I was talking to someone recently about budgeting programs, and why I'm a huge fan of YNAB, but not so much Mint or some of the others.
The problem with Mint (et al) is that it only tells you when you screw up. It makes you feel bad about going over-budget. You find yourself on the defensive, talking back to the spreadsheet or screen shot or whatever, exclaiming, "but I didn't know ___ was going to happen!" From having to attend a funeral to saying yes to a spontaneous get-together with a friend in town unexpectedly to simply not knowing you were going to have to buy your kid new shoes this month, there are many ways where your best-laid plans can go awry. Instead of red numbers or emails telling you, "you screwed up!" (okay, maybe not so harshly, but that's how it can feel), I like YNAB's Rule 3 philosophy to roll with the punches.
And you don't have to use the software to implement the strategy. Just change your numbers.
I know! Who knew it could be so easy? But that's really all you have to do. Sure, you might freak out for a moment, going, I don't have enough money to cover this! My experience, however, has shown me that there is always a way.
Earlier in my journey, when I still didn't quite have a handle on my non-monthly expenses, it was Sylvia's dance recital fees. I remember stressing in the car on the way home, thinking that the only way I could cover this was to add debt to the credit card. But when I got home and looked at my budget screen, I saw that I could instead pay less towards my outstanding debt and still not incur new debt. (I still could pay the minimum plus, just not as much as I wanted.)
Every month, I put $25 in my Mayhem category (for stuff I forgot, unexpected, etc.). In the beginning, I was using that much more often, but now, I've got close to $200. If you leave excess unbudgeted, you will be more inclined to buy yourself something fun (or at least, I would). By having a category for it, it's there for you when you need it.
Your budget should not feel like a straight-jacket. Most budgeting software does. If you don't want to pay for YNAB, use pen and paper or a spreadsheet so that you can feel in control of your budget and change as necessary. (Of course, much more detail available in my eBook :)
Change your budget as necessary so that instead of feeling like a failure, you feel empowered.
Wednesday, December 9, 2015
Thursday, November 19, 2015
Balancing Frugality
I read and participate on sites and forums dedicated to personal finance. Sometimes, people post about things that I personally won't do to save money.
Complain about fast food service to try and get a coupon or freebie. Now this one's personal since my daughter currently works in said industry. She tells me stories of people recording interactions or complaining about a tone of voice or lack of smile. Dude (or lady), you're at a fast food restaurant. Calm down! Now, this is not to say that we won't speak up if our order is incorrect. My daughter felt really bad, but she still spoke up when her order wasn't right. But as long as you get what you paid for, there's no need to create drama.
Open credit cards or bank accounts for cash back/rewards. I only open credit cards or accounts if I actually need (or want) to do so. With Costco/Amex's impending divorce, I started keeping my eye out for credit card deals, and of course, I chose one that had rewards and a sign-up bonus, but I don't plan to open any more because I don't want the added hassle of another card to manage. I'm really happy with my credit union, and now that I'm signed up with one online bank for savings, I'm done. I had to call that online savings bank recently for one matter, and of course, they tried to sell me a checking account, but I politely declined. I suppose I could chase $50 here or $100 there, opening up checking accounts A-Z, but it just doesn't seem worth it to me.
Buy 2 to get 1 free, or spend $x to get free shipping. I always consider it. And almost always decide against it. As an Amazon Prime member, I am used to free shipping, but if I do happen to be on other sites, it's almost always less to pay for the shipping than to get to that $ threshold. If I need 1 of an item, I don't need 3. I will save money by not buying the 2nd.
Clip coupons. When we moved, we got the Sunday paper for free for a few weeks so I went through the practice of looking at the coupons for the first couple of weeks. And found almost nothing that I'd use or want or try for 40 cents off! Needless to say, I'll never be on Extreme Couponing!
Shop on Black Friday. I've never understood the appeal of getting up in the middle of night (or whenever it starts these days) to buy a TV or whatever. I mean, I know they're supposedly great deals, but I much prefer Cyber Mondays...or just buying such things when I can afford them at the best price I can find.
