Friday, February 28, 2014

Pay Day Thoughts

I paid and recorded our bills for payday. Some bills are automatic, so I only need to record them. Other bills I just need to go online and authorize a payment. All credit card bills are current. Yea!

At the beginning of the month I save $50 for Christmas, $114 towards auto insurance and registrations, and $57 for the 52 Week Savings Challenge. The mortgage which includes an extra $103 towards principal, water bill, cellular bill, gas bill, and electric bill are all paid. I also give a small allowance to our girls. I pay the Target Red card and any balances on any other credit cards. I set aside cash for the upcoming pay period. And if there is cash left, I save it!!

This payday I was able to save $510. I like that! February was definitely a low spend month for us. With the cold weather it was just easier to stay in and out of the stores. I think that using up things last week also stretched our grocery bill a little, too. I still have my eye on a few things in the cupboard that need to go soon.

I'm fully aware that we will owe money for taxes in the next 6 weeks. Our daughter has a birthday in March. It is also spring break from school and we are taking a mini road trip to visit a college. Family is  near there, so only gas and food, no hotel costs at least. I will pay our auto insurance, but this is already saved for, as I mentioned above. And if it gets the least bit warmer it will be time to buy some new spring clothes. We don't buy a lot, but several of us will at least need new capris and shorts. We are probably pretty good on short sleeve tops. I also know one daughter will need a jacket. So although I saved that $510, I do see increased expenses in the future. Which means at least some of that money will be spent.

Yep, it was a good pay day! I'm very grateful for the blessings bestowed upon us.

Sunday, February 16, 2014

Frugal Eating

Our family isn't exactly frugal with our eating. This can be seen by our grocery bill and unfortunately some of our waistlines. Ugh! I really would like to think that we are more frugal than some people. While I don't want to blame my husband entirely, he has some expensive tastes and goes through chips and snacks fast. As a mom, I also easily give in to my children's wants. I have noticed my older daughter has pretty good portion control, so no complaints there!! My younger daughter is picky, which is another way of saying she doesn't eat a large variety of foods. All of that to say, we don't have this eating thing down perfect.

What we do well over many of our peers, is that we watch for sales on foods we normally buy and use coupons when we can. Although, I've noticed there are not many coupons for fruit and veggies, but they do go on sale and are less expensive in season.

We make a list when we go grocery shopping. This means we make fewer trips to the store, which saves time and money, but also keeps us  from buying too many extras. Yes, extras do pop into the cart at times. Darn extras!

The one thing that helps the extra spending on food is that I make a point to make sure we eat what we purchased with as little waste as possible. This involves looking in the cupboards and fridge before we go shopping and while we are making our meal plan. For example this week, I chose to make tacos since I noticed we had a full container of sour cream. We need to use that up. We also had tomatoes, shredded cheese and refried beans already on hand. I plan to eat a salmon filet that has been in the freezer awhile. I will probably eat it for lunch since there is only one. I might make a salad to use up carrots and lettuce we will have leftover from tacos.

I have my eye on some applesauce, margarine, and ripe bananas that need to be used up this week. We'll see what I can come up with. Banana bread is a strong possibility!

Do you make a conscious effort to eat things up in your fridge and cupboards as a way of being frugal with the things you have already purchased? Do you have anything you can make an effort to use up this week before it expires or use instead of buying more at the store?

Thursday, February 13, 2014

The Simplest Way to Track Spending

I was thinking about the early money days in our marriage recently. One thing that I remember doing is tracking everything we spent. I specifically remember a three month period where I was very meticulous about it. If I remember right, it was just to gauge where we spent our discretionary money and how much that generally was. In this case, I mean discretionary as in anything that wasn't a bill with a due date. So this included gas, groceries, formula and diapers. 

I wanted to keep things simple because I had two young kids and a husband who worked three jobs and didn't have any interest in the information. I found a used envelope, wrote the month on the outside and stuffed all receipts inside. Some receipts my husband gave me where ATM withdrawals. Initially, I didn't care what he actually spent the cash on. Once it was out of our checking account it was spent. 

At the end of the month, I went through every receipt and did my best to categorize each item we purchased. It wasn't perfect, but I was able to get an idea how much we spent on diapers, formula, eating out, groceries, gas, entertainment, and even cash spending (even though I didn't know what it was spent on). I also made sure to know the total of all this spending for the month.

After tracking for at least three months, maybe four, I had an average we spent in a month. I ended up using this number or a number as a starting point for our budgeting system. I'm not entirely sure I remember the number but I think it was around $1000. Since my husband was paid weekly, we set aside $250 each week to cover all those discretionary expenses. I'm pretty sure this was relatively tight. Not too tight, but not so loose we were out buying music or eating out every week. 

I would take each paycheck subtract bills due that pay period as well as the $250 to see what amount we had left to do something else with. I do know some had to be saved for our mortgage payment each pay period as one weekly paycheck alone didn't cover our mortgage. And I'm positive some money each pay period was either sent in to pay down debt or at least set aside to add as extra on a debt we would pay later in the month. 

Over the years the amount we set aside each pay period has increased. We just recently increased our discretionary spending to $1000 per pay period. My husband is now paid twice per month. I think it was necessary to increase it as we have two teenage daughters and our grocery spending seems larger, likely inflation, but probably being more relaxed about what we buy. 

It doesn't have to be difficult to track your spending. I think it is an important exercise to try for a few months. It can help you see where you spend the majority of your discretionary money or to establish a discretionary spending amount for your budget each pay period.  All you need is commitment to holding on to your receipts, a place to store them and a calculator and pen to add them up at the end of the month. Then do it again for another couple months. This can be the start of knowing where you money goes and how much you really spend. Of course, if you have a budgeting spreadsheet that works too!! 

