Category Archives: Money Management

A change in perspective

Our no spend summer has resulted in the lowest balance on our checking account in, well, as long as I can remember. I was paid Friday, and after paying our bills and buying our groceries, our checking account balance is now $250.

I know there were times when I was in college, and even after I graduated, when my balance dipped well below $50. There were times when I overdrew my account. I remember these times vividly. But this is the first time since we started living frugally that I’ve seen a bank balance this low.

Don’t worry about us. We have more money in savings than we’ve ever had in one lump sum in our lives. We’re doing fine. Keeping our checking account balance low is a defense mechanism. It protects us from ourselves, and prevents us from spending more money than we want to spend.

But looking at that balance stresses. me. out. Especially since we’re heading on vacation this weekend.

I have access to our savings through my ING checking account just in case we need money immediately. Our low balance doesn’t pose us any threat since every penny is accounted for these days.

I still just don’t like seeing our balance that low. It makes me feel out of control, just like I did a little over two years ago when every penny wasn’t accounted for. When I still had bills to pay and food to buy with that $250 balance, and I was trying to make a dollar out of 99 cents.

I’m tempted to move some money around just to make myself feel better. I don’t like looking at that balance. But then the sadist in me wants to keep going, to see how far we can go this summer without dipping into our savings. After all, that was the point of the challenge. If I move $100 into our checking account just to make myself feel better, that’s technically cheating. So I’ll probably keep going, and it may even dip lower before the summer is over and Tony starts getting paid to teach again.

But it’s made me think about those days 2 years ago when low balances were a fact of life. Back when my bank balance rarely went above $500, and there was no separate account where I kept my savings because I didn’t have any savings. Back when I spent every penny I earned almost immediately. I felt out of control, and I never knew where my money went.

It’s times like these when I’m proud of what we’ve accomplished in such a short time, and I remind myself that I don’t ever want to go back. It’s amazing what frugality has done for my perspective.

Reflections on month two of our no spend summer

We were not as successful this month as last month. We made a handful of unnecessary purchases on our debit card in desperation, not because we needed things but because we wanted them. I know, I know, we’re bad. But this is an experiment. In the beginning we set a goal, and even though we’ve had some setbacks, we’ve still accomplished our main goal: getting through the summer without spending our savings.

We made a short trip to Myrtle Beach to see The Wallflowers. It was a lot of fun, and aside from the tickets we bought in May and a couple gallons of gas, it didn’t set back our budget at all.

We also made the decision to splurge on concert tickets to see Paul McCartney. While this wasn’t part of our no spend summer plan, it wouldn’t have been possible if we hadn’t spent the summer saving.

The biggest benefit we’ve experienced this month is we’re getting much better at sticking to our grocery budget. I’ve learned to estimate the cost of items based on past experiences, so we have no surprises at the checkout. I know when we’re over budget, which allows us to reprioritize, cut things out, and come in at the right amount. If that’s the only skill we’ve learned through cash budgeting, I’d say it’s absolutely worth it.

While it’s been more difficult this month and we’ve faced more setbacks, I’d still call it a success. After all, we haven’t touched our summer savings, and we’ll even have enough extra money to buy new tires and do some necessary maintanance on the car without dipping into our emergency fund.

How’s your budgeting going this summer?

Credit card companies are watching your purchases

While I don’t recommend using credit cards to rack up debt, the unfortunate truth is that maintaining a credit history can be an important part of good finances. After all, your credit history is what determines interest rates and credit-worthiness for even “good” debts like mortgages and (sometimes) car payments. Even if you have a zero tolerance policy when it comes to all debt, your credit history can affect your car insurance rates, job search, and your ability to rent an apartment.

As the economy worsens, credit card companies are looking for excuses to cut spending limits or close accounts. Both of these actions can negatively affect your credit history.

Even if you’re a responsible credit card user, you may be using your card on monthly purchases or charging things just to maintain your credit activity and avoid account closure. Well, it turns out credit card companies could be watching even responsible purchases to weed out users who they deem a poor risk.

