Tag Archives: budgeting

Mid-month progress report & TGIF link round up

Whew! I feel like this week has flown! Since we’re right in the middle of the month, now is a good time to check up and see how I’m doing on my first real budget!

Most of our expenses are fixed bills that we pay at the beginning of the month. Things like the electric bill, gas bill, rent, etc. So I’m tracking our progress based on the categories that we spend throughout the month, including groceries, miscellaneous shopping, and entertainment.

How are we doing? We’re $9 under the halfway point for our grocery budget, $6 over in the shopping category (that’s a catch-all category where I’ve budgeted $50 toward miscellaneous toiletries, cleaning supplies, and other necessary purchases throughout the month). I hope to cut down our spending on this category as I get used to taking advantage of the CVS deals. We’re right on target in our entertainment budget … $25 out of $50 spent. Woo hoo!

I’m feeling really motivated now that I know that we’re still on track! Hopefully we can continue this momentum throughout the month!

Here’s a round up of the posts that inspired me and helped me stay on track this week!

  • She also writes a fabulous series every Friday on frugal date nights. This week she offers some great tips for frugal outdoor dates. I’d love to try some of these ideas if it wasn’t raining this weekend!
  • Tiffanie at We Like Money wrote about salvaging old items instead of throwing them away. It can be so tempting to throw away old items, especially when they’re not that expensive to replace. But those can add up (in your bank account and in landfills) so it’s important to make sure there’s no fixing it before you throw it away. Sometimes a little cleaning up is all it take
  • Finally, this great post at Wise Bread breaks down the actual amount you save if you’re a one vehicle home and explores whether it’s worth it to live outside of the city where housing is cheaper if you’re spending all that money on your commute. Some great facts in here! It doesn’t take rocket science to figure out that two cars cost more than one, but it’s amazing to see all the numbers in black and white. I can’t even imagine how we could afford a second car!

So that’s it for this week. Tomorrow we’re headed to the farmer’s market and our local co-op to compare prices and get some questions answered. Come back for the final verdict on whether we can afford to spring for organic produce! Happy Friday!

Spending money can save you money

When it’s time to tighten your budget, the first rule is “cut all unnecessary spending.” Since we started cutting expenses, there have been many “extras” that we’ve cut out. Restaurants, movies, and shopping trips for unnecessary items, to name a few.

Budgeting has changed the way that I look at my money. I’ve begun to dread extra expenses outside of our normal monthly living costs, because it forces me to renegotiate the budget to avoid overspending.

This can be a good thing. It forces me to really examine unnecessary spending and put it through a basic litmus test: “Do we really need this?”

It can also be dangerous. It makes me hesitate spending money on some things that may not be required, but could ultimately save us hundreds of dollars in the long run.

When considering whether to cut “unnecessary” expenses, it’s important to consider the future, too. Maybe you won’t see a return on your investment immediately, but shelling out the money for certain expenses can end up saving you money later on.

Here’s a list of the “unnecessary expenses” that we’ve added to our budget because of their long-term saving potential:

1. AAA membership

We signed up for AAA right before we drove back to Indiana for our wedding. It’s a long trip, and we didn’t want to get stranded in the middle of nowhere by a flat tire, car problem, or stupid mistake like locking our keys in the car. Membership normally costs $42 per person for a year, but we received a direct mail piece offering membership for a discounted rate of $20 per person for a year.

In my opinion, it’s worth it even at $42 per person. AAA Members receive roadside assistance that includes towing, jumping, fuel delivery, tire changing, and lockout services. If you use just one of those services even once in a year, it pays for itself. We haven’t had to use it yet, but even if we don’t, I think it pays for itself in peace of mind, especially when you’re traveling far from home.

Members also receive a huge array of discounts on car rental, hotels, and other travel and driving related expenses. This perk is secondary to me because all of the discounts are for things that we shouldn’t be spending money on anyway.

Next time we need an oil change, we’ll check the rates at the AAA Auto Care station near us, but we’ll only go there if it really is a deal. And of course, if we do need to get a hotel room or rent a car, we’ll take advantage of our AAA discount.