This is not to say that there's anything wrong with doing those things if 1) you enjoy them, and 2) you see value in them. Ah, see what I did there? I put enjoyment before value! Because one of my friends thinks I'm crazy with my grocery spreadsheet. It's not crazy to me because I enjoy updating my grocery spreadsheet every week...and I see the value in staying on or under budget. But I don't think I'd have kept it up this long if I didn't enjoy it, too!
So this is a really long-winded way to say (again) that your values should align with your spending...and saving.
Complain about fast food service to try and get a coupon or freebie. Now this one's personal since my daughter currently works in said industry. She tells me stories of people recording interactions or complaining about a tone of voice or lack of smile. Dude (or lady), you're at a fast food restaurant. Calm down! Now, this is not to say that we won't speak up if our order is incorrect. My daughter felt really bad, but she still spoke up when her order wasn't right. But as long as you get what you paid for, there's no need to create drama.
Open credit cards or bank accounts for cash back/rewards. I only open credit cards or accounts if I actually need (or want) to do so. With Costco/Amex's impending divorce, I started keeping my eye out for credit card deals, and of course, I chose one that had rewards and a sign-up bonus, but I don't plan to open any more because I don't want the added hassle of another card to manage. I'm really happy with my credit union, and now that I'm signed up with one online bank for savings, I'm done. I had to call that online savings bank recently for one matter, and of course, they tried to sell me a checking account, but I politely declined. I suppose I could chase $50 here or $100 there, opening up checking accounts A-Z, but it just doesn't seem worth it to me.
Buy 2 to get 1 free, or spend $x to get free shipping. I always consider it. And almost always decide against it. As an Amazon Prime member, I am used to free shipping, but if I do happen to be on other sites, it's almost always less to pay for the shipping than to get to that $ threshold. If I need 1 of an item, I don't need 3. I will save money by not buying the 2nd.
Clip coupons. When we moved, we got the Sunday paper for free for a few weeks so I went through the practice of looking at the coupons for the first couple of weeks. And found almost nothing that I'd use or want or try for 40 cents off! Needless to say, I'll never be on Extreme Couponing!
Shop on Black Friday. I've never understood the appeal of getting up in the middle of night (or whenever it starts these days) to buy a TV or whatever. I mean, I know they're supposedly great deals, but I much prefer Cyber Mondays...or just buying such things when I can afford them at the best price I can find.
This is not to say that there's anything wrong with doing those things if 1) you enjoy them, and 2) you see value in them. Ah, see what I did there? I put enjoyment before value! Because one of my friends thinks I'm crazy with my grocery spreadsheet. It's not crazy to me because I enjoy updating my grocery spreadsheet every week...and I see the value in staying on or under budget. But I don't think I'd have kept it up this long if I didn't enjoy it, too!
So this is a really long-winded way to say (again) that your values should align with your spending...and saving.
Tuesday, November 17, 2015
Surviving the Holidays on a Single Parent's Budget
So honored that Mandy Walker asked me back on her Conversations About Divorce podcast to discuss budgeting for the holidays as a single parent.
Tuesday, November 10, 2015
Avoiding Impulse Buys
I've never been into brick-and-mortar shopping. I don't even much like going to movie theatres in malls. I am, however, a big fan of online shopping. It's just so easy and convenient!
In the past few years, I've learned how to keep the ease and convenience while still remaining debt-free.
Amazon Prime is a priority for me, and I don't mind paying the annual fee (I budget $9/mo to cover it). I've decided that I will let my Costco membership expire next year, and I use Amazon Subscribe & Save in place of wandering that huge, always-crowded warehouse! And, of course, I budget for that.
Still, there are times when retail therapy sounds nice, so I may browse Amazon, but instead of adding items to my cart, I add them to my wish list. When I get my monthly cash back from my credit card, I can use that to buy something on my wish list.
Whenever I peruse my wish list, I delete those items that I don't even remember why I wanted them! If something costs more than what I have available in rewards, then I have to check the budget to see if there's enough in the relevant category to cover the difference. If not? Not buying that item this month! Things on my Wish List range from $10- hundreds so there's usually something on there that meets my rules.
If I'm on a site other than Amazon (which does happen from time to time), I may add the item to my shopping cart, but then I have to check the budget. Sometimes, I'll move things around to make it work, but most of the time, I look ahead to next month and x out of that tab with a mental note to come back on the 1st (and sometimes I do, sometimes I don't).