Last week, I read an interesting article outlining the top 10 purchases not to make on a credit card. According to the article, credit card companies are watching statements closely to look for “red flags” that may indicate borrowers are in trouble. The most surprising item on the list: bargain shopping. It turns out that using a credit card at a bargain store like Wal-Mart signifies to credit card companies that you may be in financial trouble. Also on the list: tires and other big ticket necessities, marriage counseling, and income taxes.

I don’t know about you, but we’ve definitely charged big ticket items like tires or plane tickets on a credit card just to keep the account active. Even though we have the cash, we make the purchase with a credit card to keep the account active and rack up rewards points, then pay it off immediately when the statement arrives. I had no idea that could lead credit card companies to take action that could negatively affect my credit score.

To me, this is just another reminder of why credit cards stink. On the one hand, they’re necessary to build and maintain a good credit history, but I absolutely hate being at the mercy of a credit card company even now that I don’t carry any consumer debt.

Thoughts on our first month of cash budgeting

cash

Photo by lincolnblues

I can’t believe it’s been a whole month since we began our cash budget. It has flown by so quickly, but I guess that’s a good thing.

As I wrote yesterday, the longer we go, the harder it gets to keep it up. A lot of our initial excitement and motivation has faded. For the first couple of weeks we had plenty of money left over. For the last two weeks, we’ve spent every penny of our weekly $90 allowance for groceries, household expenses, and entertainment (sometimes a little more).

But there have been some definite benefits to our cash budget. I’ve lost 7 pounds, and I think Tony’s lost a few, too, though he doesn’t know what he weighed in the beginning. We’ve also been having a lot of fun rediscovering frugal activities and trying new meals.

I’m surprised at how well we abstained from using our debit cards. One week we forgot to pick up romaine for the salads I bring to work for lunch. We ended up debiting a little under $4 for 6 heads of romaine at Costco. That’s the only debit charge that’s come out of our main bank account.

I’d be lying if I said that’s the only “extra spending” we’ve done. I started the summer with about $50 in an ING checking account (including a $25 bonus they sent me for opening the account). I didn’t count this with our summer money, because I was counting on some slip ups.

A few dollars here and there have been charged on the card for expenses that we didn’t plan for in the budget (a little under $20 total). I’m leaving the $30 left in the account out of this month’s budget, too, so it’ll be there if we need a little help making it through the week. Yes, it’s technically cheating because it is a debit card, but I knew we weren’t going to be perfect. Planning ahead for errors has made it easier to manage.

The good news is we’re getting better. Last week we trimmed our grocery budget down by $10 to avoid going over budget. Motivation is harder to come by, but practice is making us better at cash budgeting without going over.

As I look at our success, I’m feeling a renewed motivation. I’m going to need it to get through the next two months!

Unexpected benefits of our cash only budget

cashWhen we decided to live this summer on a cash budget, I was nervous. Not only did I know it would be a challenge, but I feared that we would feel deprived and miserable. Almost three weeks into the experiment, that’s not the case at all. In fact, there have been several unexpected benefits.

Weight loss

After almost 6 months of minimal success with dieting and exercising, I was pleasantly surprised this week to discover I’ve lost three pounds. This could be due to any number of recent lifestyle changes, including my limited bread and pasta consumption over the past 3 weeks. But I also suspect our new lifestyle has a lot to do with it. We’re choosing frugal, more active fun instead of pricier sedentary activities, and we’ve cut out restaurant meals. We didn’t eat out more than once a week before, but apparently that was enough to slow my weight loss down.

Camaraderie

Since my husband and I are facing this challenge as a team, it’s definitely bringing us closer together. It’s been fun discovering frugal alternatives to our more expensive date nights, and we’re working together to solve problems and overcome challenges.

We’ve been living frugally for almost two years, but this is extreme even for us. Spending the evening playing a board game instead of going out to dinner is a great way to reconnect, and it really feels like we’re breaking out of some of our old routines and enjoying a lot of new activities. Fun!

