Monthly Archives: March 2013

The three basics of taking control of your finances

I developed my passion for personal finance during a potentially catastrophic period in my own financial life. I doubt many people reading this blog have been in money trouble as deep as my family was. Though it’s an ongoing process to pull ourselves out of the hole and become financially secure, I’m happy to report that our outlook is pretty rosy.

It led to my wanting to talk more openly with friends and strangers alike about my strategies and thoughts about personal finance, to hopefully help others either get out of a bad situation or make their good finances even better. As I was preparing for the first informal discussion group, I realized just how much I have to say, and decided I needed a blog, or else no one else would be able to get a word in edgewise at the meetings!

I struggled to encapsulate my thoughts about personal finance into one coherent philosophy, and I kept coming back to the idea that cleaning house financially for me was divided into three distinct areas: the present, the past and the future. I use different strategies for each area, and though they run concurrently sometimes, the major work to deal with each came in that specific order.

To stop the bleeding and survive day-to-day, I had to deal with my present finances. Once that was done, I had to face the problems caused in the past. And once I had at least a plan to deal with those, I needed to take a hard look at my future and start to prepare for it.

A bit more about the three basics, as I see them:

The present. Maybe you’re struggling as badly as we were several years ago, watching more money go out than comes in and feeling helpless to control it. But even if you’re in basic balance, chances are if you haven’t really thought about it before, there are some changes you could make to your present cashflow situation. Either way, the budgeting techniques I’ve written about in past posts, and my quiz about the health of your budget, are the essence of the “present” part of the plan. Once you get to a place where you know where your current cashflow is going and you’re fairly comfortable with how it’s all allocated, you can move on to the next step.

The past. If you’re struggling with your current finances, chances are you struggled in the past, and the repercussions may still be hanging over your head.  So here’s a little assessment quiz:

1. Do you have old debt hanging around that doesn’t seem like it’ll be gone anytime soon?
2. Do you have a smaller-than-ideal retirement fund due to either not contributing early in your working life or not contributing enough?
3. Do you have past behaviors that still crop up in the present to sabotage your financial health, such as spending binges, family or friends who ask for money, gambling, etc.?

If any of the above are true for you, the next step after clearing up your present financial situation is to face the past and try to rectify the lingering issues. You should also try and put safeguards in place to avoid the behaviors or situations that got you in trouble in the first place.

This could be an ongoing process for quite a while, depending on how deep the financial hole is from your past. For me and my family, we’re still working on all of these issues, trying to eliminate debt and build our retirement funds to where they should be. But every bit of progress you make helps your future look just that little bit more secure.

The future. Once your current budget is on track and you’ve got a plan in place to conquer the problems of the past, it’s time to look to the future. This is one of the grimmest areas for some to examine; in fact, many would rather avoid thinking about it. But even being aware of your situation can get you increasing retirement contributions.

All aspects of personal finance are variable depending on the person and her circumstances. But future planning is where it really gets personal. So here are some questions to ask yourself:

1. Do you have a basic plan for retirement: when, where and what next?
2. Do you know how much money you’ll need at a bare minimum?
3. Do you know whether your current investments and contributions are likely to get to the level you need?
4. Do you have any fantasies, dreams or goals that you would want to work toward if you knew you’d secured your basic financial needs for the future?

Everyone has different levels of income, different levels of their savings and debt, different day-to-day wants and priorities, and different visions of an ideal future. But if you start to calculate and research, little by little, you could start to see your dream seem more realistic — or, at least, see your worst nightmares about the future dissipate.

So how do you feel about your present, past and future financial picture? Do you think this is the best way to tackle things, or do you have another method that’s worked well for you?

Our financial hole looked something like this at its worst!

Our financial hole looked something like this at its worst!

Grab a copy of my homemade budgeting tools!

Fellow Savers, I kept intending to write a step-by-step tutorial for creating my spreadsheets, complete with screen captures. They’re fairly simplistic — I dare say it would take considerably fewer than an infinite number of monkeys typing on computers to come up with them — but they would take a fair bit of explaining and screen-capturing to show you how to create one.

Then I had the brilliant idea — or rather, my friend’s Facebook page gave me the idea — of sharing my “Future Checkbook” file via Google Drive. (That’s where I keep most of my files anyway, so it was easy.) You should be able to save a copy of your own and get to work budgeting!

So here they are! You’ll notice two tabs on the spreadsheet:

The Ledger is what I use to keep track of exactly where I am in my financial life. When I update it, I paste my current checking account balance at the top, delete any transactions that have occurred since the last time I updated it, and add any future transactions I know about that aren’t already on there. There are some sweet features; Column D lets you know what the checking account balance will be at any particular time after a transaction. And, if Column D ever shows a negative balance, the font of that cell turns red to make sure it stands out!

The Bills & Budget tab is where I keep my “fixed” budget — the predicted monthly income and bills and general spending category amounts. When my Ledger has less than a month of future transactions on it, I paste a copy of my Bills & Budget info at the bottom, tweak the dates and format, and add any unusual expenses or bits of income that I know will be coming that month.

It’s a hands-on system that requires frequent updates and contact with your checking account. That’s what I like about it — it requires me to stay involved with our finances. Maybe someday I’ll be ready to move to a system that can go on autopilot, but as long as I’ve got very aggressive debt and savings goals that require pretty strict budgeting, I like it this way.

Besides the actual making it jibe with your checkbook and your bills, and troubleshooting if you see it’s not adding up at the bottom, the only work you’ll have to do is on the Ledger spreadsheet:

1. f you add or delete rows or move them around, you’ll want to copy the Column D cell above the ones you changed, select a chunk of Column D cells below that include the affected ones, and paste. This makes sure the formula is preserved. You’ll see what I mean if you start using these spreadsheets — it’s really easy.

