace. Fill a glass with water and place it on the counter in front of you. Stick your finger in the glass. Now, pull it out. See the impression you’ve made? I’ve done the rockstar bit, and I’ve been in positions that were necessary for the profitability of larger divisions of large companies. It doesn’t matter. Corporate loyalty is a joke.
Budgeting
35% of people who attend the game write it off as a corporate expense. (source)
Miss T presents 5 Ways to Lower Your Monthly Bills | Prairie EcoThrifter.com posted at Prairie Eco-Thrifter, saying “Believe it or not, there are lots of ways to save money, no matter how much of it you have- or don’t have.”
Credit
http://www.youtube.com/watch?v=jRYLhkOV2so
Tim Chen presents Pentagon Federal Offers Best Gas & Airfare Credit Card Rewards, Period. posted at NerdWallet Blog – Credit Card Watch, saying “There is only one credit card in America that offers no strings attached 5% cash back at any gas stations (excluding the likes of Costco) – the Pentagon Federal Platinum CashBack. It also gets you 2% back at grocery stores.”
Miranda presents Accelerate Your Credit Card Debt Pay Down posted at CreditScore.net, saying “Use these techniques to pay down your credit card debt faster.”
Buck Inspire presents Moving Up and On From Prepaid Debit Cards posted at Buck Inspire.
Ryan Hudson presents How I Got a Credit Card Late Fee Waived posted at Best Credit Cards IQ, saying “Don’t take accidental late fees laying down. Do something about it. Here’s how I got rid of my late fee.”
Debt
No network footage exists of Super Bowl I. It was taped over, supposedly for a soap opera.(source)
John presents Get Out of Debt Fast – How to Speed Up the Process posted at Passive Family Income, saying “There are quite a few people today that are beginning to dig their way out of debt. They have monitored their spending, created a budget, and have done the best that they can to stick with it. But, as many of you have experienced, the excitement of becoming debt-free gets pretty old after a while.”
Finance
http://www.youtube.com/watch?v=VRDx18GYITw
Mike Collins presents Defined Benefit vs Defined Contribution posted at Saving Money Today, saying “Understanding the different types of retirement plans.”
Boomer presents 10 Ways For Women To Obtain Financial Empowerment posted at Boomer & Echo, “It’s not that difficult to get your financial life under control (your control). Remember, a man is not a financial plan.”
Frugality
The Super Bowl is measured in Roman numerals because a football season runs the span over two calendar years. This year the season began in 2010 and ends in 2011. (source)
Madison DuPaix presents Substitute, Improvise, and Make Do With What You Have posted at My Dollar Plan, saying “So often, when we run out of things we need, we run to buy something or spend money when we don’t have to. Find out how you can avoid this trap.”
Money Beagle presents The Power Of The Free Calendar posted at Money Beagle.
Amanda L Grossman presents Homemade Diversion Safes: Save Money by Making Your Own posted at Frugal Confessions – Frugal Living, saying “You can purchase your own home security money safes (diversion safes), but I thought it would be more frugal and fun to think of ones to make on your own. See what I can do with a used deodorant!”
Money Management
http://www.youtube.com/watch?v=KQkK1UCH1EU
MoneyNing presents What Would You Do with a Million Dollars? posted at Money Ning, saying “I know what I would do with a million dollars. How about you?”
Other
More drivers are involved in alcohol-related accidents on Super Bowl Sunday than any other day of the year (except St. Patrick’s Day), according to the Insurance Information Institute. (source)
Joe Morgan presents Is Gen Y Irresponsible, Or Is It A Matter Of Perspective? posted at Simple Debt-Free Finance, saying “Generation Y has a reputation for having a sense of entitlement, but here’s one reason it may just be a matter or perspective.”
Saving
http://www.youtube.com/watch?v=_78ylMLa0JQ
Ryan @ MFN presents Roth IRA Qualifications posted at The Military Wallet, saying “Are you qualified to open a Roth IRA? Find out income and contribution requirements to see if you are eligible!”
Brian @ BeBetterNow presents Money’s Golden Rule: Spend Less Than You Earn posted at Be Better Now, “In the end, most personal finance advice boils down to spending less than you earn. Here’s another article to reinforce that.”
Spending
http://www.youtube.com/watch?v=g364TG_8Qmw
Barb Friedberg presents Wealth in Life: 25 Cheap Ideas for Fun posted at Barbara Friedberg Personal Finance, “Join in to build a massive list of low cost fun!”
Taxes
http://www.youtube.com/watch?v=R55e-uHQna0
PT presents Tax on Unemployment Compensation posted at PT Money, saying “A detailed look at what taxes are due on your unemployment compensation.”
