Saving Idea – Reuse

I beleieve that in North America we have been conditioned to consume and throw out. When we purchase a product we use it and when it gets a little old we toss it and get a better model. Take a look at your cell phone, if you have one, did you replace it within the last year or two? Chances are that you did and your old cell phone was still perfectly functional; it was replaced simply because there was a better model out there for us to use. Rather than simply buying new all the time this weeks saving idea suggests that we reuse some of the items that we throw out. I will not pretend to be any different from other consumers, I too buy products when I might not NEED them. But I do try to reuse whenever possible.

A perfect example of this occured for me a couple years ago when my friend was moving out of town. He was never big on cell phones and didn’t have his own. Because of the move he was contemplating getting one. When he told me this I offered to give him an old cell phone of mine. I had purchased it as part of a pay as you go package. I changed packages and cell phone carriers a couple months after making the purchase and had kept the phone. In the end I gave my friend the phone and he’s still using it. We were able to reuse an item that would otherwise have cost him a bunch of money.

Opportunities to reuse items are all around us and it doesn’t have to be for big ticket items only. We have jars of rice at home that were once salsa jars; this keeps the rice protected and from spilling. I could have purchased special jars or containers for this but why when I had some perfectly good containers available. Printed pieces of paper have been turned into little scraps for notes so they can be reused before they are recycled. Getting into the mindset of reusing items isn’t always easy because we are so used to buy use and throw out that we don’t even realize that something might have a second use or could be useful for someone else..

Saving ideas are posted on Fridays as suggestions on how you could save yourself some money. If you have a saving idea send it along to matt@onemillionandbeyond.com.

The Fluid Budget

Budgeting by definition means allocating a certain amount of money for a task or activity; it is an estimated or planned amount of spending for whatever category you decide. In my opinion the whole budgeting process is always a work in progress because when you create the budget there will be unknowns that you simply can’t account for.

This past week I recieved a comment from a reader that indicated that once you reach the budgeted amount of money spent on something that’s it you can’t spend more. This user challenged my budget creation process and I wanted to pause and think about it. My initial reaction was to get a bit defensive but after a moments pause I started questioning my budgeting process and approach. The reality is that when you create your budget this is your planned or ideal spending for the week and not the reality.

A budget can’t be static

If you did the same things every week and absolutely nothing changed from week to week then you could simply create a budget and stick to it exactly. But in that situation there would be little need for a budget because once you created one budget you would never need to do another one. Life is a series of changes and no two days or weeks are the same so when you create your budget you have a set of expenses in mind there will be circumstances that force you to sepnd differently than initially planned.

The perfect example of this would be the food budget for the week; if you plan on spending lets say $100 but when you get to the store it turns out that your groceries cost you $105. Do you put something back to make the amount exactly correct? If you’re trying to save money and be very concious of your spending then you might. But on the other hand if you need all $105 of food in order to feed yourself would you put something back and go hungry? Personally I would spend the extra money because I don’t want to go hungry and if necessary I can find the extra $5 from a different category.

Circumstances will dictate what you need to spend your money on and those will in all likelihood be different at the time you make your purchase than when you were coming up with your budget. There has to be a certain amount of flexibility in your budget in order to account for the changing circumstances of life.

Changing your behaviour to meet your budget

For me the goal of budgeting is to help me change my behaviour in orderr to not overspend and to know where my money is going. The commenter challenged the fact that I overspent on a vice (alcohol); he was 100% right to challenge my overspending. If I say I’m going to spend $65 on alcohol then I should do everything I can to stick to that amount rather than spend double even if it means I should change my behaviour to accomplish this.

If you intend to stay on budget you need to make concious choices to remain within what you were planning to spend. So going back to the grocery example if you intend to spend $100 on groceries for the week and the cashier rings up $105 and there is $10 in items that you want but don’t really need (say chocholate bars and chips) then you should take those items out to remain on budget. Adjust your behaviour to stay on budget.

