In the several Weekly Progress and Savings that I've posted previously, I've unintentionally focused on the "savings" more than the "progress."  It's pretty darn rewarding to see actual dollars saved that can be put toward goals.  But budgeting "progress" is equally, if not at times more, worthy of focus because to me progress is staying within our budget!

While listening to Dave Ramsey's radio show this week, a caller detailed her situation and asked Dave's advice.  Her husband made $150k salary (they are a one income household) and they had $150k in debt (not including the house).  $90k of that debt was credit card debt.  Dave's conclusion was "you are living on $200k a year and bringing in $150k" and advice was clearly to change their spending habits and get on a written budget.  It just goes to show that you can be broke on any income. 

Living within your means, regardless of how much means you have, is worth celebrating!

And if you aren't currently living within your means, it is never to late to start.  For the woman caller, it took $90k on a credit card before she got mad enough to change their situation.  We all have different breaking points, but let's hope each of ours is at significantly less debt.

All that to preface that savings this week is:  $7.00

But, in perspective, that is okay because at least $0.00 was to debt!

What we accomplished within our budget this past week:

• We spent all day last Saturday painstakingly staining the outside of our screened porch. Cost: between $60-$70.  Savings from doing it ourselves: easily several thousand.  And the pride and satisfaction from completing a project like that from start to finish:  of course, priceless.
• After this exhausting 7 AM-6 PM work, we treated ourselves to Mexican food and margaritas at a restaurant!  Since we have all but cut out restaurant eating, this was a treat - and we still didn't break bank!  And I must say it was especially good...absence makes the heart grow fonder, or more grateful perhaps.

What we have put off for another day:

• Depending on how much you have read of my blog, you may or may not know that we moved several months ago.  Unlike some people in my family who magically settle-in and decorate within several weeks (you will not be named, but if you are reading then you know who you are :-), we are still in the thick of settling and arranging and decorating.  I have ideas for family room curtains, roman shades and pillows (which mostly will be DIY) and I'm anxious to begin!
• Clothes...I'm in need of some Summer tops and my husband needs some work boots for around the house (current pair is being held together with duct tape!).  I honestly don't even have the time to shop, but I'll get around to it one day.

This coming weekend brings with it no costly projects that I know of.  Plus we are putting stuff in a garage sale which I hope brings in some money.  Maybe next week I can start on the DIY decorating!

Have a great weekend and thanks as always for reading!

Stacy

Focused! Two Categories for Efficient Budgeting

Having a budget is simply being intentional with money.  And being intentional, in any aspect if life, requires that we focus our energy where it is most effective or needed.  

Most of the energy involved in budgeting goes not into deciding, but in doing.  The first step to budgeting is of course laying out a written plan.  But the bulk of budgeting involves controlling and tracking expenses - a process that can be time-consuming and cumbersome.

But over 80% of the items listed on my family's budget are for amounts which we do not control on a daily, weekly, or even monthly basis.  Short of moving or refinancing, our mortgage will stay the same.  Our subscriptions are for services that we plan to keep long term.  And while we can be conservative with utilities, the amounts we are billed reflect our family's routine and lifestyle.

As a working adult and busy mom, tracking this 80% as a part of my budgeting routine is not an efficient use of my time or my energy.  Now if I need to cut expenditures then by all means I will turn to these items and trim the fat.  But once the budget is lean, these amounts are not where pennies will be pinched.  So quite frankly, I set these aside and focus on the remaining 20% regarding tracking and controlling spending.

Yes, that is right.  I only regularly track and control 20% of our budget!

I first divide my full written budget into two categories.  Once I have listed all of my monthly expenses and have assigned a function to every dollar of income, I select a small number of items for my "mindfulness needed" category and all the rest (the 80%) fall aptly into "out-of-sight, out-of-mind."

"Mindfulness Needed":  The Items to Regularly Track and Control

Essentially these are items that I can influence on a day-to-day basis and can squeeze pennies out of every purchase (whether I choose to or not...some weeks are better than others).  Therefore, tracking and controlling these expenses pays off!

And importantly, I keep this list as short as possible.  The goal is to focus my energy, not spread it too thin.  The only items I now include in "mindfulness needed" are groceries, clothing, entertainment, and miscellaneous spending (misc because it varies depending on season).

"Out-of-sight, Out-of-mind":  The Items to Track Infrequently

All other items (the 80%) are then lumped into our "out-of-sight, out-of-mind" category.  Playing the role of a responsible adult, I of course budget these items first and foremost and ensure that they are paid each month.  But I can simply have these payments auto-drafted and, despite their importance, they essentially do become out-of-sight and out-of-mind.  These items include tithes, savings, mortgage, utilities, insurance, and subscriptions. 