Ken presents Important Tax Update for 2010 You Don’t Want To Miss posted at Spruce Up Your Finances, saying “A few of the tax provisions applicable to tax year 2010 such as the extension of tax filing date, expanded tax benefits, phase out on some limitations, etc.”
Fanny presents Top 10 Tax Deductions for Parents posted at Living Richly on a Budget, “Being a parent is one of the most important roles in life. Why not take advantage of all the deductions you qualify for?”
Thank you all for participating! Next week’s host is Saving Money Today, so be sure to submit your posts.
Save Your Family
I don’t attach much importance to dreams. They are just there to make sleepy-time less boring. Last night, I had a dream where I spent most of my time trying to prepare my wife to run our finances before telling my son that I wouldn’t be around to watch him grow up. That’s an unpleasant thought to wake up with. Lying there, trying to digest this dream, I started thinking about the transition from “I deal with the bills” to “I’m not there to deal with it”. We aren’t prepared for that transition. Last year, we started putting together our “In case of death” file, but that project fell short. The highest priorities are done. We have wills and health directives, but how would my wife pay the bills? Everything is electronic. Does she know how to log in to the bank’s billpay system? Which bills are only in my name, and will go away if I die? Is there a list of our life insurance policies?
I checked the incomplete file that contains this information. It hasn’t been updated since September. It’s time to get that finished. Procrastinating is inappropriate and denial is futile. Here’s a news flash: You are going to die. Hopefully, it won’t happen soon, but it will happen. Is your family prepared for that?
The questions are “What do I need?” and “What do I have?”
First and foremost, you need a will. If you have children and do not have a will, take a moment–right now– to slap yourself. A judge is not the best person to determine where your children should go if you die. The rest of it is minor, if you’re married. Let your next-of-kin, your spouse keep it. I don’t care. Just take care of your kids! Set up a trust to pay for the care of your children. Their new guardians will appreciate it. How hard is it to set up? I use Quicken Willmaker and have been very pleased. Of course, the true test is in probate court, and I won’t be there for it. If you are more comfortable getting an attorney, then do so. I’ve done it each way. You can cut some costs by using Willmaker, then taking it to an attorney for review.
It’s a sad fact that often, before you die, you spend some time dying. Do you have a health care directive? Does your family know, in writing, if and when you want the plug pulled? Who gets to make that decision? Have you set up a medical power of attorney, so someone can make medical decisions on your behalf if you aren’t able? Do you want, and if so, do you have a Do-Not-Resuscitate order? Willmaker will handle all of this, too.
What’s going to happen to your bank accounts? I’m personally a fan of keeping both of our names on all of our accounts. I share my life and my heart, I’d better be able to trust her with our money. If that’s not an option, for whatever reason, fill out the “Payable on Death” information for your accounts, establishing a beneficiary who can get access to your money if you die. Do you want your spouse to lose the house or the car if you die? Should your kids have to miss meals? Make sure necessary access to your money exists.
Does anybody know what you have for life insurance? Get a copy of the policy and make sure your spouse and someone else knows what company holds it and how much it is worth.
Now, it’s time to make some lists. You need to gather account numbers and contact information for everything.
- Bank accounts. List every bank and account you own. Checking, savings, CDs.
- Investment accounts. Again, every company, every account.
- Mortgage and car payment information.
- Life insurance. Get your policy numbers, contact information, beneficiaries, and amount of coverage all in one place.
- Credit card accounts. Every card, every company. If it’s just your name on the account, your spouse will need to send certified death certificates to stop collections. Otherwise, she’ll need to pay the bills.
- Utilities. Get the account number for the electric bill, the gas bill, water/sewer/garbage, cable and phones.
- Other bills. These include car/home insurance, Netflix, memberships and anything else you pay.
- I’ve included the account information for my web host, registrars and websites. Some of it is salable, some of it is income-generating.
- Car titles. Put the actual titles in the pile of lists.
- Property deeds. Keep these here, too.
Non-financial information to list:
- Online accounts. Any financial sites that would be useful, or any community sites you would like to have informed about your death. Your online presence is a part of who you are.
- Email accounts. Will your survivors need to interact with anybody potentially contacting you? They will need your username and password, or most big providers won’t let them in.
- Social media. How many networks do you participate in? Do you want to disappear, or should all of your Facebook friends know your dead?
- Blogs. Do you have a blog that needs an announcement? Does it generate income? Could it be sold?
- Contact list. Who else needs to be informed of your demise? Don’t make your loved ones hunt for the information.
Now, take all of this information and put it in a nice, fat envelope and lock it in the fireproof safe you have bolted to the floor. Make a copy and give it to someone you trust absolutely. Make sure someone knows the combination to the safe or where to find the key.
Your loved ones will appreciate it.
