Money Isn't The Only Thing You Have To Budget

It's imperative to budget your money if you want to properly manage it, and it's equally important to budget your time if you want to have enough. Most of us have very busy schedules. If you work full-time, have a house to maintain, kids to raise and spend time with, a significant other who you'd like to be more than just a roommate, and exercise to remain healthy to do all of that; it can be hard to fit everything in.

My husband and I got a rare date night tonight, and while we were walking together, we talked about things we'd like to do with our time (like post on this blog on a more regular basis), and how hard it is to find the time for everything. But then we starting talking about how if we actually sat down and looked at how we were spending our time every day, we might be surprised at how we could fit in a few more of the important things. I started thinking about how our time is much like our money, most of us don't have enough for everything we need or want, and we have to decide when and how we're going to use it, and prioritize and make sacrifices when necessary. Wouldn't it be great if we all won the lottery and had clocks that could stop time? Since that's not reality, I guess the Money Maiden will have to be as diligent with her time as she is with her money.

How Hipsters Manage Their Money

Do you want to get a handle on your money, but you think an Excel spreadsheet is far too antiquated? Check out the NPR All Tech Considered blog where you can find a number of websites to help you manage your money, many that have a social networking aspect to them.

And if you need help with the psychology of your spending and not just tracking your spending, here's a helpful website: Your Money or Your Life

Spending Less Money

Barbara Warmsley, also known as the "Green Granny" is posting videos on youtube with ideas about how you can spend less money. I saw an interview with her where she discussed the fact that she grew up during WWII and learned how to be frugal. My grandparents who grew up during the Great Depression also learned to be less wasteful and to make better use of their items than my generation.

These videos have some good ideas that just might help you to stay within your budget. They might also trigger some of your own ideas about ways to save money.

The Stress and Money Cycle

Are you feeling stressed right now? Many people are. There’s a laundry list of concerns right now that contribute to feelings of stress.
• The economy
• The unemployment rate
• Housing foreclosures
• Added responsibilities at work
• Fear of losing your job
• Difficulty finding a new job

All of these concerns and many more are making this a particularly trying time for lots of folks. One common response to these feelings is to do something nice for ourselves. This is a wonderful reaction; unless it spirals into a vicious cycle of spending unbudgeted money that leads to more debt which leads to more stress.

There is a good way to break or avoid that cycle altogether: include money in your budget to treat yourself. It might mean trimming elsewhere, but it can help you to manage your anxiety without adding additional burdens or concerns.

During these difficult times it’s important to discover and pursue what feeds your soul. For some people it’s a trip to the movies, for others it’s a relaxing massage, or some really lucky people feel renewed by taking a quiet walk outdoors (that one doesn’t even require budget maneuvers!) Just remember, it is so much more rejuvenating when you spend budgeted money on yourself guilt-free.

Squirrel Away Money When You Have the Chance

In a recent issue of Time magazine, there was an interesting article about your job being your most important asset. It had some different ideas and definitely gave me some food for thought. It also underscores that education, what I call good debt, is worth pursuing because it increases your future earning potential.

But what about all of the people who have lost their jobs, or are in danger of losing them soon? Their “asset” is no longer paying out. The best protection if this has happened, or might happen to you, is to have money in savings. I know a few people who work at jobs where they are assigned to particular long-term projects. Some of these folks know that there aren’t any new projects in the queue and that their employment will be done when their current project is done. One person is not really worried because he’s saved money for just such an occasion and knows he’ll be all right for about 1 year. Some of the other people I know are sweating it a bit more.

I realize that there are all kinds of expenses that make it difficult to save. However, it is easier to find money to set aside when you have a job than when you’re on employment. Make a category for savings in your budget and put as much as can in there each month. Check with your work to see if you can have two accounts for your direct deposit. If you can (and most workplaces who have direct deposit can), just put some money directly into your savings account. It can be easier if you never actually have the money to spend on other things. Do what you need to do so you’ll be a little bit safer if you lose your job.

What if I Don't Have Enough Money?

A question I frequently hear is, “what if I don’t make enough money to cover my expenses? How do I save, how do I avoid debt?”

Most people probably have more money than they actually realize. The first step would be to look at how much money you’re spending on non-essential items. When you start tracking your money and where and how you’re spending it, it can sometimes be surprising how much you actually spend that you weren’t even aware of.