Other items in this category are highly predictable in both frequency and amount such as gas, vet/grooming for pets, oil changes, and haircuts.  I include these with the 80% because I do not influence these amounts (i.e. gas) or do not influence these amounts on a daily or weekly basis (i.e. pets, oil changes, haircuts).  My focusing on these items more than every 8 weeks, twice a year, or yearly, is simply wasted effort on my part.

Chances are that if you budget you already focus to some degree.  I have a good friend that uses the cash envelop system very successfully.  She actively decides which budget items to turn into cash envelops so that she and her husband control their spending.  She of course does not make a cash envelop for her mortgage or insurance or the like because she does not need to daily track and control her spending on these items.  Already her efforts are focused!

If you do not currently budget, likely one reason is due to the time, energy, and effort involved in tracking and controlling expenses.  But perhaps you would be more likely to budget if you knew you only had to track and control a handful of items and thus drastically reduce the effort involved.  After laying out the big-picture as far as focusing the budget, I will walk step-by-step through the planning process.

If you budget, how do you focus your energy?  If you do not budget, would you be more likely to if you only had to track and control 20% on a regular basis?

Weekly Progress and Savings

We had much more breathing room this week!  Despite the typical grocery run and a Target excursion (they might as well take my money at the door), we left the weekend with cash in hand.

And except for an unplanned late-night diaper run, the days went by without any spending on our part.  Personally, I think those are the best.  In our case, we are likely spending more quality time together at home - playing in the cul-de-sac or sitting on our back porch.

This week's savings: $40.00

So far we are averaging $30.00/week deposit into our "dream jar"!  Some weeks it's around $20 but some weeks we save as much as $80.  And that average doesn't include extra income such as the treadmill we sold. 

And don't get me wrong - just because we aren't spending constantly doesn't mean we aren't out-and-about and having fun as a family.   

This weekend's plans:

-Cleaning out the garage - good, free elbow-grease

-A friend's baby shower (bought the gift this past week at Target and didn't break the bank!)

-Trip to the Zoo (yearly membership purchased last year)

-Watching a free vintage baseball game with a picnic lunch (http://tennesseevintagebaseball.com/ and I know the guy that started the league...pretty cool, eh?  I'm easily star-struck)

And isn't that just the best picture ever!?  Pure joy.  And all while enjoying time as a family on the back porch.  Brings to mind the saying "the best things in life are free."

May we spend well and live well!

Do you have any fun and free weekend plans?

I Say Pay Yourself First...and Last!

I had this same little lion bank as a kid.  But no, saving it not a trap or a cage but is freedom!

Picture found at this etsy shop.

Over the weekend there was a USA Today article entitled "Don't laugh, the piggy bank strategy works" by Lewis Walker.  He states that "wealth starts with a goal, discipline, and saving a dollar at a time" - bringing the idea of a classic piggy bank to mind.  He goes on to say that "while piggy banks teach children the wisdom of thrift, adults often need to relearn childhood lessons. The best time to save money is when you have it. Excess debt can be ruinous." 

Yes!  And our "dream jar" is no different than a piggy bank.

Walker also mentions George S. Clason's 1926 book The Richest Man in Babylon in which Clason recommends that "when you earn money, peel off the top 10%, put it aside, save and invest wisely" (as paraphrased by Walker). [although this is just one of Clason's seven rules - another of which is control expenditures.]  Paying yourself first is not a new idea and is one that many people put to use (i.e. the 10/20/70 method). 

This article suggests that "paying yourself first" and prudently setting aside dollars in a piggy bank are mutually inclusive.  And suggests that setting aside a percentage each month is end-of-story regarding savings.  But in my experience automatically "paying yourself first" and being prudent with day-to-day expenditures are different actions and mindsets - but together they produce the best results.

Active v. Passive Savings

I categorize "paying yourself first" as a passive form of savings as it is a method that now is inherently non-cash based, digital, and automatic (think 401k contributions and internet banking).  In our budget, "paying ourselves first" falls under my "out-of-sight, out-of-mind" grouping (our budgeting method HERE).  Your paycheck is deposited, you transfer a percentage into savings, and you do so automatically without much thought -  which is what is generally prescribed.

But in contrast, I feel that prudently setting aside dollars in a piggy bank is an active form of savings that remains inherently cash based.  In our method, it is essentially "paying ourselves last."  Importantly, dropping a physical penny in a bank or dollars into a jar requires a choice each time - spend this or save this?  But with automatically setting aside a percentage each month, the whole point is that the decision is not burdensome and that saving is automatic.  Personally, we grew comfortable and lazy when only "paying ourselves first."

Paying Ourselves First...and Last

So we now "pay ourselves first...and last" and have seen the best results from doing so.  Paying ourselves last being saving dollars from our weekly cash budget to drop into our "dream jar," in addition to automatically placing a percentage of our income into savings each month.