2. Car maintenance

I’ve recently started putting money into a savings account each month to pay for routine car maintenance like oil changes, but in the past these things have come out of our regular budget. It can cost anywhere from $18-$30 for a basic oil change service, but for some reason I hate having it done.

It’s really a no-brainer, though. Cars that are serviced every 3,000 miles last longer. Since we have a new car that was purchased in 2006 (a very generous graduation gift for us from my in-laws), we plan to drive it for at least a decade. That makes regular servicing even more important.

3. Veterinary Services and Medications

When you adopt a pet, it’s important to remember that you’re committing to a lot more financially than just the adoption fees and dog food. Every month our dog, Howie, requires heartworm prevention medicine as well as flea and tick prevention. He also gets a heartworm test, physical exam and several shots every year, including immunizations for rabies, kennel cough, and parvovirus. I think there might be other immunizations included in his yearly boosters, but I’m not sure what they are at the moment.

We get his monthly medication every 6 months through 1-800-PetMeds, which is a lot cheaper than what we’d pay at the vet. It still costs about about $16 a month for the medications alone.

Vaccinations are about $10-$15 each, so they end up costing roughly $40 a year. Our vet offers a 20% immunization discount on Thursdays, so we always schedule his appointments then. Heartworm testing is required to renew his heartworm prevention medicine each year, and that runs about $30.

His yearly preventative exams cost $50. We also spend $18 every three weeks for his dog food. We choose to feed him high quality dog food because it keeps him healthier. (If you’ve ever had to clean up after a dog that eats cheap dog food, you understand.)

As you can see, being a responsible pet owner isn’t cheap. Not including dog food, we spend over $300 a year to keep Howie healthy. But we committed to taking care of him when we adopted him, and in the long-run proper medical care could prevent major illnesses that cost thousands to treat. Putting money aside for these yearly expenses makes it a lot easier when it’s time to order another six-month supply of medicine or take him to the vet for his check-up.

On a personal note, you could argue that the best way to avoid these extra expenses is to not have a pet. That’s true. However, for us, the fulfillment and joy that we get from being pet owners is worth the cost of taking care of him. Studies have shown that owning a pet can increase your overall health and well being, so I would definitely say pet expenses have long-term benefits. Dogs really can be a wonderful addition to your family and well worth the money if you can work them into your schedule and budget.

4. Renters Insurance

We’ll probably be renting for a while, so we invest in a renters insurance policy. It covers our personal belongings in and outside of our apartment for just $18 a month 9 months out of the year. Our policy does cover us for the other 3 months of the year, we just pay the premium over 9 months for some reason. We’re covered up to $20,000, which is probably more than the total value of our stuff because most of what we own we bought second-hand.

I’ve always thought the term renters insurance was inaccurate, because it’s really personal property insurance. The most valuable things we own are our laptops and my engagement ring. Both are covered by our renters insurance, no matter where we are when the damage or theft occurs. For instance, if one of our laptops was stolen from our car while we were traveling, our renters insurance would cover it.

Damage to the property inside our apartment is protected by our renters insurance in the event of a break-in, flood, or other natural disaster (particularly important since we live in hurricane country). Most policies also cover personal injury to protect you from liability in case someone is hurt inside your apartment.

This is another expense that pays for itself in peace of mind. Landlords rarely cover any damage to your personal property, and usually have a provision written into the lease that says they’re not responsible for damage even if it’s their fault. Renters insurance is basically homeowners insurance for renters, so if your pipes burst or a hurricane destroys your apartment complex, you can replace your personal property. I say, better safe than sorry.

What extra expenses do you add to your budget to save money in the long-run?

Wedding planning: Looking at the big picture and getting started on the right track

This week I’m covering basic initial planning and getting yourself started on the right track. You’ll find that I come back to these basic principles throughout the series because they truly were the basis of my wedding planning strategy. They affected each and every detail of my wedding, and ultimately determined our bottom line.

Prioritize and cut corners on the things that matter less to you.

When you first start planning, it can be overwhelming. There is so much to do. One of the most helpful tips I read in the beginning was, “Sit down and think about exactly what you want. Look at the big picture before you start planning.”

