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!! 

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?

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.

Another Emergency Fund Savings Alternative

I know people like quick fixes to their money problems. I personally think many money issues could be avoided in the first place with a well established emergency fund. But where do you begin if you don't even have one?

You have probably read about having a garage sale, or saving your change. Not bad ideas if the weather was warm and you have lots of things to sell. And as I have mentioned  there is the 52 Week Savings Challenge that many are participating in. And on my Savings Advice Blog, I have been tracking snowflakes as a way to build up cash. Those sources of income come from many places, which you can read about over there.

I ran across a new idea for you today. This might be one single way to increase your savings. I found the explanation on this blog, The Simple Dollar. It is called $4 Per Gallon Savings. You basically charge yourself $4 for every gallon of gas you purchase at the pump. The amount you save is the difference between the total if you paid $4 and the actual amount you paid. The author of the blog mentioned above explains it in more detail. I think if one could make this idea alone a habit, it could quickly get an emergency fund started. Now if you ride a train or subway, this probably won't work for you the same way. Maybe you could round up your fare by a dollar, each time you ride and save those.

I find it interesting to read about alternative ways of saving. Have you come across any new savings ideas?

Frugal Inactions?

I've been keeping my mind open this week for more frugal things we are doing around our home that you might like to hear about. I realized some of the things that are frugal are things we don't buy or don't do. See if you notice those in the list below.

• Used half a dryer fabric softener sheet for an entire load of laundry.
• Used fabric napkins at dinner.
• Reused my tea bag once each day.
• Borrowed a movie at the library.
• Sent my sister a $5 Starbucks gift card I received for free.
• Used thread from my stash for a sewing project, and get to return the one I bought.
• Used the ends of old bread for breadcrumbs on our Chicken Parmesan.
• Used half the amount of seasoning in a recipe because I ran out. It still tasted great!
• Used a bar of soap that is very, very thin for washing my hands.
• Turned the thermostat setting down 2 degrees more for when we are sleeping. 
• Wore long underwear under my jeans in the house so I wouldn't need to increase the temperature in the house. 
• Only wore makeup one day this week. 
• Used piece of flannel on our Swiffer to pick up dust and hair off the floor. Then tossed in washer.
• Drank water from the tap. 
• Reused a mailing envelope to send a package.

I know those things don't seem like much, but imagine the opposite of some of those. If I bought  a new mailer each time at the post office, I would likely be paying $2 or more just for the envelope. Or how much would I spend on disposable Swiffer cloths in a years time if I didn't use a reusable cloth? So if you gathered from the list that we don't buy napkins, most movies, bread crumbs, bottled water, or too many mailing envelopes, you would be correct!

Do you buy some of things I buy, such as tea bags, or dryer sheets? Do you have an alternative? What are some things you don't buy, that many people do?

Yes, Stay At Home Spouses Can Get Credit

There was a small period of time where stay at home moms and dads were not able to get credit cards because we did not have employment or income. Well we still don't have those, but currently we are able to use household income as a way of showing a source for paying our debts. I will refer you to this blog post on Million Mile Secrets for the details.

I personally talk to my husband about ALL credit that we open. We are honest and open about where we stand. Of course, it helps that we pay off our debt in full every month so there are really no worries when you know that is how we operate in our home. I would make sure you have an open line of communication with your spouse regarding credit card debt, especially if you are the one at home and looking to open an account in your name. It is only fair and likely how you would like to be treated if the employment situation was reversed.

The really nice thing about being able to open credit as stay at home spouse is that you can take advantage of credit card bonus offers twice! Double cash is good. Do not open credit cards for rewards unless you can pay your balance in full each month and have established this pattern already. We never pay interest on any of our credit cards.

Did you know stay at home spouses were legally able to apply for credit in their own names, but based on the household income?

Today's Frugal Habits

I will admit we aren't the most frugal people on the block. When I stop to think about things we do that are frugal, I can come up with several. Here is a peek into some of our frugal habits today.

We made our own coffee at home this morning. Right now we are using Trader Joe's coffee that we received as a gift over Christmas. It is really good. I consider this frugal simply because so many people run to the nearest coffee shop to get their fix of caffeine.

I made a list for the grocery store. I almost always make a list. Do I always stick to it? No. Generally, that is because I forget to put something on the list and then remember at the store that I do need it. Today, I didn't purchase anything that wasn't on the list. I used a few coupons, but otherwise bought generic and used my Target Cartwheel coupons.

We ate all our meals at home. Dinner was homemade pizza. I made the dough from scratch for two very large pizzas. The sauce for one pizza was from a jar, which we recently started using, but we have found it is too salty! The other pizza had leftover barbeque chicken that I had frozen in the freezer and made a point to thaw this morning. I was able to use barbeque sauce, onion and cilantro already on hand. I did buy shredded cheese. One of my goals this year is to get in the habit of shredding our own cheese. I think it is healthier without extra preservatives.

I sent my husband to get a haircut. I didn't technically send him, he knew he needed to go. :) Usually we have coupons from Great Clips, but we were out. I was able to find a competitor coupon for a $9.99, and Great Clips honored it. I noticed this on a sign in their store the last time I was there. That just means more coupons available if I keep my eyes open for them.

My husband is also working on getting ALL the lotion out of the bottle before we open a new one. The last step is to actually cut the bottle open to get the very last of it out. We do this with liquid makeup, hair styling products, shampoo, conditioner, toothpaste, and even laundry detergent. The first time I did this with some gel my daughter uses on her hair, I was shocked at how much was left that she could use. Probably enough for 3 days. Effectively this saves us from buying one bottle of hair styling product per year, which saves $16. Doesn't seem like a lot by itself, but if we use up everything we buy in full it saves us from buying more. We get the full value of our purchase as well.

We kept the thermostat at 69 degrees. I realize this isn't really low, but it was really tempting to increase it with the blowing winds and colder temperatures we were experiencing today. So I counting that as frugal for today. We do have a programmable thermostat which is set to drop to 62 degrees at night in the winter. I should probably try to drop it a bit more this winter to offset the need to have it a little higher in the day time hours.

We did do some shopping today, so I cannot say we spent nothing today. I purchased a pair of Smartwool socks for my sister. I spent about $20 for one pair. I know this seems crazy expensive, but these are socks made of wool that can be worn all year long. They will last years! So well worth it. We also bought three books of stamps today. The rate of First Class stamps is increasing tomorrow from $0.46 to $.049, which is a 6% increase. I bought three books of stamps to cover our needs for at least the next year...maybe more. I also bought some items from Joann's. I made sure to use a 40% off coupon on my most expensive item which was two yards of fabric normally priced at $7.99 a yard.  This fabric and part of the rest of the purchase is actually a business expense that will be reimbursed. I helped the buyer out really. :) I suppose the other frugal part of this portion of our day is that we did all of these errands in one trip, so only one time out today in the car.

It's a Saturday night and we are staying in. My husband and I have a $5 bottle of wine and have purchased a movie rental. I like to say the movie was free, but we couldn't find a free one we wanted to watch. Instead we found one for $4 to digitally rent. We could watch it as many times as we want in the next 24 hours, but the likelihood of watching it more than once is slim!

In other frugal news...we used microfiber rags to do our dusting and cleaning. No disposable wipes, just reusable clothes that can be washed again and again.

What frugal thing did you do today? How much did you save?