Just this weekend, I learned about a new product I really wanted to try that wasn't available on Amazon and frankly, it was overpriced. I added it to the Cart anyway, but then deleted it when I saw it would take 6-8 weeks to ship and really, what's the point of an impulse buy if I won't have it in 2 days? If I'm still thinking about it next month, I'll figure out a way to add it to the budget.
What I find fascinating is that clicking that "Add to Cart" or "Add to Wish List" generally satisfies that impulse for me. I don't actually have to pull out my credit card or click "complete Purchase" to feel complete. This little mental game has been effective for me almost every time. (I honestly can't think of a time where it hasn't been, but that may also be a mental trick!)
While I recommend waiting at least 24 hours (preferably 30 days) before making an impulse buy, at the very least, check your budget (or your balance) first. You will enjoy it so much more if you know you can afford it!
In the past few years, I've learned how to keep the ease and convenience while still remaining debt-free.
Amazon Prime is a priority for me, and I don't mind paying the annual fee (I budget $9/mo to cover it). I've decided that I will let my Costco membership expire next year, and I use Amazon Subscribe & Save in place of wandering that huge, always-crowded warehouse! And, of course, I budget for that.
Still, there are times when retail therapy sounds nice, so I may browse Amazon, but instead of adding items to my cart, I add them to my wish list. When I get my monthly cash back from my credit card, I can use that to buy something on my wish list.
Whenever I peruse my wish list, I delete those items that I don't even remember why I wanted them! If something costs more than what I have available in rewards, then I have to check the budget to see if there's enough in the relevant category to cover the difference. If not? Not buying that item this month! Things on my Wish List range from $10- hundreds so there's usually something on there that meets my rules.
If I'm on a site other than Amazon (which does happen from time to time), I may add the item to my shopping cart, but then I have to check the budget. Sometimes, I'll move things around to make it work, but most of the time, I look ahead to next month and x out of that tab with a mental note to come back on the 1st (and sometimes I do, sometimes I don't).
Just this weekend, I learned about a new product I really wanted to try that wasn't available on Amazon and frankly, it was overpriced. I added it to the Cart anyway, but then deleted it when I saw it would take 6-8 weeks to ship and really, what's the point of an impulse buy if I won't have it in 2 days? If I'm still thinking about it next month, I'll figure out a way to add it to the budget.
What I find fascinating is that clicking that "Add to Cart" or "Add to Wish List" generally satisfies that impulse for me. I don't actually have to pull out my credit card or click "complete Purchase" to feel complete. This little mental game has been effective for me almost every time. (I honestly can't think of a time where it hasn't been, but that may also be a mental trick!)
While I recommend waiting at least 24 hours (preferably 30 days) before making an impulse buy, at the very least, check your budget (or your balance) first. You will enjoy it so much more if you know you can afford it!
Thursday, November 5, 2015
Balancing the Bonus (or other windfall)
It's that time of year where you might get a bonus! Or money as a gift. Or next year, a tax refund.
In such situations, I prefer the 1/3 windfall rule I learned from The Debt-Free Spending Plan: 1/3 towards debt, 1/3 towards savings, and 1/3 towards something fun or even frivolous. I like this method because it means you're not blowing it all, nor are you "being good" with it all. You get a little closer to your financial goals and still get to treat yourself!
Since I'm now consumer-debt free, however, I don't use that exact rule. Instead, I use 1/3 towards my Emergency Fund, 1/3 towards my Car Purchase category (to stave off future debt), and 1/3 towards something fun - usually my theatre tickets category, but sometimes retail therapy. I opt not to put it towards my student loans because the interest rate is so low, I'm better off saving myself from a future car loan.
If you have more than one kind of debt, the 1/3 should go towards the one with the highest interest rate. If, however, it's enough to pay off a debt completely at a lower interest rate, by all means. Or if you could pay off a debt completely using more than 1/3, then go for it! Then split any remains evenly towards savings and fun.
Even if it's a relatively low amount left for fun, enjoy the game of getting the most bang for your buck: a manicure, a bottle of wine, even a latte! Something that feels completely indulgent to you that you can enjoy debt-free.