Many wedding planning magazines and websites urge you to think about everything you want so you won’t leave out any of the over-the-top fantasies you’ve always had about your wedding day. When I sat down to think about the big picture, I considered what was most important to me instead.

I considered doing a small affair with just immediate family in a casual setting, but I ultimately decided that I didn’t want to miss out on the basic traditions: the white dress, the floral bouquet, my best friend as my maid of honor, or having the people close to me beyond my immediate family present.

Once we had a list of what was absolutely most important to us, we started cutting out the things that didn’t matter so much. I didn’t need a huge, extravagant party with a DJ and dancing. I didn’t really want a sit-down dinner or a huge guest list. All of those things cost a lot of money, and many people think you have to have them just because most people do. But if it isn’t important to you, then it’s not worth spending all that money. If you figure out what matters most to you, you can spend more of your money on that stuff.

Keep your guest list short

This isn’t an option for everybody because it’s a tough thing to do. Ultimately, I felt that my wedding was a very personal thing, so I only wanted my closest friends and family to be there. Our guest list ended up being about 50 people.

Our small guest list saved us money in a lot of ways. We had a beautiful reception venue at an absurdly affordable price, but the catch was that the place only held 50 people with no room for dancing.

This worked for us because we didn’t want a lot of people there. If inviting your entire extended family is one of your priorities, you’ll have to cut corners elsewhere to make it work.

Keep your attendant list short

Both my husband and I have known our best friends for many years. They were our college roommates, and we’ve known them since childhood. So it was very important to us to include them in our wedding. However, even though I have three sisters and a sister-in-law who I love very much, I just couldn’t do 5 attendants for each of us. It would have complicated the process of choosing their attire and inflated our flower costs.

We loved having two attendants. It made our best friends feel extra special, and it also made it a lot easier to plan for attire and buy flowers.

Do it yourself if you can.

This is the most obvious tip for planning a wedding on a small budget, but it bears repeating. If you can do it yourself, then it’ll probably cost you a lot less. We made our own invitations and favors, provided the music for our reception by creating a huge iPod playlist of our favorite songs, and made our own centerpieces for the tables.

Open a separate checking account for wedding funds and ONLY use that debit card when paying for wedding related things.

This final tip is about money management. Even when planning a frugal wedding, it’s easy to be swept away in the planning and spend more than you want. That’s why it’s important to keep the money that you’ve saved specifically for the wedding separate from your day-to-day living money and your regular savings.

We had a lot of money coming in from several different sources, including our own savings and contributions from our parents. To simplify things, I kept all of the wedding money in a separate wedding account with a debit card.

You could easily open an ING checking account for this purpose and earn a little interest in the months leading up to your wedding. Whatever works for you. I just know it would have been a lot more confusing to keep track of our budget and stay on track if our wedding funds were combined with our regular money.

Having a separate account also made it a lot less painful to make those big purchases. The money was there and it was set aside specifically for our wedding, so I didn’t even flinch when I had to spend large amounts of money for the big-ticket purchases like the reception food.

Come back next Wednesday for the second installment: cutting costs for the ceremony and reception!

Will joining a grocery co-op bust my food budget?

I love the idea of a grocery store co-op. Cooperatively owned by community members, these stores sell local produce that is organic and free of pesticides. Not only does shopping there support local growers, but it reduces your carbon footprint by reducing the emissions created by the huge semis that transport produce to grocery stores from distant locations.

I used to shop at the local co-op occasionally when I was in college, but I never became a member. The produce was fresher, tastier, and better quality overall. But it was quite a bit more expensive.

While they do sell packaged organic and specialty foods, those items are way overpriced, so we only plan to shop at the co-op for produce. But we’re trying to reduce our grocery costs, and even with the discounts, I’m afraid that we’ll pay a lot more for our produce.

I think this is a really important cause, healthy produce is important to me, and I understand that local farmers can’t compete with the prices of larger distributors. So I’m willing to pay a slightly higher price for the quality and the cause, but we can’t afford to completely bust our food budget to shop there.

