Monthly Archives: December 2013

Time for reflection

The year in review

WordPress helpfully sent me a year-end report on my blog, which was fun to read and also made me think about the past year of blogging, and finances in general. Apparently I wrote 38 posts in 2013, so about 3 per month. Not bad!

My DreamHost renewal comes up in January, so I have to decide whether to continue. I think I probably will, but I doubt I’ll be as prolific. I started this blog because I was bubbling over with opinions and advice that I wanted to impart, and I spilled all of my biggest ideas about finances this year. I don’t want to become one of those personal finance sites that posts anything they can think of just to keep going, recycling the same advice over and over, packaged slightly differently each time.

However, my views and practices do change from time to time, as evidenced by my recent shift to annual vs. monthly budgeting. And I learn the occasional new strategy that I want to share, like when I figured out how to cut my dental bill in half. So I think I’ll renew ordinarysavers.com and see where I feel like taking it in 2014.

The League of Ordinary Savers Facebook page may become more active as the blog becomes less so; I can see myself sharing other people’s thoughts when not creating my own, and Facebook is a more convenient way to do that.

What I learned this year

Although I only started this blog when I felt like I’d figured out most of the mysteries of personal finance, I did learn a few new things this year.

The basics remain the same

But the main truths about personal finance that I believed when I started this blog have remained the same. In a nutshell:

  • Spend less than you earn. I mean, this is really the only piece of advice anyone needs to follow in order to keep their head above water, and encapsulates all the other pillars of personal finance that follow.
  • Make a budget and stick to it. Once you see the whole picture of income and outgo, it makes it harder to spend money you shouldn’t, because you know it’s just going to make things harder for yourself.
  • Get (or stay) out of debt. Avoid credit card debt like the plague. If you must borrow for a home, an education or a car, have a plan to pay it off, preferably ahead of schedule. If you do have consumer debt, attack it like it’s a zombie looking to destroy you, because it basically is. Think about it: The thing you purchased is probably long gone, yet its shambling corpse follows you around in the form of credit card bills. Die, zombie, die!
  • Save up for emergencies and big purchases. There are always going to be unexpected expenses that will trip you up if you don’t have money stored away for just such an occasion. Likewise, you’ll always have bigger things you want, whether it’s a new computer or a trip to the Caribbean. Saving up for them prevents you from putting it on a credit card and losing ground financially.
  • Put something away for retirement. I admit I’m still clearing up the mistakes of the past and haven’t fully focused on retirement yet. But I’m putting 10% of our income toward it anyway. I may have to play catch-up later on in life, since I haven’t always put aside 10% like I should have, but I figure anything I do now, even if it’s not enough to have a dream retirement of leisure and travel, will improve the picture from where it was. Which leads me to the one big piece of advice, for anyone who is feeling hopeless about having neglected their finances for too long:
  • Don’t ever think it’s too late. Seriously, anything you do to improve your finances will improve your finances. The longer you ignore them, the harder it will get to fix them, just as the longer you wait to start saving for retirement, the less growth you’ll see in your accounts. But letting that stymie you any further is a fool’s game. Wherever you are right now, things can get better, and any measure of improvement is better than wallowing in self-defeat.

And all of the above adheres to my three basics of personal finance: control your present, then fix your past, then secure your future. No matter how you dissect it, that’s what being an Ordinary Saver is all about.

Here’s to a prosperous new year!

New Year

A sea change: going from monthly budgeting to annual

I’ve been a fan of monthly budgeting virtually since I started trying to budget ever. You figure out your income and outgo and it stays basically stable month-to-month. When I developed my budgeting tools — the Ledger (or “future checkbook”) and the Bills & Budget static spreadsheet — I felt pretty on top of things, and the system served me well for several years.

I realized that there were nonmonthly expenses that were nonetheless predictable and should be budgeted for, so I developed my DIY “escrow” method, in which I calculated the annual amount of a nonregular expense, divided that by 12 and entered that figure into my monthly spreadsheet. It worked well, although every time I entered another month of expenses into my ledger spreadsheet, I’d need to do a bunch of math right up front to add the escrow amounts to the proper lines and delete the lines, then ensure everything added up.

I also got sick of having to re-date everything with the exact dates when I entered them into the ledger, then reorganize them so they were chronological.

Yet, even when I made this article about budgeting annually my link of the week for a blog post, I didn’t seriously consider its advice. I was comfortable with my system, even though it was a lot of work.

The recent re-evaluation of everything about how my family runs our lives, however, made me rethink my budgeting technique. For someone who’s also juggling home-cooked meals, kids and a full-time job, why was I giving myself more work unnecessarily? So I decided to try out an annual budget. We have enough of a budget surplus to fund most nonregular expenses the month they happen, so saving up a little each month isn’t as much of a necessity anymore.

So I made an Excel file (in Google Drive, natch) similar to my Bills & Budget sheet but with 13 sheets instead of one. I have a sheet for each month of 2014 with expected income and expenses tailored to that month (for instance, the homeowner’s insurance bill is listed in full on the February calendar rather than having a line each month with one-twelfth of the amount). I fixed all the dates gradually in my spare time, so instead of estimating the date as the “15th,” for example, each line has the exact date of each paycheck deposit and bill payment.

The 13th sheet is where I add up all the expenses to see what percentage of my annual income goes to Needs, Wants and Savings, so I can make sure I’m roughly adhering to the Elizabeth Warren / All Your Worth philosophy.

I’ll still paste each month into my ledger and keep track of actual balances there, but I won’t have to do nearly as much juggling with all the escrow lines now eliminated and the dates already figured out.

Next year will be even easier to calculate because I can just make a copy of this file and fine-tune the dates.

Changing one of the most fundamental aspects of my budgeting has reminded me that nothing’s set in stone, especially when it comes to the tips and tools that help keep personal finances in balance.

annual accounting

Image courtesy of Stuart Miles / FreeDigitalPhotos.net