Monday, February 10, 2014

Start a Slush Fund

I've got a little tip for you! If you are just starting to get control of your finances and budget your paychecks you might want to establish a slush fund. A slush fund is pool of money set aside for unexpected expenses. It is a little similar to an emergency fund, but for use for non emergency spending. Maybe you budget a certain amount for entertainment or eating out each month, but you get a call near the end of the month from out of state friends who want to meet for dinner. Your budget for eating out is zero this time of the month! Yes, you could say no, but you really want to see these friends. This is where I dip into the slush fund, because I know that it isn't an emergency. Some people might pull from another budget category and that would work too.

At our house, we don't budget by categories in great detail. Yes, we set aside money each month for Christmas, auto registrations, car insurance, but we don't break it down by groceries, gas, clothing, entertainment and so forth. We have a set amount we set aside for all of those things and just watch our spending as we go during each pay period. When we get near that set amount, we really slow our spending down or wait to buy something until the next paycheck. The amount we set aside for discretionary spending is conservative. We purposely do this to keep spending in check. And I will say we have increased it a little in recent years as we have noticed the price of food has gone up, but again very conservatively.

Our slush fund varies from month to month. It rarely is over $500, maybe an average of $300. Sometimes we don't put anything in because it is already funded well enough and we would rather send extra money to pay down our mortgage or save for our vacation. Some months the fund gets a lower than $50 if we have several dips into it. There is really no right or wrong amount. If the fund starts to get too big, over $500 in our case, I will pull that excess away from the slush fund and apply it to our current goal. For some this might be adding to an emergency fund or paying down credit card debt. In our case, we are currently paying extra towards our mortgage principal. I should also say some months we don't dip into the slush fund, because our discretionary spending is within the amount we set aside.

We keep our slush fund in our checking account currently. I am able to do this because I use a simple spreadsheet to track the slush portion of our checking account funds. It might be a little complicated for first time users. In fact, my husband probably doesn't even get it! If you are establishing a slush fund for the first time, you might consider a second checking account at your current bank, especially if you can get one for free. This way you will keep those slush funds separate and clearly know when you are dipping into those funds and for what amount. A second checking is better than a savings account, as many of those have rules on the number of times you can withdrawal from them without a penalty. You might be dipping in more than those, especially when you first start. I think it is important to keep it at the same bank because of the ease of transferring the funds. Usually instantly. An account at a different bank will have a couple days of wait time for the funds to be available.

Because we get paid twice per month, I simply evaluate the balance in our slush fund each pay period. Do I need to throw some more in, do I need to adjust the balance down for extra spending that occurred, or do I need to take some out because the amount is to big. I find it helpful and comfortable to have a slush fund, because it is stressful to see the balance in your checking account close to zero when you really NEED something or have an opportunity come up that you don't want to say no to. I do suggest that you try not to touch your slush fund too often, if you are doing it everyday there is a something wrong. You likely are spending too much, or cutting your discretionary fund to close.

Try it out, tweak it. Make a slush fund part of your personal budgeting plan. I really don't think you will regret it!

Do you already have a slush fund? What do you call it? What amount do you tend to keep in yours? Where do you keep it?

Wednesday, February 5, 2014

Fastest Way to Pay Debt Off

The fastest and best way to pay off debt in my opinion is utilizing a method of paying on one debt as you pay minimums on the rest. The key is to continue to use the same amount or more money towards debt each month, while at the same time not adding to your debt. This is often called the Debt Snowball Method.

The best way to start is to list debts, balance owed smallest to largest. In the example below, there are four debts listed with the amount owed and the minimum payment. The plan involves making minimum payments on all debts except the one with the lowest balance.
  1. Medical, $1000, minimum $75
  2. Credit Card, $2250, minimum $90
  3. Auto Loan, $6000, minimum $210
  4. Student Loan, $8000, minimum $125
The total amount of debt in this scenario is  $17,250 in this example. Overwhelming, huh? Now if you didn't pay any extra on this debt it would take 35 months to pay this off. IF you weren't being charged interest. And IF you didn't add any more debt. This isn't a bad plan to get rid of debt if you can stay on the plan. It will get paid off, it will just take time. (Yes, I did ignore interest in these examples for the sake of simplicity.)

If I were starting with these debts listed, my first goal would be to pay off the medical debt. It is the smallest debt and I can knock it off pretty quickly. And even quicker if I were to add more money each month. Let's assume I can add an additional $200 per month towards the payment of debt. Here's what the pay off schedule would look like:

That payoff schedule eliminates the debt in 25 months! Ten entire months faster than if I didn't add the extra money. Once all the debt is eliminated I have the original $500 I was paying on debt and that extra $200 that can be put back in my budget. That will feel nice to have $700 to plan with.

Do you want to see another scenario? Maybe one where you can send in another $300, or $500 over the $500 you are sending in, for a total of $1,000 per month. It gets exciting!

Using this method of snowballing and adding double the normal payments, this debt of over $17,000 is eliminated in 18 months! And see that last month? The payment is only $250. Again once that debt is off your plate, you now have $1000 in your budget to work with.

What would you do with out debt? Save more for retirement, save for a down payment or college? Pay for something in cash? Any debt snowball questions?

 If you wonder where to find extra money, check out my blog at Saving Advice where I write a lot about snowflakes...small amounts of money that I find to apply towards paying down our mortgage debt.