The next thing to look at is what you have defined as essentials. Are some of the things that you spend money on really necessary? Right after I got out of college and wasn’t making much money, I decided that I wouldn’t have cable television. Although I definitely wanted it, I knew it wasn’t necessary and decided that it wouldn’t fit into my budget. What types of services or items are you purchasing that aren’t totally necessary?

It’s also good to look at how much you’re spending on your essential items on a regular basis. Make sure not to get complacent with your service charges, shop around and find the best deal. Can you save money by bundling your insurance, or switching to a new company? One note on this, make sure you don’t switch to save money if the new service doesn’t meet your needs; notice that I wrote find the best deal, not just the best price.

Practice delayed gratification. When you find something that you want, it can be really hard to wait to purchase it. But it’s much better in the long run to save up and wait until you can afford an item than to get into debt. See this clip from SNL called “Don’t Buy Stuff You Cannot Afford.” It sums this point up beautifully and comically.

If you are one of the few who truly cannot pay for your basic needs you’ll need to look into other options. Find out if you’re eligible for any aid programs, get a roommate to help with rent or the mortgage, try to find a job that pays more even if it isn’t your first choice of work. But most of us can use the tips in the previous paragraphs to find more money than we ever realized we had.

How to Use a Budget - Post #3

Now that we've walked through the steps of creating a budget (see here and here); we'll talk about how to use your new tool.

The purpose of creating a budget is to understand how much money you have available to actually spend so that you only spend that amount. Now you know how much money you can spend on eating out or buying clothes this month without getting into trouble. Although the real trick can sometimes be actually sticking to your budget. Let me point out that a budget that you don't stick to is a waste of your time. So how do you make sure that you're spending what you decided you should?

Although this is a little old fashioned, if you're having difficulty sticking to your budget here's a really helpful trick: Keep your money in envelopes for each category and only spend what you have in the envelope. Once your envelope for clothes is empty, you don't buy any more clothes until you earn more money to put in that envelope.

I'm obviously someone who likes technology, and I grew up on a debit card. But I found that it was difficult to keep our spending under control when my husband and I were both on the debit card for all of our purchases. So we moved to a cash only basis for our "free" money. This has been very beneficial for 2 reasons: We only spend the money we have on hand so we're sticking to our budget; and we frequently spend less than our allowance so we're able to save up for bigger "fun" items. Saving our unspent allowance is how we got the TV we have now.

A budget can help you to stop spending too much money, and it can even help you to stop spending money altogether on some items. If you find that your Starbucks habit just doesn't allow you to balance your budget, you could cut it out completely and stop spending money there.

Used correctly, a budget can be the tool that helps you to get your spending under control and truly manage your money.

How to Create a Budget - Post #2

This is the second in a series about how to create a budget. These steps take you through the mechanics of actually creating and working with a budget. Read here for the first three steps.

Step 4: Create categories for all of your money. These categories will be driven primarily by how you spend your money, and so you'll need to modify it for yourself; but here's a list to get you started.

Savings (yes, it's first on the list because you should make it priority for those inevitable lean times)
House - mortgage/rent, insurance, repairs
Auto - payment, insurance, fuel, maintenance
Food - dining, groceries, lunch money
Entertainment
Credit Card
Cash allowance (I know, cash is a little old fashioned, but it's easier to stick with the right amount on your "free" spending than using a debit card)
Charity donations
Daycare
Medical
Life insurance
Telephone - land line and/or cellular, ISP
Utilities - water, gas/electricity, sewage
Garbage Removal
Gifts
Vacation
License Plates
Television
Bank Fees
Business Expenses
Clothing
School Supplies & Fees

Step 5: Based on your tracking of how much money you spend, assign a certain amount for each category per month (or whatever time frame you're using.)

Step 6: Balance your budget. This is a vital step, your income has to be at least as much as your expenses. If you find your expenses outstripping your income, you will need to make some tough decisions about where you can cut back. Can you spend a bit more on groceries which will save money on food since it costs less than eating out? Can you check around and see if you can get a better deal on your insurance? Do you qualify for any assistance programs for your utilities or daycare? However you get to the bottom line, your income has to cover your expenses.

The next post on budgeting will talk about how to use this new tool to actually make a difference. Because that's just what a budget is, a tool. And no matter how fancy or thoughtful your tool is, it only works if you use it correctly.

How to create a budget - Post #1

I realized that I’ve posted several times and referred to your budget. But some folks may not know the mechanics of starting a budget. So with the new year approaching, I thought I'd post a series on the steps for creating and working with a budget.