Less budget stress

One of the worst feelings is checking the budget Monday morning after a weekend of overspending. Since we paid off our credit card debt and increased our income a little, we started getting more and more complacent about our frugality. It happens.

This cash only experiment has helped us get back on track. Now when I look at the budget Monday morning, I know exactly what we spent Friday through Sunday. The weekends no longer derail us, because we only have so much in our pockets to spend.

If nothing else, living on cash only really has led to more mindful spending. It’s not necessarily because I put a premium on cash, but because when you only have so much in your pocket, you’re forced to avoid spending more than that. Knowing exactly where we stand at the end of the weekend is incredibly freeing.

Downsides

I miss the occasional lunch out at work. Last Friday the entire office left for lunch at my favorite inexpensive restaurant. Because of my diet and my budget, I ate my boring salad. That was the first and only time I felt a little deprived on cash only.

The biggest downside? Oh my goodness, I hate dealing with cash. I hate having change everywhere. I hate that I have to stop and get myself organized after the cashier hands me my change. I really hate that I have to fish around in my wallet for the correct amount when I pay for things. It seems to hold everything up, and it’s just such a hassle. Holding on to receipts and manually splitting transactions on Mint to track our spending is inconvenient and confusing at times. What do you do, though? It seems a small price to pay considering all the benefits so far.

Photo by nicmcphee

New to frugality? What to do first

Frugality is overwhelming in the beginning. I remember reading blogs from frugal veterans who made it sound easy, but I was terrified. Cutting groceries down to $35 a week, zero-based budgeting, coupon clipping, drug storing? It may have been easy for them, but I didn’t know where to begin.

Take a deep breath. Remind yourself that frugality is a major life change. It’s not going to happen overnight. The best way to get started is to jump in, and don’t try to change your life too drastically in the beginning. Frugality is a gradual change, one that you’ll hopefully be able to maintain long term. It’s okay to start with baby steps.

Here’s how to get started:

Figure out where your money is going.

Before you can cut expenses or create a budget, you need to know what you’re spending and where. Link your bank accounts to Mint.com, and spend normally for a couple weeks. This step was incredibly eye-opening for us in the beginning, and we immediately saw some areas where we could easily cut back.

Create a budget.

Next it’s time to face the dreaded b-word. Don’t be scared, though. Budgeting is actually empowering, especially in the beginning. Don’t try to deprive yourself or make drastic changes at first. Just create a zero-based budget to ensure that you’re not spending more than your income. I use Mint.com to set limits on our spending, and then I track it in real time. Every dollar has a purpose, and anything left over goes to savings or debt. You can always reduce your expenses later. The most important thing in the beginning is getting used to tracking and following your budget.

Open a savings account.

Even if you’re deep in debt and struggling to make ends meet, find a way to start saving something. You can always increase the amount later. What’s important now is establishing the habit. Even if all you can spare is $25 or $50 a month, open an ING savings account separate from your checking and start putting a little money away.

Learn to entertain yourself without spending money.

The first step to having fun without spending money is learning to love your library. If you don’t have a library card yet, go get one right now and start borrowing books and movies for free. Check out a cookbook first. If you’re like my husband and me, eating out is probably one of your favorite date night activities. Learn to have fun cooking for yourselves, and you’ll drastically cut your food budget.

Create menu plans & grocery lists.

When you first start cooking at home, it’s tempting to go overboard at the grocery store. You don’t have to cut your grocery spending to $35 a week to make the most of your shopping trips, though. Find a menu planning strategy that works for you, plan your meals with the grocery ads in front of you, and start buying meats and staples in bulk. You’ll cut your grocery expenses without affecting the quality of food you eat.

It’s okay if you makes some frugal mistakes in the beginning. Learn at your own pace. As you master these basic frugal habits, you’ll gradually find yourself learning new ways to save even more money. It’s an ongoing process for everyone, even the frugal masters.

As long as you’re committed to saving money and reducing debt little by little, your life will continue to improve. Remember, frugality is about improving your quality of life, not just cutting your expenses.

What made you decide to live frugally?

