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Three Alternatives to a Budget

Finance

the envelope system: day one
Image by J. McPherskesen via Flickr

Budgets aren’t for everyone.  For some people, the very idea of trying to track where their money going is painful.  And that’s just the idea of tracking the money.  It gets far worse when you’ve got $10 budgeted for coffee, $12 for fast food, $66.50 for gas, and $0.75 for entertainment.  It’s can be hard to follow a strict budget for long.

If you know you need to track your money, and you also know that a strict, zero-based budget won’t work for you, what can you do?  Luckily, there are alternatives.

1. Hope and Pray. This is otherwise known as the “Call my bank everyday and see how close I am to over-drafting” system.  To fully embrace this system, you need to not only abandon a written–or even organized–budget, but you should also throw your checkbook register in the garbage.   Make sure you’ve got a good overdraft protection account attached to your checking account and let your money take care of itself.  This is the ultimate zen of personal finance.  Don’t stress or worry, just hope for the best.   This system works best if you make more money than Oprah and have modest tastes.  For those of us who have to watch our money a bit to make sure the month outlasts our money, this probably isn’t a great plan.

2. The Envelope System. To implement this system, you do need to create a basic budget so know what you are obligated to pay.  Once you have that done, take a stack of envelopes and label them for each item you have to pay.   Add another envelope for food, another for entertainment, and another for miscellaneous because there is always a miscellaneous.   Divide the money among the envelopes.   Now for the magic. When you have to spend something, take the money out of the appropriate envelope and spend it.  That’s it.  If, however, there isn’t enough money in the right envelope, but you still need to spend the money, you have to take it out of a different envelope and spend less on the category that lost money.

3.  Percentages. This is the simplest of the non-budget budgets.   Take 50% of your money and spend it on necessities, like the mortgage, food,  and utilities.   The next 30% goes to savings and retirement.  The last 20% is for fun or any other thing you want to spend it on.  This naturally works best if you are out of debt, but if not, just make sure most of the 20% fun money goes to repaying debt.   This system works best if your bills are automated and you will need to set up a basic budget first, so you can make sure your necessities come in under 50% of your income.

Not every budget plan will work for everyone, but there are always alternatives that can still help you manage your money.

How do you track your money?

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4 Ways We Keep Wasting Money

Finance

DENVER - NOVEMBER 22: A traveler undergoes an...
Image by Getty Images via @daylife

MSN Money has an article up on common ways money is wasted.    Here is my spin.

We(as a species) tend to do a great job of wasting money.   Between inertia and the emotional pain of cutting off something we have gotten used to–whether it be Netflix or a 3rd arm–it’s hard to kill wasted costs.  As Robert Heinlein said, “Man is not a rational animal, he is a rationalizing animal.”

MSN listed 4 ways to make your money go bye-bye:

1.  Credit cards

According to the article, in the US, the average rate of interest is 15% for a total nation-wide debt of $850 billion-with-a-B.  That’s insane.   I lucked out and quit using my cards before the CARD act forced all the issuers to send their rates to the moon.   I’ve opted out of every agreement change since then, while I pay off the remaining balances.   15%! If you buy something for $1000 and pay it off in a year, that’s $1150.   What could you do with an extra $150?   It’s time to get out the torches and pitchforks and drop by Mr. Debt’s house.

2.  Overdraft fees

I set up an overdraft protection account years ago, because it was a heckuva lot cheaper than bouncing checks.   It came with a 25% interest rate and a $2 fee per use.   A couple of months ago, they boosted the fee to $10 per use.   Jerkface, you’re already cashing in on my interest, do you have to touch me like that at the beginning of the date, too?   Thankfully, we haven’t used our overdraft protection since we went on our debt-killing crusade in April of 2009.   Oh, Mr. Debt!  You’re going to have a really bad day when I get to your house.   There will be a smoothie à la Otis when I get there.  Side note: If you’ve got a dark sense of humor, rent Otis.    Not only will you love it, you’ll get the smoothie joke.

3. Unused memberships, gift cards and rebates

Gym memberships are the big example here.   People buy a membership because they set some awesome New Year’s resolution, use it for 2 months, then spend 6 months telling themselves they’ll start using it again soon before they finally cancel.   At $30 per month, that’s $180 that could have been spent sending me presents.   If you must get a gym membership, wait until spring.  That’s when people tell themselves they don’t need a membership because it’s so nice out, they can just exercise outside.   When people tell themselves that, the gyms cut membership costs to lure people in to start their own 6 months of denial.

Take a look at your other recurring costs, too.  Do you use the cable package you have, or could you be just as happy with the next one down?  Do you need the donkeys-and-kneesocks-around-the-world channel?   You’ve gotten your 10 CDs for a penny, can you tell Columbia House where to go with their $20 per CD commitment?

