Tag Archives: money

Simplify your money

At the start of the year, my friend Kacie inspired me to explore new options for simplifying our finances and bill pay process. I’m still working out some of the details for these new systems, but I’m going to share them with you here, in addition to the systems we already have in place for simplifying. Be sure to share your ideas in the comments!

Go paperless.

If you haven’t done it already, chances are you think about it every time you open a paper statement and see the words, “Go paperless now!” My advice is to just get it done. To keep a record of statements, open the electronic version when it becomes available and save it as a PDF on your computer. You’ll feel better without all that paper mail bogging you down, and it will simplify your filing system, too.

Automate your budget.

Rather than manually tracking expenses in a spreadsheet or on paper, sign up for a service like Mint.com. Mint will automatically track and categorize your spending. With very little management, you can see a complete picture of your spending and budget categories as well as charts showing you whether you’re on track for meeting your monthly budget limits.

Automate your bills.

Kacie has been working on this herself, and it inspired me to figure out a system that works for us. Right now, I navigate to each bill’s website and pay each bill online individually. I like the immediacy of paying online through the site, because I receive a confirmation immediately, and then it’s done.

I don’t like automatic electronic funds transfer, because it basically gives the payee unlimited access to your account forever. (I learned this the hard way when our previous health insurance company continued debiting our account for 4 months after we canceled the policy despite the fact that I elected to stop automatic debit months before we canceled. I eventually had to file a fraud claim with my bank and have them blocked from my account, at which point they sent us a letter notifying us that they were canceling the policy due to nonpayment. PFFT. FINALLY.)

Check with your bank to see how their automatic bill pay system works. Setting up each individual payee will be a pain the first time, but then it’s done and you can pay each bill through your bank’s website with a single click.

Split your paycheck to even out pay periods.

My husband is paid twice a month — on the 15th and on the last business day of the month. I try to balance our bills so that we’re paying about the same amount in fixed bills from each check, but our mortgage payment really throws that off. If we were extremely disciplined, this wouldn’t be an issue. We could just leave the surplus from the other check alone, and use it in the next pay period. Unfortunately, that’s not usually what happens. What happens is we see that surplus in the first check, and we overspend for the first two weeks of the month. Then at the end of the month after the bills clear, things are really tight until the next pay day. It’s annoying.

Kacie came up with an idea that will remedy this problem, and I’m going to give it a try myself. She decided to add up all of her fixed bills (mortgage, utilities, etc.), and have half that amount deposited from each paycheck into a separate “bill pay” checking account. The remainder of each check will be deposited into a different account for daily expenses like gas, groceries, and other purchases.

For example, to make things simple, let’s say you earn $2000 a month. Your fixed expenses total $1500. Everything else is $500 a month. After paying your fixed bills, you have $400 left out of the first check and only $100 left out of the second check. Under Kacie’s system, you would deposit $750 from each check into the bill pay account and $250 into the daily expenses account. Now you have an equal amount for daily expenses each month, and your fixed bills are covered no matter when you pay them.

It might sound complicated, but I like the simplicity of having the same amount for expenses in each pay period. The symmetry will make budgeting much easier.

Pay the bills on pay day.

To combat the confusion of tracking a million different due dates, pay bills just twice (or once) a month. Every pay day, I go through and pay all the bills that are going to be due in the next two weeks. I have a list that I work from, so I know around what time the bills will be due even if the actual date fluctuates by a day or two. Once I pay all the fixed bills, I know that whatever is left in the account is available for day-to-day expenses.

How do you keep your finances simple?

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Financial literacy, your kids & a chance to win a Flip camera!

Sorry, entries for this contest are now closed. A winner has been chosen, and I will be announcing as soon as I’ve received the prize from T. Rowe Price and contacted the winner. Thanks for participating!

When I was a kid, my parents were a pretty open book. We talked about money just like we talked about everything else. My parents never kept us in the dark. We understood the financial choices they made, and they shared things with my sisters and me candidly.

Now that I have a baby of my own, I’ve already put thought into how I’d like to educate him about money. I think it’s important for parents to talk to their kids about money from an early age. The lessons should be age-appropriate, of course, but I think we’ll start Judah’s financial education pretty early.