Some weeks we do need our full cash budget and that's okay (see HERE - that is why it is budgeted after all).  But some weeks we simply do not and that is when we can save and "pay ourselves last."  By paying ourselves last, we are making saving a priority from week to week which necessitates prudent spending.

Once we can budget the full percentage upfront, we will move onto the next goal - again saving dollar by dollar through "paying ourselves last."

The Mindset Required

And the frugal mindset that is made habit by paying ourselves both first and last should serve us well through each savings/giving goal.  The motto being that we live off the least that we can while saving the most that we can.  Finding ways to save and come under our weekly cash budget is always a top priority.

As opposed to the attitude of we have paid ourselves first and are now free to increase our lifestyle/consumption equal to what remains of our income.  This is the thinking the we had fallen victim to in the past.  We had paid our percentage, box checked, out-of-sight and out-of-mind and were okay with spending the rest of our income.  But in our experience, only passively saving did not make for a truly prudent heart.  And we weren't making big strides toward reaching our financial goals.

Do you also pay yourself first and last?  In your experience, do these promote different mindsets?

Why Budget?

Before I elaborate on our "Dream Jar" and our method which I mention HERE, I want to answer the question "why budget?"  There are a million answers to this question ranging from scholarly advise to "because you have to," but I'm simply going to answer for ourselves - why we budget.

I budget so that I'm honest and accurate with our finances.

In studying art, a teacher once told me to "draw what you see, not what you think you see."  And it is so true.  For instance, eyes on a person's face are half-way down the head.  But to see people draw a face from memory, the eyes that they draw are generally up in the forehead region because we think that is what we see when we look at a person.

Without a budget I would say "I think I have good spending habits," because after all we weren't racking up credit card bills.  But without a budget, or truly seeing what we spend, I wouldn't even know what our spending habits are.  I would be drawing eyes on the forehead!

We have to make decisions based on our income.

I knew that as an adult making big decisions were inevitable, but it's amazing to me how much those big decisions ride on our personal finances.  We want to think that in a happy and ideal world money doesn't matter or is not something we have to think about regularly.  Or maybe a person has a bad taste in their mouth from money attitudes that they lived with as a child.  But regardless, money either has been or could easily have been at the center of every big decision we have made as a couple.

Income is finite, but the list of what I want money to do for our lives seems infinite at times.

Spoiler alert!  Those goals I'm going to eventually delve into are not earth-shattering but crazy basic.  Our big goals are flexibility, funding retirement, paying off the house, paying for college, giving like nobody's business, and living life to the fullest.  Oh and I'd like to throw vacations and a house remodel in the mix somewhere.  

That is still quite a bit to accomplish and the truth is that income is finite.  And retirement and vacations are not just going to magically happen for us.  We have to start now and plan accordingly.

How do you eat an elephant?  One bite at a time.

I am the first to admit that it can seem overwhelming at times.  I have this list of things to accomplish financially and we are still at the top of the list.  But that's okay!  Because the way to eat an elephant is one bite at a time.  That one bite is the meager percentage we can save upfront for retirement each month.  Or the meager $20 or $40 that I place in our dream jar each week.  Those are the bites that we eventually have this elephant eaten. 

For more great stories on why people budget and their financial "aha" moment, visit The Financial Literacy Awareness Carnival at The Heavy Purse HERE.

May we spend well and live well,

Stacy

Weekly Progress and Savings

Our weekly budget will of course extend through tomorrow, but I want to go ahead and post this week's progress and savings report today because 1) tomorrow is a holiday, and 2) the results are already in...(dun dun dun)....and it's:

This Week's Savings:  $0.00 but actually $75.00 (I'll explain)

This past week has been one of those rougher budgeting weeks because we left the weekend with only a few dollars in hand.  Yeah, not fun. 

But in prior weeks we have saved and then deposited into our Dream Jar anywhere between $20.00-$85.00!  So the system does pay off.  And even if this week's savings is $0.00, I can still be glad that we didn't go over budget!  And that is something to celebrate.

What maxed us out:

-supplies to make two dog cots (made for $30 each rather than paying $100 each retail)

-two larger boxes of diapers (that potty training thing is looking better and better)

-a huge bag of dog food

What we wanted but had to delay:

-A helmet for our toddler.  Don't worry, her safety is not yet in jeopardy!  She isn't even riding her scooter and trike but I won't let her start until we have a helmet.  I'm going simply borrow the helmet from her grandparent's for the time being!

-Screen to repair a small hole in our screened in porch.  The mosquitoes aren't out yet, so we are good.

-A book that I want for my kindle - again, I can wait.

-A new flush valve for the master toilet.  Yeah, this one kind of hurts.  The replacement is like $10.00 and I would love for hubby to replace it TONIGHT for convenience sake.  But it is not killing us, I turned off the water so we aren't wasting water/money, and I'm stubborn and will stick to this budget come heck or high water (literally!).