Step 1: Determine what time-frame you’re going to use for your budget. The typical time-frame is monthly, but if you get paid on a different frequency and prefer to budget bi-weekly or bi-monthly, that works too. Just choose what works best for you, after all, it is your budget.

Step 2: Determine how much income you make during your budget time-frame. Please see this earlier post about converting your pay frequency to monthly (if you want to budget monthly); and how decide how much income you should budget if you aren’t paid on salaried basis.

Step 3: Figure out how much you’ve actually been spending. This is where your eyes can really be opened to where and how you’re spending your money. If you use software to track your checkbook, you should be able to run reports that will give you this information. If you don’t currently track your spending, you may have to start tracking it for a couple of months before you can really create your budget.

Please check back for the next post that details the next steps in the mechanics of creating a budget.

Can you have ANY fun with your money?!

During these times when everyone is feeling the pinch of the economy, we all hear advice that we have to be very careful with our money and watch every penny that we spend. I agree with that advice, but not to the same extent that I hear in some recommendations.


I agree that it is very important to make a budget and to understand where your money is going. But part of that budget should include some "fun" money. We all need to be able to spend money on things that we enjoy from time to time. You may not have enough money to spend much on fun activities, but you can probably include a little in your budget and set it aside each time you get paid. After you've saved for a little while you'll have enough for that small vacation, the trip to the amusement park, or whatever activity you and your family really enjoy.

I agree that it's important to be fiscally responsible, but you should be able to live life and have fun at the same time.

Cash only Christmas

With the holiday season upon us, the money spending frenzy is now beginning. Going into unmanageable debt so that you can buy gifts for everyone on your holiday list is not what the season is about. I'm not going to assume that I know what the season does mean to you, but I know that the people who really love you don't want you to put yourself in financial trouble just so they can have a shiny new gift.

I save money each month for Christmas shopping, so that I'm on a cash-only basis with my holiday shopping. If you haven't been saving for holiday shopping all year, you can still work to have a cash-only Christmas. Make this holiday less elaborate, and then start saving in January for next Christmas. If you're one of the lucky few still getting a year-end bonus from work, you could use that to pay cash for your gifts. Or you can get creative with your gift giving. Between families, friends, co-workers, children's teachers, etc.; the bill can really add up. This might a good year to give hand-made gifts. My mom always gives my grandmothers calendars with pictures of the family. They aren't terribly expensive, but they are very treasured.

If you work to get yourself on a cash-basis during the holiday, you give yourself a big financial advantage for the rest of the year.

How to manage your money when you don't make much

When you're not bringing home much money, you have to be even more creative about managing your money. Especially now in this time when we're facing extraordinary inflation on the essential items that we all have to buy. Here are a few things to think about if you have to manage a very small budget with shrinking buying power:

Are you spending money on non-essential items? If so, this is probably a good time to reduce that as much as possible, and make sure you're saving up before buying any big items.

Are you shopping at the least expensive grocery store in your area? I wouldn't travel too far away to find the cheapest price since that could waste gas or mean a larger bus fare, but most communities have more than one store choice fairly close. And make sure to look for the generic brands with the same ingredients, but a smaller price tag.

Have you shopped around for insurance and found the best price? Check with your benefits department at work to see if they have negotiated any group rates on home or auto insurance; or check with your insurance agent to make sure you've got everything bundled and are getting the best rates.

Have you adjusted your thermostat? If you turn it down a few degrees this time of year and wear a sweater inside, it can save money on your utility bill, and research shows you sleep better in cooler temps. Also, make sure to check with your local utility company to see if they have any assistance for your income level.

Do you turn the water off when you're not using it? I'm pretty good about doing this, but my kids aren't. So I try to remind them when they're brushing their teeth to shut the faucet off. This won't save a ton of money, but it will save some, and every penny helps these days.

Do you shop at thrift or second-hand stores for clothing? If you have kids (who seem to grow an inch a week sometimes!), this is an especially money-saving way to shop. Many of the clothes are in very good condition because another child outgrew them before they could ruin them.

Do you walk or ride your bike when it's reasonable? It saves on gas if you don't start up the car to make a trip 2 blocks over.

As an added bonus, some of these tips are better for the environment and your health (and being healthy can also save money)!

How to Make a Budget

So I've told you that in order to get out of debt you have to plan for paying that debt down, but how do you go about making that plan? By making a budget. But how exactly do you go about creating a budget?