I know that many implore treating any debt as an emergency, but it was important for me to be able to give myself these little treats every so often to maintain a debt-free lifestyle. Further, growing that savings is just as important to living debt-free.
If you haven't yet gotten off the paycheck-to-paycheck cycle, the savings should go towards getting yourself a month ahead. First goal: $1,000. Then, a month's worth of expenses. Then another.
If you don't have any debt, congrats! Consider investing 1/3 in something like Betterment. Or put 1/3 towards a savings category that will help you avoid debt in the future, like your kids' education (in which case, it should go into a 529), a down payment towards a house or car, or a potential large purchase in the future (like replacing your fridge, computer, etc.).
Windfalls are great for making progress towards your goals, and should also be enjoyed!
In such situations, I prefer the 1/3 windfall rule I learned from The Debt-Free Spending Plan: 1/3 towards debt, 1/3 towards savings, and 1/3 towards something fun or even frivolous. I like this method because it means you're not blowing it all, nor are you "being good" with it all. You get a little closer to your financial goals and still get to treat yourself!
Since I'm now consumer-debt free, however, I don't use that exact rule. Instead, I use 1/3 towards my Emergency Fund, 1/3 towards my Car Purchase category (to stave off future debt), and 1/3 towards something fun - usually my theatre tickets category, but sometimes retail therapy. I opt not to put it towards my student loans because the interest rate is so low, I'm better off saving myself from a future car loan.
If you have more than one kind of debt, the 1/3 should go towards the one with the highest interest rate. If, however, it's enough to pay off a debt completely at a lower interest rate, by all means. Or if you could pay off a debt completely using more than 1/3, then go for it! Then split any remains evenly towards savings and fun.
Even if it's a relatively low amount left for fun, enjoy the game of getting the most bang for your buck: a manicure, a bottle of wine, even a latte! Something that feels completely indulgent to you that you can enjoy debt-free.
I know that many implore treating any debt as an emergency, but it was important for me to be able to give myself these little treats every so often to maintain a debt-free lifestyle. Further, growing that savings is just as important to living debt-free.
If you haven't yet gotten off the paycheck-to-paycheck cycle, the savings should go towards getting yourself a month ahead. First goal: $1,000. Then, a month's worth of expenses. Then another.
If you don't have any debt, congrats! Consider investing 1/3 in something like Betterment. Or put 1/3 towards a savings category that will help you avoid debt in the future, like your kids' education (in which case, it should go into a 529), a down payment towards a house or car, or a potential large purchase in the future (like replacing your fridge, computer, etc.).
Windfalls are great for making progress towards your goals, and should also be enjoyed!
Wednesday, October 14, 2015
My Fiscal Year in Review
In my day job, the end of the fiscal year is kind of a big deal so it felt like a good time to look at my personal financial life for the past year.
Here's my Net Worth report (sans numbers):
Even though there's still some red after March, that just shows my credit card balance before I pay it off. I usually send at least 2 payments a month to keep my debt to credit ratio under control. The actual debt was paid off March 1.
The spike in February marks my tax refund. Alas, since Sylvia is turning 18 soon, I don't expect these kind of returns from now on, but I feel like I shouldn't need them anymore, either.
Because I continue to grow certain categories every month (Emergency Savings, Rainy Day funds), this has helped even in the months where I have large bills to pay (like the car maintenance last month). I'm sure a month or two without an upward trend would still be okay, but I admit, I like the current look of it!
This graph, btw, is brought to you by YNAB. I spend most of my YNAB time in the budget screen, but the reports, particularly this Net Worth report, can also be helpful.
Incidentally, being a month ahead also recently helped me. I don't know why I even try to multi-task anymore because it never works, but someone called when I was entering my time, and I thought I could both carry on a conversation and enter my time. When I checked my paystub the following week, I found that I'd missed a day. Oh, well, not the end of the world - just went back and entered it and it'll show up in the next paycheck. But I did think about those many years in the past when such a mistake would have completely stressed me out while I scrambled to figure out how to pay that week's bills and groceries. We would've been fine, but I don't need - or miss - that kind of stress.