So where the did the $75.00 come from?  We sold our old treadmill this past weekend since we no longer had room for it.  Great timing!  We could of course take $10 or so from this and fix the toilet, which I'm sure most less-type-A people would do.  But honestly it is not an emergency and we made our choices and will live the consequences (but thankfully not for long). 

So glad that we have a weekly budget and can start again in just over a day!

My "Focused-Weekly-Cash" Budget

Over the years friends and family have asked me "how do you budget?"  They don't ask because they think that I budget perfectly (or if they do then they are greatly amiss) - they ask simply because they know I have a system...and have had a system for a long time.

Now let me sidetrack onto the idea of a "system."  To me a system is not a stagnant, never-changing, system-for-the-sake-of-a-system method.  A truly functioning system is organic, ever-changing, serving the needs that I have at present and that I predict in the future. 

That is an important preface to my budgeting experience because I have tried A LOT of systems.  But again, to me a system is ever changing.  And because I've constantly adapted our system, I now have the most simple, most successful, and most fulfilling budget method that I have ever used.

Three-Key Components:

• Focused
• Weekly
• Cash

Focused: Place Your Energy Where It's Most Effective

This component has been a part of my system for as long as I can remember.  Maybe because as an Accountant I think in terms of "fixed" versus "variable" expenses, which is the essence of this step.  But truly, I simply separate my expenses into one of two categories: "out-of-sight, out-of-mind" or "mindfulness needed."

Into which category an expense is placed is not crazy important, but the more I place in "out-of-sight, out-of-mind" the simpler my day-to-day budgeting will be.  And I like simple.

Currently, the only three budget items I have in my "mindfulness needed" category are Groceries, Clothing, and Entertainment.  I chose these because I can actively manage how much is spent in these categories from budget period to budget period.  All other items I cannot do much to change short of refinancing, shopping for new insurance, or changing Internet providers - which I will not be doing on a regular basis since I enjoy sanity.  So such items can aptly be placed in "out-of-sight, out-of-mind," assuming I do reassess as needed.

Weekly: Saturday to Friday

I first chose a weekly budget simply because this was the common denominator of our two paycheck cycles (that is the only algebraic term I will use - I promise).  Since my husband is paid biweekly and I'm paid monthly, calculating our income weekly was the most accurate method. 

But aside from the practical, why I will never go back to monthly budgeting is because I find a weekly budget so much more motivating and gratifying.  At the end of each week, I'm met with the fruits of our labor as I deposit into a "dream jar" any unspent cash.  I also can reassess weekly rather than monthly whether our budget is working or needs to be tweaked, therefore I'm quicker to adapt and change (harping back to a successful system being organic).

And perhaps most importantly, our weekly budget is Saturday morning to Friday night.  Since our primary and essential spending occurs during the weekend (think weekly grocery trip and other errands) those takes first priority as they should.  Then, and only then, might we have leftover money to spend during the week on work lunches or miscellaneous expenses (generally non-essential or luxury items).  If we decide to do a lot one weekend, we simply know that it means no work lunches that following week.  But that is much better than the Sunday-to-Saturday alternative of everyday work lunches but then no grocery or fun money come Saturday (or going over budget since groceries and fun will likely be had regardless). 

Cash:  Yes, The Green Paper Stuff

It's almost embarrassing how crazy simple and almost antiquated this component seems, but in my opinion it makes all the difference.  It is interesting how the most effective aspect is not a new idea at all but something that our parents and grandparents and great-grandparents used for generations back.

I was hesitant to go to cash because we live in the digital age and I thought I would miss out on some great convenience.  But in all honestly the success I'm reaping from using cash far outweighs any of the inconvenience that my mile-long drive to the ATM brings to my Saturday morning (besides, I'm generally out-and-about anyway). 

Now my assumption was that cash would be effective because I'm physically handing over money each time I make a purchase.  I've heard it's harder to spend cash than to swipe a card.  While true, this does not fully describe what goes through my mind when I spend cash.  The reason cash has been most successful for me is that each time I open my wallet I physically see the amount of cash remaining.  I'm then reminded that the cash in front of me is the exact money that will someday fund my "dream" (whether a room remodel, a car, or that retirement that I someday want to enjoy).  So every time I open my wallet I have to make a choice - is the item on the counter worth delaying my dream? 

To illustrate, the $7.00 sunglasses that I bought this week will not delay my dream significantly and I went ahead with the purchase.  But if it had required using the last $20.00 in my wallet, no doubt I would have waited until the next week!  My goal is to every Friday deposit at least $20 into my "dream jar."  So yes, the item on the counter may in fact be "essential" but making that choice (item vs. dream) every time I make a purchase keeps me on track.  And you can bet that I'm motivated to pay the least possible amount!  Case in point - $7.00 pair of sunnies.

May we spend well and live well!