The first thing you have to know is how much income you earn. If you're salaried this is pretty easy to figure out. The only small challenge here is figuring out the timing if you aren't paid monthly or bi-monthly since most of your bills will be monthly. If you're paid bi-weekly, you have a choice about how to budget your income. You can either multiply your salary by 26 and then divide by 12 to figure out a monthly amount, or you can budget for 2 checks per month and the two times per year that you receive a third check, this can be extra money. The other option is to plan the timing of your checks and plan certain checks for certain bills. The method you choose here should be the one that works best for you.

If you are paid hourly, piece rate, or any other type of rate that doesn't guarantee the same amount on each paycheck, figuring out how much income to count on can be more difficult. You can figure out an average of the amount you bring home on each paycheck, or you can figure out a minimum that you always bring home and treat any additional amount as extra just like the salaried method.

The next step in budgeting is determining what your expenses are. Some of your bills are easy such your mortgage or rent, daycare, car payments and other set expenses which just get plugged into your budget at the amount you pay every month. Bills like utilities, groceries, gas, clothes, etc. are more variable and you'll probably need to figure out on average how much you spend on those bills each month to plug into your budget.

You may find that after you put down all of your expenses, you're spending more than you make each month. This is frequently part of the problem with going into debt, when we continue to add expenses without making sure that our income can support the additional expenses. If this happens, the solution is either making more money (good luck and let us all know if you figure that one out!), or cutting your expenses. Maybe you'll find that you've been spending about $200 per month on clothes. So you can look at spending $100 per month, and not allowing yourself to spend any more than that. If it's your utilities that are causing you to blow your budget you can try setting your furnace 2 degrees cooler and wearing a sweater in the evenings; or spending a little bit of money and getting a programable thermostat. If it's your grocery bill, look for coupons or try a generic brand of your favorite food. The key to getting your finances back under your control is to spend less than you make; and having a full understanding of how much you make and how you're spending that money is the first step.

How to Eliminate Debt

Nearly all of the advice you read or hear about money management recommends not spending more money than you make. But what do you do if you've spent more than you should have in the past and you're carrying unwanted debt? You make repaying that debt part of your budget.

I once worked as a Before and After School Program director at an Elementary School. When I took over as Director of the program, it was $40,000 in debt on an annual budget of about $160,000. Getting the program back to it's self-sustaining status was a pretty daunting challenge, but one I was willing to take on.

I drafted a budget for the program which included that debt as a monthly expense so that it would be paid off by the end of the year. This plan meant having to cut spending in other areas. We accomplished this by doing a few things differently than we had in the past. We went through all of the craft cabinets and cataloged all of the leftover supplies from old crafts. We then planned our new crafts around those old supplies instead of always buying new supplies. I scheduled the staff differently so as our numbers went down in the late afternoon, staff went home, which worked well for the high school students working in the program. I also worked with families who were behind on their payments to help them to make plans to get caught up.

By the end of the school year the program was not only out of debt, but had a surplus of $4,000 that we were able to donate to the school to buy a marquee sign for the front of the building. My daughter goes to that school now, and every time I see that marquee sign I remember what good money management can accomplish.

So if you're carrying debt that you’d like to get rid of, make it a part of your budget. Decide how much you can pay each month and pay that amount. You'll need to include any interest that you owe as part of the budget or you might just feel like you're only staying even, and absolutely make sure that you’re paying more than the minimum amount required. This might mean making some cuts in other areas, but the result is well worth a few sacrifices. If you stick to your payment plan each month, you’ll be able to get rid of that debt and rest easier in the knowledge that your financial situation is much more secure.

The Secrets of Successful Money Mangement

There are really only two things that you need to know to successfully manage your money:

1. Know how much money you earn and how many bills you have to pay (a.k.a. "budgeting"). Most of us have heard the old adage that you shouldn’t live beyond your means, spending more money that you earn. Easy to say, not always so easy to do. Knowledge and planning are what allow you to heed this oft-given advice.

2. Delayed gratification. If your water heater goes out, it's probably a good idea to accept some debt so you can get it repaired and not go to work with hypothermia or unkempt. But if your old television set works perfectly fine but you really, really want that large-screen LCD crystal flat-panel set, you should probably wait until you’ve saved up enough money to buy it rather than purchase it on credit.

If you can make a realistic budget and stick to it by controlling your spending and saving up for new purchases, vacations, etc. in advance, you'll be well on your way to successfully managing your money.