4.  Airline fees

This one is easy.   Forget the 3 hour lines, fees for showing up, Pervo-Scan™, and minimum-wage molestation agents masquerading as cops.   Drive whenever possible.    If it’s not possible, show up in a kilt, regimental-style(assuming you are a guy!).   Don’t check a bag, just ship if overnight to your hotel.   Most of the time, that’s cheaper than $50 per bag, anyway.  Avoid the fees as much as possible.

What other ways have you wasted money?

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Carnival of Personal Finance #270, the Elvis is Dead Edition

Misc

Elvis mugshot2
Image via Wikipedia

Today is the 33rd anniversary of the death of Elvis, so I’m bringing you the “Elvis is Dead” edition of the Carnival of Personal Finance.

What can the King teach us about finance?  The immediate lesson is, of course, to not let success destroy you or your life.  Always remember what is important.

“Adversity is sometimes hard upon a man; but for one man who can stand prosperity, there are a hundred that will stand adversity.” -Elvis Presley

Before we get into the carnival, please take a moment to subscribe, either by rss or by email.  If you are on twitter, please follow me at @LiveRealNow.

Editor’s Picks

“When I was a child, ladies and gentlemen, I was a dreamer. I read comic books, and I was the hero of the comic book. I saw movies, and I was the hero in the movie. So every dream I ever dreamed has come true a hundred times…I learned very early in life that: ‘Without a song, the day would never end; without a song, a man ain’t got a friend; without a song, the road would never bend – without a song.’ So I keep singing a song. Goodnight. Thank you.”
-From his acceptance speech for the 1970 Ten Outstanding Young Men of the Nation Award. Given at a ceremony on January 16, 1971

Craig Ford from Money Help For Christians presents How to Buy Cars With Cash. This is great advice.   My car will be paid off in the next few months and I will be doing exactly this.

FMF from Free Money Finance presents Are Tattoos at Work Really That Acceptable? Do tattoos limit your career? I reference this graphic when thinking about a tattoo.

Pop from Pop Economics presents Getting a raise: The negotiation.   It’s always best to raise your top line as high as possible.  Bringing in more money is far more effective that simply reducing your expenses.

[Read more…] about Carnival of Personal Finance #270, the Elvis is Dead Edition

Saturday Roundup – No More Car

Misc

Free Money (film)
Image via Wikipedia

…err, no more car loan.  I paid off my car this week, a year early!   Now I’m down to 2 debts: a credit card with an embarrassingly high balance and my mortgage.  We’re rocking the debt snowball!

Free Money Tip

INGDirect is having a sweet promotion.  Open a checking account, use it three times in 45 days, and get $50 free.  Free money is the best kind.  I love my ING account and keep all of my savings there.  If you don’t have an account there, yet, now is a great time to open one.

30 Day Project Update

This month, I am trying to establish the Slow Carb Diet as a habit.   At the end of the month, I’ll see what the results were and decide if it’s worth continuing.   For those who don’t know, the Slow Carb Diet involves cutting out potatoes, rice, flour, sugar, and dairy in all their forms.   My meals consist of 40% proteins, 30% vegetables, and 30% legumes(beans or lentils).    There is no calorie counting, just some specific rules, accompanied by a timed supplement regimen and some timed exercises to manipulate my metabolism.   The supplements are NOT effedrin-based diet pills, or, in fact, uppers of any kind.  There is also a weekly cheat day, to cut the impulse to cheat and to avoid letting my body go into famine mode.

I’m measuring two metrics, my weight and the total inches of my waist , hips, biceps, and thighs.   Between the two, I should have an accurate assessment of my progress.

Weight: I have lost 17 pounds since January 2nd.   That’s 6 pounds since last week.  I cheated this week and had a slice of toast and 6 croutons with my grilled chicken-but-no-cheese salad.

Total Inches: I have lost 9 inches in the same time frame, down 3.5 since last week.

Naturally, the first week is the most dramatic.  That’s when my body was flushing most of the garbage I’d been eating, including holiday feasts.  I’ll have a hard time complaining about 6 pounds in a week.  My guess is that I drop another 10-15 pounds by the end of the month, bringing the average to about 1 pound per day.   Over time, that will drop as my base caloric burn drops to match my new weight.

Best Posts

Realized Returns is giving away a Kindle.  I would greatly appreciate it if you didn’t enter, because I’d love to get a Kindle.

Maximizing Money has put together a stellar list of financial blogs.  If I’m not enough to keep you going, take a look at that list.

Mystery shopping sounds like it could be such a sweet deal for some people. Always try to make money doing what you love.

Here is another list of sites that can make you some money.  I love side hustles.

And finally, here is Lifehacker, showing you how to make better cocoa.

LRN Timewarp

This is where I review the posts I wrote one year ago.