Every frugal family has a unique reason for choosing this lifestyle. For some people, it’s a job loss. For others, it’s the birth of a child or the desire to be a stay-at-home parent. For us, it was a gradual change, but I do still remember the day I made the conscious decision to live frugally.

When we arrived in North Carolina before my husband began graduate school, we had quite a bit of money in the bank (about $10,000 to be exact). We’d saved for a year knowing we would need a little padding until I could find a job.

In the beginning, I wouldn’t say we were frugal. We spent too much on groceries. We bought a lot of new things for our apartment. We adopted a puppy (which I absolutely don’t regret). Even though we were careful, we weren’t what I would call frugal yet.

We’d been living here for two months, and I had no leads for jobs despite sending a ton of resumes. I was beginning to worry that we were going through our savings too quickly. It’s scary to look at the bank account and see a lot of money going out with nothing coming back in.

Then I finally got a call for a job interview. I was thrilled. I even went out and bought new clothes for the interview. They called me in for a second interview. Then a third and a fourth. I met everyone in their small office. I thought I had the job in the bag. Our spending had gradually increased. I was so sure I’d be working full time soon.

They invited me back to meet with the president of the company for the second time. I was positive this was the hiring interview. It was such a relief.

The day before the meeting, they canceled. For some reason that I’ll never understand, they decided not to hire me at the last minute.

Devastated does not describe how I felt. I was completely crushed. After two months of sending resumes and six weeks of interviewing with this company, I thought this had been my shot. I thought this was the perfect opportunity. But it didn’t work out.

I was absolutely depressed for days. Then I started fretting about money. Our savings was running out. I had been counting on this job for six weeks, so we’d spent more than we should have leading up to the rejection.

I realized I would have to take a part-time job outside of my field until I could find something else. I also realized we were going to have to live on a lot less money than we’d hoped. Even with freelance writing jobs, it just wasn’t enough to cover the gaps.

If I couldn’t do anything to increase our income, we’d need to decrease our spending. At the very least, we’d be able to get by without increasing our debt or worrying about paying our bills.

Frugality empowered me to pick myself up, dust myself off, and get on with my life. I realized that I had more control over our financial destiny than I thought. For so long I thought the only answer for us to improve our financial situation was to make more money. When I realized that wasn’t the case, a huge weight was lifted off my shoulders.

We made under $20,000 that year. And yet we were still able to plan our wedding, pay off a chunk of credit card debt, and keep our heads above water. We didn’t start saving again until we paid off our credit card debt and I was hired full time, but I’m still proud of the progress we made on such a small income.

Even though our income has finally increased some, the lessons I learned in that year will stay with me forever.

What made you decide to live frugally?

Thoughts on our first cash-only weekend

We made it through our first cash-only weekend! It has been quite a challenge, but it’s actually been fun! Here are some highlights:

Successes

We didn’t use our debit cards once! The only money we spent was from the $90 we withdrew on Saturday.

We also didn’t go over budget! After buying groceries and seeing a matinee, we have $20 left. This is the exact amount we budgeted for household expenses. Because we didn’t need any household items this week, we’ll hang on to that $20 for a later week when we’ll inevitably need more than $20 for necessary household expenses.

The biggest victory is that I’m not dreading our bottom line. Most weekends, I cringe when I look at Mint the following week and see how much we spent. This week, I know exactly how much we spent, and I know we didn’t blow our budget. Yay!

Challenges

This afternoon, the weather was beautiful and I felt the urge to go out to lunch someplace with patio seating. Because we didn’t have cash for it in the budget, we didn’t go. It was tough, though.

Instead, we took a drive to the beach, walked the dog around a nearby lake, and got some work done. In the end, our choice was healthier for us physically and financially, so I’d say our cash-only budget is having positive effects beyond our bank accounts.

Setbacks

We technically didn’t follow our own rules. Because we were $9 under budget for groceries, we should have ended the weekend with $29 in pocket. Part of the deal was that we would hang on to extra cash if we went under budget for later weeks or something fun at the end of the summer. Instead of hanging on to it, we spent an extra $4 over our entertainment budget because the new Pixar movie “Up” wasn’t playing at the cheap theater. We also picked up a couple extra items at the grocery store for $3 total.