We plan to ask Judah to put aside a portion of birthday and Christmas money given to him by grandparents into a savings account. He’ll be allowed to make choices about how he’d like to use the money, but we’ll talk with him about the value of saving money and spending it responsibly.

I’m not sure where I stand on the topic of giving an “allowance.” My sisters and I were given an allowance off and on throughout childhood, and it was usually tied to completing certain household chores. I think kids should learn that contributing to the household by doing chores is part of their responsibility as a member of our family — not an incentive for money. However, I think there’s value in teaching kids that work = money, and if they want to earn an income, they have to work for it.

Most importantly, Tony and I plan to be open with Judah and future children about our financial situation and choices. When they’re old enough to understand, I’d like to teach them about paying bills each month and show them how much things cost. I’d like to go over the family budget with them to show them where our money goes and discuss our emergency fund, savings, and other financial choices in depth.

I want to encourage our children to work part-time after school when they’re teenagers, and give them financial responsibilities of their own like car insurance, gas, and spending money. I was given financial responsibilities as soon as I was old enough to work, and I think it taught me a lot about money management and responsible spending habits.

As part of their financial literacy campaign, T. Rowe Price asked me to write a post about talking with kids about money. According to a recent survey conducted by T. Rowe Price, they discovered that parents found it more difficult to talk to their kids about money than talking to them about dating, drugs, smoking, or alcohol. That sort of blows my mind. I think money is a topic that you can begin discussing with children at a much younger age than I would bring up those other topics.

It doesn’t have to be complicated. It can be as simple as playing “store” or “restaurant” with a young child and teaching them to exchange play money for toys or play food. The lessons can grow with your child as you discuss more complicated financial issues like budgeting, saving, and investing.

To help parents start talking about money with their children, T. Rowe Price and Disney have teamed up to launch the Great Piggy Bank Adventure, an interactive website designed for children ages 8 to 14 to teach them about important financial concepts like saving, spending, inflation, and more complicated investing concepts. In addition to the website, T. Rowe Price is also the sponsor of the Great Piggy Bank Adventure experience at Epcot Center at Walt Disney World. There, children and their parents can learn more about financial planning in a hands-on, interactive environment.

I love the idea of the Great Piggy Bank Adventure, because I think it makes financial literacy fun for kids and parents. There’s no reason to feel overwhelmed about teaching your children about money. It can even be a game!

As part of their campaign, T. Rowe Price asked me to talk to you about how you talk to your kids about money. In exchange for your participation in the discussion, you’ll be entered to win a Great Piggy Bank Adventure Flip camera provided by T. Rowe Price. Here’s how to enter:

Write a comment answering one or more of the questions below. For each question you answer, write a separate comment. Each comment will be counted as a separate entry.

That’s it! It’s easy. The winner will be chosen randomly on Friday, August 12 at 9 p.m. EST, so you have until then to enter.

Here are the questions:

  • Is it easier for you to talk about drugs and alcohol than your family finances? If so why?
  • Why do you think it is easier for parents to talk about drugs and smoking than family finances with their kids?
  • Was the topic of money “taboo” in your family growing up?
  • What advice would you give to other parents talking to their kids about the family finances?

Good luck!

Disclosure: In exchange for writing this post, T. Rowe Price provided the Flip camera for this giveaway and also provided me with a gift card for my participation. T. Rowe Price is not involved in or responsible for the outcome of this giveaway.

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Why the Internet makes frugality easier than ever

The Tightwad Gazette (affiliate link) by Amy Dacyczyn is my favorite frugal book. It’s full of simple ideas for how to cut costs without affecting your quality of life, and Dacyczyn’s values and priorities are very similar to mine, so I find it motivating and inspiring.

The first time I read the book, the ideas were brand new to me. It was a few months before I started this blog, and it was the beginning of my frugal journey. It was eye-opening to realize how simple it could be to cut expenses even more, even when you think you’ve cut them as much as humanly possible.

I just read it for the second time, and it wasn’t so revolutionary this time — for obvious reasons. I’ve been living (somewhat) frugally for three years now. I’ve been through these ideas over and over, and they’re no longer new.

Because I wasn’t so focused on the ideas this time, I noticed how dated some of the advice is. Most of it is pretty timeless, and it is absolutely still useful. However, you can’t deny the fact that the Internet has changed pretty much everything about how we live our lives, and because the newsletters and books were written before the Internet age, it serves as a reminder to me of how much harder it was to live frugally before the Internet.

