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Budget Lesson, Part 2
Today, I am continuing the detailed examination of my budget. Please see part one to catch up.
This time, I’m going to look at my monthly bills. These are predictable and recurring expenses, though not all of them are entirely out-going.
Let’s dig in: [Read more…] about Budget Lesson, Part 2
What Happens When You Save
- Image via Wikipedia
I’m a debtor.
I’d like that to be otherwise, but I’m pretty close to the limit of what I can do to change that. Don’t get me wrong, it’s changing, but there is a limit to how many side projects I can take on at one time. So, I’m in debt and likely to stay that way for the next couple of years.
As part of my budget, I set up a few categories of items that are either necessities or “really wants” without being immediate expenses. For example, I’m setting aside some money each month for car repairs, even though my car isn’t currently broken. When it comes time to fix something, I hope to have the money available to fix it, without having to scramble or <spit> tap into my emergency fund.
All told, I have about a dozen of these categories set up, each as a separate INGDirect savings account. Twice a month, a few hundred dollars gets transferred over and divided among the savings goals. Most of these goals are short-term; they will be spent within the year, like the account for my property taxes. Some of them are open-ended, like my car repair fund. Some are open ended, but will eventually end, like the fund to finance my son’s braces. All of the accounts are slowly growing.
As I’ve watched the progress of my savings accounts, I’ve noticed something funny.
My confidence is up.
It may only be a few thousand dollars, but it’s more money than I have ever had saved. The vast majority of this money will be spent over the next few years, but having it there, now means that I have tomorrow covered. For the first time in my life, I’m not living paycheck to paycheck. No matter what happens, I know I can make ends meet for a couple of months. That fact alone has reduced my stress level more than I could have imagined.
Two years ago, I was sure I was going to file bankruptcy. Now, I’m looking at being just two years away from having all of my debt gone. I have faith that my future will be bright, and only getting brighter. If I can dig myself out of this hole once, I can do it again, no matter what happens.
This has brought a calm that I can’t easily explain. I don’t have to worry about where next week’s groceries are going to come from, or how we’re going to afford braces in a couple of years.
Having an emergency fund and some auxiliary funds has been entirely worth the work we’ve done for last two years. Have you noticed any changes as you pay off your debt and build savings?
Budget Lesson, Part 6
It’s been a month since I’ve written a post for the budget series, so I’ll be continuing that today. See these posts for the history of this series.
This time, I’ll be reviewing my non-monthly bills. These are the bills that have to be paid, but aren’t due on a monthly basis. Some are annual, some are quarterly.
- School Lunch – This could be cut by sending a bag lunch. We pay about $1.25 per day for school lunch. At that price, I don’t think I can beat the nutrition, let alone the convenience of the meal. We pay this whenever the account gets below $10.
- Property Taxes – We pay this semi-annually. This bill goes up every year due to the ****** ***-******* ******-******* who don’t care about their constituents making ends meet. ******* ***** ******* *******. Huh. Who knew WordPress came with a censor? I could move, but I’d have to get out of commuting distance to get this down much.
- Life insurance – I’ve got two quarterly life insurance policies. I can’t get these much cheaper, but I should be able to next year. The questions asked if I’ve smoked in the last three years, and that will be up on Halloween.
- AAA – It’s only been recently that I’ve owned vehicles reliable enough to avoid paying my AAA dues for me. I could cancel this, but for $80 per year, the hotel discounts make it a wash. One vacation per year comes close to making the difference.
- Vehicle Registration – The only way to cut this would be to get rid of a vehicle. I don’t think that’s possible for us. We work in opposite directions and, for at least one quarter per year, spend too much time chasing around for activities.
- Daycare – We’ve been using our current daycare provider since my oldest(10) was one. When my youngest turns 2 in June, our costs will go down. Without one of us quitting our job, this bill can only go down as the kids grow up.
- City Bill – This bill combines our garbage, water, and sewer. With three adults, three kids, and 5 animals in the house, reducing our garbage level is difficult. We do try to manage our water usage in the summer, to keep that down.
- Web host – I have a few domain names and a hosting package to handle my side hustles and miscellaneous projects. This is a deductible expense. I have been allowing my domain names to expire if the project isn’t being actively pursued.
- Memberships – I have annual dues to two organizations. I’m making payments on lifetime memberships, so these will be going away in about 18 months.
Reviewing this list, there doesn’t seem to be too much I can cut and accomplish any meaningful savings. Am I missing something?
First 3 Things to Do in the New Year
- Image by iowa_spirit_walker via Flickr
With the new year looming, it’s the perfect time to review the things that may not have gone as well as planned in the current year, and plan ahead for the coming year, to make sure things go well from now on.
To get a good start in the new year, you should focus on three things.
1. Budget.
A good budget is the basis of every successful financial plan. If you don’t have a budget, you have now way of knowing how much money you have to spend on your necessities or you luxuries. Do you really want to guess about whether or not you can afford to get your car fixed, or braces for your kid? I’ve gone over all of the essentials to make a budget before. Now is the perfect time to review that series and make sure your own budget is functional and ready for the new year.
At the same time, spend some time thinking about how your what has gone wrong with your budget over the previous year. In my case, when we got back from vacation in August, our mindset had changed a bit about spending money, and we got out of the habit of staying strictly on budget. By the time we got back on track, it was Christmas and our plans got shot, again. If it weren’t for my side hustles–money that I don’t track in the budget because the money isn’t consistent, yet–we would have had some serious problems this fall. Where have you gone wrong, and what could you do to improve next year?
2. Credit Cards and New Debt.
In the new year, if you haven’t already done so, make sure you throw your credit cards away. The most basic law of debt reduction is, “If you don’t stop using debt, you’ll never be out of debt.” That’s why you need to set up your budget first. Make sure that your expenses are less than your income, so you can make ends meet without having to charge the difference.
How has your debt use worked out over the last year? Have you used it at all, or have you eliminated the desire to pay interest? What have you used your credit cards for? How much of that could you have done without?
3. Estate Planning.
Now is the time to make sure that all affairs are in order, if the worst should happen. If you die, what happens to your money? Your kids? I’ve gone over everything you need in an estate plan before, so I won’t beat that horse again. You owe it to your family to make sure they are taken care of if something should happen to you. At a bare minimum, write a will and get it notarized.
Have you putting off writing your will? You know you need one, but it’s a morbid thought, so it’s easy to put off, right? Get over it. If you love your family, you’ll do better and get your affairs together next year.
That’s a good financial start for 2011. What are you missing in your financial life?
Carnival of Personal Finance #270, the Elvis is Dead Edition
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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.