After a weekend of success (with our cash-only budget and with my diet), I was seriously craving ice cream. But I couldn’t bear to break the $20 bill that had survived the weekend. I had $1 in my pocket, plus we had change scattered around the house and in the car. We scrounged together $2.50 and headed to the grocery store to pick up some ice cream sandwiches.

While it was technically cheating, it was definitely the most fun we’ve had on a cash budget. Working hard to scrounge together the money for that ice cream made it that much sweeter, and knowing that we could only spend $2.50 limited our choices.

My unwillingness to part with that $20 bill already shows a change in how I’m viewing money, particulary cash. In the past, I would have viewed that as “extra money” already removed from our account. Now I view it as “household expenses” money that we’ll most likely need in a future week. I didn’t want to spend it, because I knew we would probably need it later to avoid using our debit cards.

If we had gone to the grocery store to pick up ice cream with our debit cards, we might have spent $4 on specialty ice cream instead of the store-brand ice cream sandwiches we chose. I hate to admit it, but when it’s only $4 coming from our bank account instead of breaking a whole $20 bill, I would have been much more likely to spend it. Those little purchases add up, though, which is the reason we’re trying this experiment.

Overall, I think our first weekend was a success! And so far we’re having fun. It’s certainly changing the way we view money. I’m looking forward to more challenges and successes for the next three months. Stay tuned!

Our “no spend summer” starts this weekend

Last week, I wrote about the steps we’re taking to make sure we can get through the summer on my income alone. Throughout the year, Tony is paid to teach undergraduate classes at his university. Now that it’s summer, he won’t be receiving a paycheck. We knew this was coming all year, so we saved enough to cover his income through the summer without using our emergency fund. But now we want to try to hang on to that money, too.

We’ve come up with a new plan to ensure that we don’t overspend and we’re able to save. It’s something we’ve never tried before, but we’re excited about the challenge. Beginning this weekend and continuing through the months of June, July, and August, we’ll not only be limiting our spending, but we’ll be living on a cash budget.

Here’s how it works:

I added up our total income for the summer without Tony’s paychecks. Then I divided that number by three months to determine our total monthly income. I added up all of our fixed expenses — rent, utilities, and other bills — and subtracted that total from our monthly income. After paying all of our fixed expenses, we’ll have $370 left each month. That means we can only spend $90 a week on groceries, entertainment, and other expenses. This is only a little less than what we would spend anyway, but lately we’ve been more and more complacent. I really want to make sure we’re not tempted to go over.

Each week before we head to the grocery store, we’ll withdrawal $90 in cash from our bank account. This will be our only spending money for the entire week. We’ll have to work extra hard to stay within our grocery budget, and if we go over, it’ll reduce the amount we have for entertainment and other expenses. I’m anticipating that we’ll spend $60 or less each week on groceries, $20 on household expenses, and $10 on entertainment.

Our idea for a cash budget for the summer was inspired by Small Notebook’s “no spend month.” It’s essentially the same concept, only we’re not limiting our spending quite as much as her family does so we can maintain it over three months instead of just one.

As an incentive to hang on to as much cash as we can, we’ve decided that whatever cash is left at the end of the summer will go to something fun. We’ll see how much is left before we go making any plans with it. :)

I initially decided to pause saving for the summer, but based on this budget, we’ll be able to save $250 a month (about half of what we normally save). At the end of the summer, we’ll be able to put the $2,000 we saved to supplement our summer income into our regular savings.

I’m a little nervous because I’ve struggled with cash spending in the past. But we’re really excited to take on this new challenge! I think it’ll be a good exercise to get us back on track. For the past few months, we’ve been a little too comfortable. Each month, we go a little more over budget on things like food and shopping. Hopefully this summer will get us back on track.

Our no spend summer begins this weekend. Any tips on how to make a cash budget work?