I wrote a post on saving money while cooking.  This post has easily withstood the test of time.  We keep getting better at stretching our budget.   Over the last year, we’ve actually reduced our food budget by an additional $50 per month, while the quality of our meals has gone up.

This was the first week I posted a 30 Day Project update.   My first goal was to start waking up at 5AM.   That worked well for almost the entire year, but I’ve let that slack off over the last few months.  On the weekends, I don’t set an alarm or try to get up early, but I’m still up by 7:30, usually.  During the week, my alarm goes off at 5:10, but I let myself snooze it.   I’ve discovered that I do better at attending to my personal projects(like blogging) late at night instead of early in the morning.  So, I’m going with what works, instead of trying to force what doesn’t.

I also reviewed the bills I pay that aren’t paid monthly in my third budget lesson.

Carnivals I’ve Rocked and Guest Posts I’ve Rolled

First 3 Things to Do in the New Year was included in Crystal’s rockin’ new Total Money Carnival.

4 Ways We Keep Wasting Money was included in the Festival of Frugality.

Living the XBox Life on an Atari Income was included in the Carnival of Personal Finance.

Swamp Finance was hosted by Squirrelers.

I ran the guest post, The Best Financial Advice I Ever Received for Saving Money Today.

Thank you! If I missed anyone, please let me know.

Get More Out of Live Real, Now

There are so many ways you can read and interact with this site.

You can subscribe by RSS and get the posts in your favorite news reader.  I prefer Google Reader.

You can subscribe by email and get, not only the posts delivered to your inbox, but occasional giveaways and tidbits not available elsewhere.

You can ‘Like’ LRN on Facebook.   Facebook gets more use than Google.  It can’t hurt to see what you want where you want.

You can follow LRN on Twitter.   This comes with some nearly-instant interaction.

You can send me an email, telling me what you liked, what you didn’t like, or what you’d like to see more(or less) of.   I promise to reply to any email that isn’t purely spam.

That’s all for today.   Have a great weekend!

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Make a Budget

Finance

DSC02103
Image by r.lovewell via Flickr

In the past, I’ve gone through a detailed series of budget lessons demonstrating how to make a budget and showing my personal budget spreadsheet template.  If you weren’t here to see them develop, you probably haven’t seen them at all.    I’ve never built an actual index for those posts.

This is the master index of my budget planning resources.  As I develop more, this will grow.

Budget Lesson #1 – In this lesson, I go over how we handle discretionary income and I explain our modified envelope system.   The discretionary budget contains things like our grocery bill, or the clothes we buy.  We have near-total discretion over what is purchased, hence the name.

Budget Lesson #2 – Lesson #2 contains the details of our monthly bills.  These are the ones that are consistent, predictable, and actually due each month.  Most people take these for granted as the bills they have to pay, but it’s not true.   You can get almost all of your regular bills reduced just by asking.   You would also be surprised what you can do without, when properly motivated.

Budget Lesson #3 – This is where I explain how we deal with the non-monthly bills.  That is, the bills that have to be paid, but are not due on a monthly basis.  I also share the personal budget spreadsheet template I developed.   I am working on a few sample templates to match various imaginary scenarios.  If you’d like to be an anonymous case study, and get free help setting up a budget, let me know, please.

Budget Lesson #4 – In this lesson, I describe our “set-aside” funds for things that will need to be paid eventually, but not on a set schedule.  Sometimes, they are never actually due.   We set aside money for the parties we throw, for car repairs and for a number of other things.  A few of these items are outright optional, but they are part of what makes life fun.  You can’t make a budget without including some of the extras.

Budget Lesson #5 – This is the companion piece to lesson 2.   Learn how I’ve reduced–or attempted to reduce–each of these bills.   For the better part of two years, I called Dish Network every few months to ask for a discount.  For almost 2 years, it was granted.  Then one, day, they told me they were putting a note on our account to keep us from getting any more discounts, so I canceled.   100% discounts help us save more.

Budget Lesson #6 – This is the reduction companion to lesson 3.  These bills are harder to reduce.  Have you ever successfully gotten your property taxes lowered?

Budget Lesson #7 – This is the reduction companion to lesson 4.  Notice a pattern, yet?

Budget Lesson #8 – Here, completely out of order, is the reduction companion to lesson 1.   Watch as I magically reduce–or rationalize–our discretionary budget.

So, dear readers, what part of budgeting should I address next?

Carnival Roundup: Bully Edition

Life, Parenting

My mother-in-law’s house is ready.   The walls are painted, the hardwood floors have been sanded and polished, the carpets have been cleaned.  Now, we just have to get the lease signed and let the renters in.

