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Wednesday, November 16, 2011

Save Money while Keeping the Frugality Pains at a Minimum

So the November (11) issue of Real Simple has a section where readers sent in 'What cutback has saved you the most money and changed your life the least".  I am always looking for new (and practical) ideas for our fam, so here are my thoughts on what they said:

1) Stop highlighting your hair.  Good idea. My thoughts on spending $100+ every 2 months are... I can't afford it. Especially when $10 boxed color looks great on almost everyone I know that has tried it. And..... it fades, so there won't be a huge line separately dyed and natural as it grows out!

2) Don't pay for cable.  Love this one. We have done it for 4+ years and we have survived. We do pay 7.99 a month for streaming Netflix, which in my opinion is better than cable anyway. And there is always Hulu if I need my HGTV fix!

3) Eliminate gym membership. Not so sure how I feel about this. Now it does make sense, especially if you don't use it; however, if you are the kind of person that needs to get out of the house and be surrounded by fellow cardio queens and/or muscle men to stay motivated- I say keep the membership and cut back in other places. After all, if you don't have your health, life will become a lot less enjoyable and more expensive to boot.

4) Frozen fruits and veggies instead of fresh. I love fresh fruits and vegetables, so I would have a really hard time with this. And even though they say that frozen is just as healthy, it doesn't feel like it. So while its a good idea to have frozen on hand (as i would preferring running out of fresh broccoli and resorting to frozen instead of having a bunch of moldy stuff in the produce drawer); however, I am not making this one of my money saving priorities, at least not until I have to.

5) Public transit. Love the idea, but it may not be practical for those of us with infants and strollers etc., especially if you have to go grocery shopping. But by all means, you should at least commute to work or even better, take your bike!

6) Make your own tea or coffee. I do indeed enjoy my morning coffee. And with toddlers around, I may even need that coffee to fully function. It's easy to get in the habit of stopping off at the coffee shop for your daily brew on your way to work or elsewhere, but even if you are going on the cheap, its still going to cost you over $2 each time plus tip if you're that kind of gal. So program your coffee maker, buy some good creamer, and voila, you got yourself a grande vanilla latte-ish drink.

7) Switch to generic. Why not? Many generic brands of products are awesome (baby wipes, plastic baggies, pasta, etc.). But there are some that have not worked for me: some generic diapers gave my kids diaper rash, generic cheerios just don't fly with them either. So it's a trial and error process- if I can get it generic, I do; i try it out, if it doesn't work-- it doesn't work.

8) Make, don't buy, your lunch. Yes, do it.

9) Stop buying wrapping paper. Well, we don't get the newspaper, so I can't use that to wrap. And really, how many gifts do I wrap throughout the year? Not that many. And if its around the holidays, I am usually at my parents anyway... who have lots of it.

10) Nix the Professional manicures. Um, yes, stop! If you can't afford to contribute to an IRA, your kids education, or are living paycheck to paycheck by all means, get your butt out of that salon! Hello $3 nail polish from CVS or you can spend $6 at the beauty supply stores for the fancy stuff.

11)Stop eating meat. Why not cut back? It does save a lot of money and it's healthier too!

12)Stop using dryer sheets. Hmm.. do I really spend that much on them? I like the way they smell.

13) Stop eating out. Well, that depends how often you are doing it. I need date night; and I need it OUT of my house. So why not budget it in. We use or when we go to cut what we spend usually by half. In addition, I am a believer in dinner backup plans in the freezer; that way we are less likely to order take out on a whim

14) Sell your second (or third) car. I say do it if you can! We have had only one car since we became a family, so we don't miss what we never had. And oh the savings of only one car payment and one insurance payment.

15) Don't buy new clothes. Agree- assuming you don't need any. If you do, don't be against the thrift shop. Most cities have ones in the burbs that are pretty fancy... and cheap.

16) Cancel your house cleaning service. Wow, I wish I had a house cleaning service to cancel!

17) Cancel your cell phone contract (buy prepaid minutes). In our house we don't have a land line; we only use cell phones so a buy-as-you go plan might be a little challenging. I did however save us some cash by increasing my text plan. It turned out that I was consistently going over the number of texts I was allocated. So now we pay $5 extra but save $20.

18) Don't go to the movies. Yes, it's very expensive so I wouldn't recommend going once a week. However, I have found recently that I LOVE going to a movie by myself. I escape my chaotic household and there is no expectation for me to be social (or share popcorn). So this is something that I work into my budget.

19) Buy a cheaper drink at happy hour. So you need to get out for some adult time. Instead of that crazy martini go for the house wine that's half the price. If you still go for the martini, just realize that then you may have to cut your happy hours in half too.

20) Ditch the paper towels. So this brings me to the final idea. I spend $10 on a pack of paper towels that probably last a month. Is it worth it to ditch the towels to save ten bucks? Well, I am going to take on the challenge- because every little bit counts if its practical and I don't miss it much. So as soon as we run out, I am not buying more- we will just use cloth towels (I will feel to eco-savvy!). I will post about it once I have tried it to release my findings:)

PS. The reader of the month that Real Simple editors highlighted for this piece said she and her husband eliminated date night... UM HELLO???? Really? I would give up cable, manicures, fresh produce, and definitely paper towels to keep date night!

Sunday, November 13, 2011

Two Checking Accounts?

If both you and your signot (significant other) are taking dips out of the same account, how do you know if you're staying within your budget? What if he spends the money that was earmarked for the car payment??!!