The membership dues are $30 a year. That fee entitles us to the member discounts, including select items at 25% off every day. They also send additional discount coupons in the monthly newletter and periodically offer member appreciation days for a 10% discount.

We’d also have the opportunity to volunteer a few hours per month to receive additional 12% discount days, and we’d receive an annual patronage refund dependent upon how much we spend. I can’t find any hard numbers on the co-op’s website or through my research on what kind of refund we could expect, so I’m assuming it’s not much.

We’ve decided to go there this weekend, check out the prices, and ask some questions about the discounts and the patronage refund. This is something we’d like to do, but not if it’s going to drastically increase our grocery bill.

We’ve shopped at the local farmer’s market before, and I’ve considered that as an alternative. I like the produce, and I think the experience is fun overall, but I don’t think it’s practical for us on a weekly basis. It’s kind of far out of our way, so I feel like our additional fuel consumption is offsetting some of the benefits of shopping there. It also forces us to get up and dressed on Saturday mornings earlier than we’d like, and the vendors there only take cash (which I find inconvenient because I generally don’t carry cash).

In addition to the costs, I’m also concerned that we might be joining a little late in the season. We live in a warm climate with a long growing season, so we can probably expect to see local summer fruits and vegetables at the co-op for at least another month or two. But what about the fall and winter? I would hate to pay our dues now and then have to wait through the fall and winter to start buying produce there.

Do any of you shop at a co-op or belong to one? What are your thoughts?

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Basic budgeting can help you lose weight (without costing you money)

Money Saving Mom wrote an insightful and realistic post today about frugal weight loss. Because I’ve struggled with both debt and my weight and I believe the two are alike in more ways than one, it inspired me to throw in my two cents.

Two years ago I lost 40 pounds without spending a dime. No gym membership. No diet program. No special meals or exercise equipment. I think it’s really important to stress to frustrated dieters that you don’t have to spend money to lose weight. In my personal experience, stressing about finances often led to overeating. The more I spent, the more I stressed, the more I ate. So for me spending money on weight loss was counterproductive.

The single most effective part of my diet was planning my meals and tracking each and every calorie that I ate. In essence, I created a “food budget.”

You can’t expect to get out of debt and save money without a budget, so how can you expect to lose weight without being accountable for what you eat and when you eat it? Every day I planned what I was going to eat for breakfast, lunch, dinner, and two snacks, and I tracked how many calories I “spent” on different foods in my food budget.

I determined how many calories I needed to be consuming (you can do this by entering your information into this handy calorie calculator). Much like a budget helps you avoid spending more than your income, a food budget helps you avoid eating more calories than your daily allowance.

It doesn’t have to be time consuming. I used FitDay to track calories, exercise, and goals. Registration is completely free, and the site has a huge database of common foods so you can estimate how many calories you’re eating. I compared the database information to many of the foods that I knew the nutritional information for, and it was pretty accurate. All you do is search for the food you ate and add it to your online food diary. You can also manually enter the nutritional facts for your favorite foods and save them to add them again later.

The site keeps track of your most common foods and makes it easy to add them without searching. It does all the math for you, so it’s easy to stay on track.

Not knowing exactly how many calories there are in a food is like buying something without even looking at the price tag. Would you hand over your debit card and walk out of the store without at least looking at the receipt? I don’t think so.

I learned more about nutrition and dieting in the first two weeks of tracking calories than I had in a lifetime of yo-yo dieting. Like a financial budget, my food budget mapped out where I was “overspending” calories so I could make targeted changes.

For the first week of my diet, I ate a bagel with a tablespoon of cream cheese for breakfast. When I looked at my food budget and realized I had been wasting 100 calories every day on cream cheese alone, I quickly determined that it wasn’t worth it and switched to high fiber cereal to save the calories. Sound familiar to you budgeters?

Tracking calories wasn’t just informative, it was empowering. I loved being able to make informed choices about what I ate. Knowing that a piece of cake would cost me more than half a day’s calories made it a lot easier to turn it down. On the other hand, I was pleasantly surprised when I found out that a mini Reese’s cup was a minuscule 40 calories, an amount I could easily afford to work into my budget and enjoy guilt free from time to time.