Here are a few of the things that struck me:

Communication

Throughout the book, the cost of stamps and postage is a frequent concern. While this may be bad news for the U.S. Postal Service, I use maybe three or four stamps a year. It’s just not a major expense in my daily life. I keep in touch with old friends and family through social networks, email, and cell phones. I pay bills online.

I do remember the days when it was expensive to call someone who lived even a few cities away. Long distance calling fees were a huge part of the monthly phone bill. Most cell phone plans don’t differentiate between local and long distance calls, which has eliminated this expense for me. Since the majority of my closest friends and family are on the same carrier and I make most of my calls in the evening and on weekends, our phone calls don’t even affect my monthly minutes.

Price comparison

Before the Internet, there was a lot more leg work involved in hunting for the best prices. You’d have to physically drive to the store or call. For insurance rates, there were no easy price comparing engines — you’d have to call each company to obtain a quote. I have no idea how people price compared items like plane tickets or hotels. Now you can hunt down prices from the comfort of your home.

Warranties & Parts

One of the ideas in the book is to call the manufacturer of a broken item to obtain cheap or free replacement parts to fix the item rather than buying a new one. Several pages are devoted to phone numbers you can call or addresses you can write to if you want to get in touch with manufacturers. I can’t imagine a world where finding out how to contact a company is any more difficult than looking up their website and clicking on the “Contact Us” link.

Yard sales

Many sections of the book discuss how to shop and sell at yard sales. Internet sites like ebay and Craigslist have become virtual yard sales where it’s possible to sell things to people living across the country, which vastly improves the likelihood of buying or selling things for a good price. I don’t think the Internet has completely replaced the usefulness of local yard sales, but it’s also made finding and advertising them much easier.

Entertainment

Online games, social networks, and streaming sites have made it easier than ever to find cheap entertainment.

Photos

My New Year’s resolution was to take at least one photo every day. The truth is, my “one photo a day” is usually 20 or 30 shots of the same thing. Most of them are bad photos that I delete without saving. I can’t even imagine how expensive amateur photography was back in the days of film cameras and developing costs. I only keep a fraction of the photos I shoot, and I keep most of them digitally. I print a tiny fraction of those photos for display in frames. The Internet and digital cameras have made amateur photography incredibly cheap, and I can keep daily memories of our life without paying for expensive film and development costs, or figuring out what to do with hundreds of “bad” photos that aren’t worth keeping.

Do-it-yourself maintenance

When something goes wrong in my home or with my car, I can easily do some research to try to determine the problem and whether it’s something I’m able to fix myself. Before the Internet, this type of research was much harder and more time consuming. I suppose you could check out home and car repair books from the library or call a knowledgeable friend, but the amount of information you could garner was limited. It was much easier to just call in an expert. We’re often able to solve minor problems ourselves with the help of Google and social networking sites, so we can avoid a huge mechanic, plumber, or other expert’s bill.

Menu planning

The Internet has made millions of recipes available at our fingertips, and we can hunt through millions of food and recipe sites to get ideas for cooking at home inexpensively. Before the Internet, you were limited by your own culinary knowledge, cookbook collection, and recommendations from friends. Now it’s much easier to cook delicious meals at home without eating the same things every week.

Exchange of information & ideas

The biggest thing that struck me is that The Tightwad Gazette newsletters were basically the very first frugal blog. Dacyczyn shared her ideas with readers, and readers shared their ideas with each other by writing letters that she published. It’s the same concept as a blog, only it’s much much harder and more complicated. The Internet has made it possible for frugal people to build an entire community around the exchange of ideas and information. We can support each other and learn from each other from opposite sides of the world without paying postage or waiting days between replies.

I pay $40 a month for my Internet connection. I think it’s worth much much more than that. I’m thankful to live during the Internet age.

How does the Internet save you money?

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Why I politely declined the invitation to your candle/purse/kitchen/jewelry party

Everyone likes to be invited to a party. I love parties! I don’t even mind if the hostess asks me to bring a dish. If I’m being welcomed to her home to enjoy the festivities, it’s the least I can do. And if it’s a shower, I love to bring baby or bridal gifts for people I love.