A school bus photographed in New York, New Yor...
A school bus photographed in New York, New York. Bus is a 2000-2001 Carpenter Classic 2000 body with an International 3800 chassis. (Photo credit: Wikipedia)

This week, we had our first real bullying incident on the school bus.  I guess one of the benefits of having a kid who is the biggest in the school is that nobody punches him.  My daughter doesn’t have that benefit.   She was punched and pushed for being in the wrong seat on the bus a couple of days ago.   Thankfully, the school dealt with it quickly.   The bus is equipped with video and the little girl copped to it.  She’s s off of the bus for a few days and her parents have been informed.   Unfortunately, her twin sister seems to be the vengeful type.  She came home yesterday lying about how my daughter behaved on the bus and got another little girl to lie about getting hit and bit by my daughter in school yesterday.

How do I know it’s all lies?

First, my daughter didn’t ride the bus yesterday afternoon.  She was scared in the morning, so I promised to pick her up from school.   Hard to misbehave on the bus when she was cuddling with her mother on the couch.    The other little girl–who goes to daycare with the twins just up the street from our daycare provider (who happens to be the grandmother of the twins)–recanted once she was away from the vengeful twin.  Her mother filled us in last night.  I’m not a fan of a grandmother defending a kid’s lies.  No kids are angels, but helping them lie doesn’t make them better people.

Live Real, Now was included in the following carnivals recently:

I’m aware that I’ve been a bit of a slacker about posting these links.  My apologies to everyone who deserved a link but didn’t get it in a timely manner.

Yakezie Carnival  hosted by Narrow Bridge

Finance Carnival for Young Adults   hosted by Finance Product Reviews

Carnival of Financial Planning   hosted by Family Money Values

Yakezie Carnival   hosted by Moneywise Pastor

Lifestyle Carnival hosted by Vanessa’s Money

Carnival of Money Pros  hosted by See Debt Run

Carnival of Financial Camaraderie #64 hosted by Master the Art of Saving

Carnival of Retirement #52  hosted by Master the Art of Saving

Yakezie Carnival  hosted by Your PF Pro

Lifestyle Carnival #33 hosted by Lifestyle Carnival

Carnival of Financial Camaraderie #62  hosted by Savvy Scot

Carnival of Money Pros   hosted by Debt Black Hole

Carnival of Money Pros    hosted by Making Sense of Cents

Lifestyle Carnival #31  hosted by Vanessa’s Money

Carnival of Money Pros  hosted by The Frugal Toad

Money Mail Carnival #5   hosted by The Money Mail

Carnival of Money Pros  hosted by Vanessa’s Money

Money Mail Carnival #4  hosted by The Money Mail

Finance Carnival for Young Adults #39 hosted by 20s Finances

Yakezie Carnival hosted by My Family Finances

Carnival of Money Pros    hosted by Growing Money Smart

Carnival of Financial Camaraderie #57  hosted by My University Money

Money Mail Carnival #3 hosted by The Money Mail

Yakezie Carnival    hosted by I Heart Budgets

Carnival of Retirement #46  hosted by Making Sense of Cents

Yakezie Carnival hosted by The Ultimate Juggle

Carnival of Money Pros   hosted by My Multiple Incomes

Carnival of Financial Planning hosted by Master the Art of Saving

Money Mail Carnival #2 hosted by The Money Mail

Carnival of Financial Camaraderie #56 hosted by See Debt Run

Carnival of Money Pros   hosted by Finance Product Reviews

Yakezie Carnival hosted by Parenting and Money

Lifestyle Carnival #27  hosted by Femme Frugality

Carnival of Financial Camaraderie #55 hosted by My University Money

Yakezie Carnival hosted by The Ultimate Juggle

Lifestyle Carnival #26 hosted by Mo Money Mo Houses

Carnival of Money Pros  hosted by Debt Black Hole

Carnival of Financial Camaraderie #54 hosted by Cash Net USA

Carnival of Financial Planning hosted by Young Family Finances

Yakezie Carnival   hosted by Portfolio Princess

Carnival of Money Pros   hosted by Thirty Six Months

Carnival of Retirement #41  hosted by Financial Conflict Coach

Lifestyle Carnival   hosted by Master the Art of Savings

Yakezie Carnival  hosted by Cult of Money

Lifestyle Carnival  hosted by Blue Collar Workman

Carnival of Money Pros   hosted by Making Sense of Cents

Carnival of Retirement #41 hosted by The College Investor

Thanks for including my posts.

Get More Out of Live Real, Now

There are so many ways you can read and interact with this site.

You can subscribe by RSS and get the posts in your favorite news reader.  I prefer Google Reader.

You can subscribe by email and get, not only the posts delivered to your inbox, but occasional giveaways and tidbits not available elsewhere.

You can ‘Like’ LRN on Facebook.   Facebook gets more use than Google.  It can’t hurt to see what you want where you want.

You can follow LRN on Twitter.   This comes with some nearly-instant interaction.

You can send me an email, telling me what you liked, what you didn’t like, or what you’d like to see more(or less) of.   I promise to reply to any email that isn’t purely spam.

Have a great weekend!

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