The point is, if you have the tools to manage your finances, then you have the tools you need to manage your weight. Discipline, basic math, organization, planning, and budgeting are the keys to staying physically and financially fit. You wouldn’t spend money to get your finances under control, so why spend money on weight loss?

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Our first zero-based budget

We’re trying a zero-based budget this month for the first time. In the past, we’ve tried setting arbitrary limits on our spending (which didn’t really work). Other than that, we didn’t really track our spending beyond trying not to buy unnecessary things.

That philosophy has kept us from blowing our money, but we haven’t tracked our spending in a measurable way or designated a certain amount to a savings account until now.

A zero-based budget is a plan for your money that accounts for every single dollar of your income. After budgeting for fixed expenses and assigning limits for other expenditures like groceries and entertainment, you also assign a purpose to “extra” money by budgeting it toward savings, investing, or debt repayment.

I like the idea of a zero-based budget because it forces us to do something with the little bit of “extra” money we have after covering expenses and paying down debt. In the past, we’ve kept all of our money in our checking account. Anything we didn’t spend at the end of the month stayed in the checking account where it collected almost no interest. We were more likely to spend it – if not that month, then the next month or the month after that.

Our new plan is to keep only a cushion amount in our checking account to avoid catastrophe in the event of a spending mistake. We’ve cleared the rest of our money into savings. To avoid spending more than we make, we’re considering the cushion amount to be “zero.”

For the first time, we’re tracking exactly how much of our monthly income is left at the end of the month (if any) and putting it toward savings or debt (in ADDITION to the money we’ve already budgeted for savings and debt). If there’s nothing left or we spend more than our income, we’ll adjust our spending habits to ensure that we’re not spending more than we’re making.

I’m looking forward to having a solid number for our monthly expenses. It will give us more control over our spending and saving habits and help us determine how much we need for an emergency fund.

Rather than setting our budget in stone or setting arbitrary spending limits, we’re creating a flexible budget by tracking our expenses with Mint. New expenses spring up every month and some months our income may be higher than others, so our budget will be different each month.

We’ll sit down at the end of every month and set the next months’ budget based on what we spent last month, what we need to spend this month, and what we expect to make. Every dollar of income will be assigned somewhere. We’re challenging ourselves to spend below the budgeted amount where we can so we’ll have money left over at the end of the month.

We set our first zero-based budget at the end of last month, and we’re on track so far. More updates will follow as I’m sure the closer we get to the end of the month the harder it will become to stay within our budget.

A cash budget just doesn’t work for me

Since I started reading books and blogs about personal finance, there’s been one tactic that has jumped out at me that I don’t plan to ever use: the cash budget.

I understand that the point is to really pay attention to what you’re spending and to view money as a tangible, finite thing. It makes sense if you view cash that way. Unfortunately, my perspective on cash is much different.

For as long as I’ve been budgeting my money and paying my own bills (about 5 years now), I’ve used a debit card. In the beginning, I balanced a checkbook to track my purchases. Then online banking became so advanced that my purchases showed up on the site instantly.

I got into the habit of checking my online bank account balance daily. This is obviously risky if your balance is low (I almost overdrew my account a few times in college because I cut it so close). Now that I’m not living paycheck to paycheck, though, I always have a safe amount of money in my account. It’s just easier for me to use a debit card.

Now with sites like Mint, you can track your spending AND your budget. I used to watch my mom crunching the numbers and paining over receipts for hours every Saturday when she balanced her checkbook. The digital age has automated the process for us. Why not save some time and let my online banking and Mint do it for me?

Maybe I’m in the minority, but having cash doesn’t make me think harder about my purchases. Somehow after years of tracking my funds electronically, the way I view cash has been distorted.

I’ve come to think of the balance in my bank account at any given moment as the amount of “real” money to my name. Once it leaves my bank account and becomes cash in my hands, it’s no longer part of that bank balance, so I feel like I’ve spent it already. I’m more likely to spend it on something stupid.

On the other hand, when I swipe my debit card, I think of my bank balance – my “real money” – dwindling, and I’m more likely to think twice about my spending.

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