Unfortunately, the invitations I usually receive aren’t for parties. They’re for sales ambushes from trusted friends. “Come to my candle party!” is really code for, “Come to my house, eat some appetizers, and buy some overpriced crap out of my catalog so I can get free stuff or money.”

Maybe I’m being a curmudgeon here. It certainly wouldn’t be the first time. The thing is, I don’t want to feel pressured to buy stuff I don’t need, especially when it’s typically so overpriced. Not to mention, it sort of makes me feel bad to know that I’m not being invited to a party simply because the hostess enjoys the pleasure of my company, but because I’m another person who may buy stuff from her.

When I choose to buy something, it’s because I need and/or want it, and I can afford it. I don’t want to feel guilted into buying things because my friend has provided appetizers or drinks, or because I feel responsible for supplementing her income. That’s not how business works. Good business is based on the exchange of money for worthwhile goods or services — not guilt because your friend is trying to start her “home business” if only her 20 closest friends would spend $200 each on the junk she’s selling.

I don’t like when sales people ambush me. I don’t like when they call me, I don’t like when they approach me in the mall, and I don’t like when they knock on my door. The last thing I want is to be solicited by a friend at a party.

If you want to build a business selling products, I don’t begrudge you that. By all means, let your friends know that you have those products available, and the ones who are interested in buying can come to you. But please don’t solicit sales from me under the guise of a get together. I’m too cheap to buy any of your overpriced stuff anyway.

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How much are you really spending?

At the beginning of this year, Tony was hired for a full-time teaching position, and our income doubled. That sounds like we’re making a lot more than we really are considering the fact that Tony was seriously underpaid as an adjunct professor. But for us, it’s a lot of money, and it’s finally enough to cover all expenses, save a good bit of money, and treat ourselves every now and then.

Along with the income increase, our goals increased, too. Now that we can afford to fund our savings account again, we’re working toward the lofty goal of saving for a down payment and other necessary costs that go with buying a house. We’ve set a tentative deadline for two years.

Aside from buying our car — an admittedly huge expense — and an increase in rent, we haven’t increased our major living expenses at all. We budgeted carefully for the car payment and the increase in rent, and these increases were offset a bit by a reduction in health insurance premiums, so those two things don’t affect our monthly savings allotment anyway.

One thing I’ve noticed, though, is that big expenses aren’t what really affects my budget. I always think carefully before adding a big expense. We carefully looked at our budget before adding a car payment to it, and we thoroughly discussed how much we could afford in rent before signing our lease. I know what to expect when I add a big expense. What gets me though, is the hundreds of tiny little purchases I make throughout the year. The amount is so small that I don’t give a second thought to swiping my debit card, but at the end of the month (or year), it adds up to a significant chunk.

For example, if you buy a soda from a vending machine every day on your lunch break at work, it doesn’t seem like a big deal. It’s just 50 cents a day. But that adds up to $2.50 a week, $10 a month, and $120 a year. Is a soda a day really worth $120 a year to you? If the answer is yes, then great! But most of the time, when I really think about purchases like this, it’s not worth the money to me.

My biggest vices?

  • Starbucks beverages – At $4 each, the expense adds up quickly even if I only indulge 2 or 3 times a month.
  • Movie rentals at the local video rental store – Sometimes we run out and rent a movie if it’s not available on Netflix Instant Play or Redbox. This is mostly TV shows or older movies. We pay $2-$3 a pop a few times a month for the convenience of watching something now, but if we just put it in our mail queue and wait, we wouldn’t have to pay extra at all.
  • Cute baby clothes on the clearance rack – I’m guilty of paying as much as $5.50 for a pair of pajamas just because they’re cute. Yes, it’s clearance, but he really doesn’t need any more clothing. Even if he did, I could get a much better deal at a consignment store.

A few dollars here and there doesn’t seem like a big deal at the time. We’re making more money, we can afford it, right? But these purchases add up. All together, if I buy 4 Starbucks beverages, rent two movies, and buy one outfit, that’s $25 a month I could have been saving toward our house. That adds up to $600 over the next two years that could go toward a house. The $25 isn’t the problem; the problem is that I spend $25 without even thinking about it.

This isn’t to say that I believe in total deprivation. You guys know that I’m all about budgeting for life’s little luxuries. The point is, it’s important to budget for these things. You wouldn’t drop $600 without thinking seriously about it, so why should this be any different?