When I first started YNAB (almost 2 years ago), I had a (very) negative net worth. I knew it would be a slow and steady race to get me to the positive, and even though I still get impatient sometimes for certain categories to grow, I know if I just stay on this path, we'll be okay.
Here's my Net Worth report (sans numbers):
The spike in February marks my tax refund. Alas, since Sylvia is turning 18 soon, I don't expect these kind of returns from now on, but I feel like I shouldn't need them anymore, either.
Because I continue to grow certain categories every month (Emergency Savings, Rainy Day funds), this has helped even in the months where I have large bills to pay (like the car maintenance last month). I'm sure a month or two without an upward trend would still be okay, but I admit, I like the current look of it!
This graph, btw, is brought to you by YNAB. I spend most of my YNAB time in the budget screen, but the reports, particularly this Net Worth report, can also be helpful.
Incidentally, being a month ahead also recently helped me. I don't know why I even try to multi-task anymore because it never works, but someone called when I was entering my time, and I thought I could both carry on a conversation and enter my time. When I checked my paystub the following week, I found that I'd missed a day. Oh, well, not the end of the world - just went back and entered it and it'll show up in the next paycheck. But I did think about those many years in the past when such a mistake would have completely stressed me out while I scrambled to figure out how to pay that week's bills and groceries. We would've been fine, but I don't need - or miss - that kind of stress.
When I first started YNAB (almost 2 years ago), I had a (very) negative net worth. I knew it would be a slow and steady race to get me to the positive, and even though I still get impatient sometimes for certain categories to grow, I know if I just stay on this path, we'll be okay.
Monday, October 12, 2015
Balancing the Lifestyle Creep
Happens to everyone. Some new service comes along and you think, "oh it's only $_ a month, I'll subscribe!" Or the ones you didn't choose, like a rent or child care increase. True story for me.
Actually, it wasn't a new service, but an upgrade. HuluPlus now offers a commercial-free option for $11.99 a month (instead of $7.99). I resisted for a whole week before I couldn't take it anymore - I think the commercials got more obnoxious just so that I would do so! But hey, a half-hour show now only takes 22 minutes.
Then I got the notice of my rental increase of $20/month. The same amount I was going to increase my savings each month. Oh, well, it's a wash.
Then it was my iCloud, which is full, and now I'm paying 99 cents a month for a bigger cloud.
Okay, so it's a lifestyle creep of about $5 a month, all in. But I have to stay mindful of these things so I don't turn around and find it's $100 a month because I wasn't paying attention. And I still want to increase my savings by $20 a month, so this month, I'm taking a closer look at my budget categories to try and make it happen.
Costs will continue to rise, so it's important to have a little breathing room in the budget. It's also an opportunity to take another look and see if the expense still aligns with your values.
Of course, increasing income should always be considered, too. It doesn't have to be 2nd job, but there may be opportunities to freelance or even MTurk. There's only so much a budget can be trimmed so if there are ways to increase your income, that's even better. So long as you can avoid the lifestyle creep, that is!
Actually, it wasn't a new service, but an upgrade. HuluPlus now offers a commercial-free option for $11.99 a month (instead of $7.99). I resisted for a whole week before I couldn't take it anymore - I think the commercials got more obnoxious just so that I would do so! But hey, a half-hour show now only takes 22 minutes.
Then I got the notice of my rental increase of $20/month. The same amount I was going to increase my savings each month. Oh, well, it's a wash.
Then it was my iCloud, which is full, and now I'm paying 99 cents a month for a bigger cloud.
Okay, so it's a lifestyle creep of about $5 a month, all in. But I have to stay mindful of these things so I don't turn around and find it's $100 a month because I wasn't paying attention. And I still want to increase my savings by $20 a month, so this month, I'm taking a closer look at my budget categories to try and make it happen.
Costs will continue to rise, so it's important to have a little breathing room in the budget. It's also an opportunity to take another look and see if the expense still aligns with your values.
Of course, increasing income should always be considered, too. It doesn't have to be 2nd job, but there may be opportunities to freelance or even MTurk. There's only so much a budget can be trimmed so if there are ways to increase your income, that's even better. So long as you can avoid the lifestyle creep, that is!
Subscribe to:
Posts (Atom)