2. When you add more cells at the bottom to paste in another month’s budget, you’ll want to select the entire Column C from the checking account balance to the last amount in the spreadsheet and hit the sum function button to add them up, so your bottom number includes the new cells.

Other than that, you may find yourself tweaking it a bit to make it work for you, but it should be fairly functional. And if you ever do mess up the formulas in the cells and want to start over, you can just come back here and save another copy!

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Image courtesy of ddpavumba / FreeDigitalPhotos.net

8 tips to better grocery budgeting

One of the attendees of the inaugural League meeting came over the other night for a small gathering. She noticed the snack my daughter was having and said, “Oh yeah! I just bought two packs of those at the Wedge (grocery store) because they were on sale.”

“Me too!”

Then she noticed the brand of chips I’d put out. “Oh, and I got some of those too —”

“— Because they were on sale,” we finished together.

It was fun to see a fellow Saver had taken the same frugal steps as I had that day. It also reminded me that I’d meant to write about groceries, and our tips for shopping in a budget-conscious way, because we spent quite a bit of the first League meeting talking about it.

This is an area my family struggles with. Groceries are, of course, a variable (vs. fixed) expense, but I allot a certain amount twice a month (after each payday) and try really hard to get our variable spending to stay within that amount (because if it doesn’t, the money would have to come out of one of our other areas). When our second daughter was born, I was determined to absorb the cost of her diapers and formula into the existing budget rather than take from another category of our budget to make our grocery spending bigger. It was, in many ways, a failure. We ran into the next month most weeks, and occasionally if I had a random windfall I’d allot part of it to groceries to try and make up our running deficit.

But we kept struggling along trying to fit our spending to the inadequate amount of money. I knew there were lights at the end of the tunnel — our first daughter using less diapers as she potty-trained, our baby quitting formula when she turned one — and our grocery budget would feel positively luxurious when those expenses went away. And we’re almost at that point. Already we buy less diapers and formula, and thanks to that and our other tactics, we’re actually on track this week!

I’m no extreme couponer, and we have various dietary needs and wants and morals that make our shopping nonstandard. So we’re by no means living on a dollar a day like this woman or this man each did for a month. But we’ve cobbled together a number of tricks and strategies that help us at least stay on budget.

1. Make a menu and shopping list and buy only what fresh produce is needed for that menu. This doesn’t allow for much experimentation or spontaneity, but it does ensure that virtually no food is thrown away, and not wasting food is one of the best ways to economize.

2. Don’t be brand-loyal. I try out the generic store versions of food and, if they taste just as good, I’ll buy those (unless the brand name is cheaper due to a sale or a coupon).

3. Shop the sales. We don’t get the paper, but the stores we shop at post their sales online too. So if we’re having a lean week, I’ll go through those and note the really good deals, and we’ll try to fashion menus around those sale items.

4. Coupon — to a point. Most of the time, buying generic and from bulk bins, and shopping sales, save us more money than couponing, especially since most coupons are for unhealthy processed foods that we try to keep out of our diet. But there are a few brands we’re loyal to for various reasons, and so we always look for coupons for those if we’re going to be buying them. My favorite bread, for instance, has an online coupon that’s usually available to print once a week. If we see a good coupon for something we buy often, we’ll print it from several computers and keep the extras for upcoming weeks. One of our stores doubles coupons on Saturdays, so we try to use most coupons there for extra savings.

5. Stock up on sale items and pantry staples if there’s extra money in the grocery budget; eat through the pantry if the budget is tight. We lump other household items into our grocery budget, so occasionally we need to buy something that throws off our food spending. This tactic helps us ride out the ebbs in money.

6. Use credit cards that reward grocery spending (and pay the entire balance off every month). For our two main grocery stores, we use an Amex Blue card, which rewards 6% on grocery spending. Even with a $75 annual fee, we net about $25 per month; I take it as a statement credit and that helps our grocery budget. If you don’t spend much in the first place, there are credit cards with no annual fee that give a 3% reward, but if you spend at least $300 at qualifying stores, the 6% is better even with the fee. We also have a Target RedCard that gives you 5% off right at the register, and with no annual fee, so we use that for our Target spending.

7. If you have ethical or health concerns that cause costs to rise, pick your battles! For instance, one meeting attendee would like to eat only organic produce, but it was costing her an arm and a leg. So as a compromise, she buys the “dirty dozen” organic and buys conventionally farmed produce otherwise. We haven’t taken the step toward buying organic yet, but we’ve moved to BPA-free canned tomatoes. We get compostable diapers instead of disposable for daycare; we finally had to admit we couldn’t afford compostable wipes as well, so we stuck with the diapers, figuring they create more waste, and get regular wipes instead. We buy free-range eggs and have started moving toward local cheeses, but we buy the cheapest milk as long as it’s rBGH free. When and if we feel we have more room in the grocery budget, we’ll try to take further steps to healthier, more ethically produced food.

8. If you belong to a couple (or trio, or more), communicate! All the meeting attendees in relationships described issues that had been resolved by talking about the challenges, agreeing on priorities, and delegating certain parts of the planning-buying-cooking cycle so everyone had a role and could give input.

Those are the methods we’ve come up with, and they work fairly well for us, but there’s always room for improvement. What are your most successful strategies for controlling your grocery budget?

food

 

(Not a real grocery trip; this is a photo of souvenir food bought during a vacation!)