Sit down and think about the little mindless purchases you make. How much are you really willing to spend when you think about it?

I enjoy treating myself to the occasional Starbucks beverage, but $16 a month seems like too much. If I limit myself to one per month, that’s only $4 a month. That’s much more reasonable to me. Even better, I could cash in MyPoints or Swagbucks (referral link) on Starbucks gift cards and get them for free.

When I really think about those movie rentals, I remind myself that I’m already paying $120 a year to rent through Netflix. I’m not willing to spend any more than that for entertainment, so I should really skip those stops at the video rental store and just wait for the things we want to watch to come in the mail.

And Judah is going to look cute in whatever he wears, whether I pay the clearance retail price or a fraction of that at a consignment store. So I should stay away from the clearance racks and be more strategic in my clothing purchases for him by shopping consignment sales and setting a seasonal budget for how much I can spend to keep him clothed.

It’s important to be mindful about every penny you spend, whether it’s several thousand dollars for a car or a few dollars for a coffee. Every penny counts, and if you’re wasting money on things that don’t really matter to you, it’s easy to sabotage your goals for the things that do matter.

Photo by alancleaver

How much is laziness costing you?

I’ve mentioned before that Tony and I use a credit card to purchase all of our gas. We pay the bill off every month before it accrues any interest, and we get 5% cash back on all fuel purchases. Since we’re not paying interest, the 5% cash back is basically free money, and keeping an active credit line is important for building and maintaining a good credit score. It’s win-win.

The credit card is through BP, and we only get 5% cash back on BP purchases, so 99% of the time we buy gas at BP. We only buy at another gas station if the cost per gallon is less than we pay per gallon with the 5% discount. Makes sense, right?

At the beginning of December, we started seeing signs at BP gas stations for a new rewards program. Fill up five times, and you receive a $10 gift card. Since we fill up at BP 99% of the time, it should have been a no brainer for us. Enrolling in their loyalty program would net us up to three $10 gift cards for 15 fill-ups in addition to our 5% cash back.

The only catch? You have to print a receipt and take it inside to the cashier to get credit for filling up.

I’m ashamed to admit that we didn’t start participating in the program until last week. It’s the end of January, and we’ve only gotten credit for two tanks of gas even though we did more driving in the month of December than we’ve ever done in a single month. We probably could have already received the $30 worth of gift cards considering all the gas we used last month with holiday travel throughout the state and the move.

The truth is, I saw the signs every time I filled up, and the only reason I didn’t take advantage of the promotion was laziness. It was cold, I didn’t want to drag the baby into the gas station, I was in a hurry and didn’t want to go inside. It was easier to pay at the pump and get on my way, so that’s what I did. But it cost me. We easily would have filled up 15 times in three months, but we probably won’t fill up enough in the next six weeks to receive all three of the $10 gift cards we could have gotten.

Granted, in the weeks after a newborn arrives, I think it’s easy for even the most frugal person to be lazy about saving money. But it’s unlike me to turn down any offer for free money, and that’s basically what I did by putting off participating in this promotion.

I see this type of thing all the time from less frugal people, too. Sometimes it’s easier to pay twice as much for an item at a gas station when you need it than it is to go to the grocery store where prices are much lower. Millions of people would rather pay higher prices for groceries across the board than clip coupons and hunt for deals. Many people spend hundreds of dollars a month on takeout because it’s easier than cooking every night.

Laziness is a harsh word, and I don’t think it applies in all cases. When time is limited, I think it makes sense to value your time over the money you could save sometimes. But my point is, how often do we choose the easy way when just a little bit of effort could save us a lot of money? If you’re taking the easy way out most of the time, you could be costing yourself a fortune.

It’s a question I’m asking myself a lot lately as we adjust to earning a higher income than we’re used to. I don’t want to be lazy about our finances. When you have a little extra money, it’s tempting to take the easy way out, but I’d rather work a little harder to save even a few dollars if that means building our savings and reaching our goals faster.

So it’s confession time: how often do you let laziness keep you from saving money? Think about it, and consider just how much you could save if you made a little extra effort in those situations the majority of the time. It could mean paying off your debt sooner, building your savings faster, going out to dinner once a month, or even taking a vacation once a year. When you make the extra effort to save most of the time, those dollars and cents add up quickly.