We all know it's easy to become stressed about money and figuring out the best way to manage it can be a challenge. What's even harder? When you are co-mingling your finances with someone else. Chances are that one of you spends a bit more than the other- whether its on clothes, or on groceries; but what if the roles reverse one day, does the other person know the limit?

My last post talked about those of us that have a difficult time with budgets and being consistent about tracking our cash. Once you figure out your variable expenses (anything NOT fixed like food, going out, clothes, etc.) you can either take that money out in cash OR just open a second checking account!

When you open a new account, number one, you won't have to worry about losing your cash and two, you can see your spending patterns without having to collect receipts.  With both of these methods, you will know when your spending has to stop (when the money is gone) and you won't have to worry about dipping into money that is intended for a fixed expense, like say your electricity.. or worse, your mortgage.

So figure out how much variable cash you have after your bills are paid, work it out so that money goes directly to your new checking account* (set up direct-deposit in equal amounts from each paycheck). Everything else goes into your primary account and will cover your fixed bills.

Make sure that the fixed bills are being paid when there is cash in that account however, so call any lenders, retailers, or organizations that you are paying and change dates as necessary.

*Make sure you know the details of the checking account you are opening. An increasing banks and even some credit unions are instituting fees to maintain a checking account; some will waive the fees if you have a certain amount being directly deposited- so read the fine print!

Monday, November 7, 2011

Who sticks to their Budget?

What do you do if you just can't stick to your budget?

Budgets are easy right? You just grab a notebook or download a free budget form online and voila- you're set! You insert your income and expenses and just make sure that you are not spending more money than you make and "the end".

I don't know how many articles and books I have read that break down the basics of budgeting with simple language like that above. It IS simple... in theory. However, budgeting is one of the hardest things we will ever do financially. First, we have to do it every day; second, it has to be altered... and frequently because things never stay the same. And finally, we are expected to stick to it.

Here's the problem. We can make our budgets, and then we have to track our spending. Are you going to collect a receipt every time you purchase something and then discipline yourself to sit down once a week to track everything in a spreadsheet? Most of us? Probably not.

Then, what if you decide to track it using your online bank account? You use your check card for all your purchases and then download the information to see what your are spending (no receipts needed). Maybe, but how do you know once you are reaching a certain category's threshold? For example, you budgeted $100 a month for entertainment and you are getting towards your limit, but you're not exactly sure because you haven't been online in a few days, so you just decide to spend the money and you'll pay yourself back next month? That's where the problems begin.

If formal budgeting and tracking systems are not working for you- ditch them! It's a waste of time if its chronically failing.

The fixed expenses in our budget are the easy ones; we generally know what they will be month to month. It's the variable expenses that mess with us. So, grab a budget form and plop in your income, subtract all your fixed expenses (including saving)- whatever is left is what you have for the variables (food, entertainment, home supplies etc.). If you are not going to officially track your spending daily or weekly, then take that cash out of your account and move to the "envelope" method. The money that is in your checking account is only for bills, the cash you take out is for the rest.

If you use this method, just make sure that you're taking the cash out weekly so that you don't use it all at once. And keep a buffer of $100-$200 in the account to cover for expenses that maybe unexpectedly higher than you planned.

Cash Flow is Key

So you have a budget, or at least you know that you are making at least a little more than you are spending. So why does it seem like you run out of money every month?

Cash Flow.

Do both you and your signot(significant other) use your primary account for flexible spending? Maybe you are in charge of the finances so you know not to do the big grocery trip right before you get paid, but do they know that?

Many of our bills tend to be grouped into one end of the month or the other. The key is to spread out our bill payments so that we can maintain a positive cash flow.

Today's tip:
  • Jot down all your bills (mortgage, car payment, electric/ gas, phone, cable, internet, subscriptions, credit card payments, insurance, and monthly savings contributions). 
  • Divide into two categories so that each side is as equal as possible. 
    • For example: 
      • mortgage/ rent= $1500
      • car payment ($400)+electric/ gas ($200)+phone ($100)+cable ($100)+Internet ($50)+ subscriptions ($100)+credit card ($200)+insurance ($150)+savings($200)= $1500
  • Next, look up all the due dates. Since most of us pay our mortgage or rent at the beginning of the month that will be one major expense allocated to the first half of the month. Next, take the bills that are  due in the first half, and see if you can change their due dates to the second half. Sometimes you can do this right in your online account, otherwise you will have to email or call customer support. There should be no reason why you cannot switch the payment date; just keep in mind, you may end up paying twice in one month when you make the switch.
  • Finally, set up as many of your bills as possible with autopay; this way you won't forget when they are due, and save yourself from late fees as well!
If you are worried that you will not be able to keep track of how much "extra" money you have left to spend on food and entertainment- check out this post for those of us who don't do well with "formal" budgets.

Sunday, November 6, 2011

Kids Love Money

I have been working on a variety of financial literacy initiatives for over 5 years. In the spirit of strengthening our communities, I have increasingly focused on empowering families through financial education. We are just now acting on the importance of teaching our children how to be financially sound. More and more states are adopting financial literacy requirements in the classroom, however the root of the issue begins at home.

We all know that kids do indeed love money, so the pun is no doubt intended; however, this forum is to discuss kids and their relationship with money along with couples and our trials with money. Ultimately we will look at how both these relationships intertwine in our families to create chaos, but also opportunity. The opportunity is for us to step back and evaluate our financial decisions and learn steps to a more comfortable state of wealth, and hopefully less stress along the way.

Let's learn from our experiences and our mistakes and teach our children (and each other) to grow up with the financial knowledge that will allow all of us to succeed.