In my particular case the month of July was more for understanding how and what I spend my money on in order to create an accurate budget. Do I need to spend as much money on unnecessary items such as alcohol and smokes? No I don’t but I am also not in a situation where hurt my financial situation by spending the money (though I don’t improve it either). This week I am actually making a concious effort to remain within what I’ve allocated for each category; but even then in my opinion a budget needs to have some flexibility.

The Fluid budget

My personal take on the buget is that it needs to be fluid. If you intend to spend a total amount of $1000 for the week then you should not go above that amount, but if you spend more or less than you planned in each specific category is not nearly as important. You need to adjust your spending to make sure that overall the budget is maintained so an extra $5 spent on food should translate to $5 less spent in another category. This type of flexibility allows you to deal with situations without any added stress. You might forget that the baby will need diapers in a given week but spending less on gas, food and miscelaneous items can let you cover the cost without any negative impact.

As long as you are living within your means having fluidity in your buget makes perfect sense and in my opinion helps you keep the stress that’s often associated with money down.

Pay Yourself First – Then make everything else work!

One of the key concepts in a lot of personal finances books is that you need to pay yourself first and I couldn’t agree more. This past month I have been tracking my spending in my weekly budgets and for those of you who have been keeping up you might have noticed that I quietly added an investments line in my weekly budgets. This wasn’t done by accident! I have set up a small withdrawl from my account that coicides with my pay and by small I am contributing a grand total of $50 every pay into a mutual fund.

I haven’t really felt any significant change in my lifestyle or other spending as a result of this $100 per month. While I’m still living a bit beyond my means it also doesn’t mean I’m forced to eat macaroni and cheese for my meals to make it work. I have been using my weekly budgets to get an understanding of my spending habits to get them under control in order to live within my means while paying my debts down. This isn’t going to be a quick and easy fix but as part of this whole mix is my need to set aside some savings even if meager.

At the end of June I had no savings and as of today I’ve got $211.11 in that account (there will be another $50 going into the account later this week). I know that this is a paltry amount and wouldn’t really matter in the grand scheme of things but I am Paying myself first. By the end of the year I should have close to $750 (or more) in that account and while this isn’t quite enough to retire on it is enough money to cover a few emergency expenses if they come up.

Why Pay yourself first?

For years now I had intended to set aside money in some basic investments and always planned to do so with budgeted money. Unfortunately I always planned to make the contribution at the end of my budgeting period. Regardless of if it was two weeks or a month I always thought that I would put money in just before I got paid. My logic was always that this would give me some money to work with just in case. This is a load of horse shit and a big stinking one at that. By paying yourself first you force yourself into making the rest of your budget work.

I am not advocating that you set aside 50% of your budget to investments or savings when you get paid (though if you could do that then you’re doing something right). What I am suggesting is that if you want to build up some form of savings account put the money into the account the moment you get paid. This will force you to make the rest of your money last till you get paid again. I am currently tight for cash and setting aside a few hundred dollars per pay would probably make my day to day life a bit tougher, but I know I could afford $50 so thats what I put in. It doesn’t affect my quality of life nor any bills (I am capable of missing those with or without the $50).

It adds up!

That small amount that I’m setting aside translates to $1200 a year and I’m not really making any changes in my life to get that. The best part is that this money is already starting to grow. While I’m not a financial advisor nor a junior Warren Buffet I will suggest that if you’re going to do this speak to a professional. If you’re only investing a small amount there might be perfect investment vehicles for you to get the best return on your money. I am using a couple mutual funds for my investing purposes and until I have more funds to invest with this will be my vehicle of choice. If you don’t know much about investing it shouldn’t stop you from building your savings, even an ING account will add up to $1200 a year with my contributions.

The moral of the story is that even if you’re tight for cash by paying yourself first you can start a small savings or investment account. Remember even a small savings account is better than no savings account.

Weekly Budget – Week 30 (July 27 – Aug 2)

Life is back to normal this week, the baby is back home and we’re grateful that she is. Had you asked me what I would have thought of my daughter leaving for a week a couple years ago I would probably have looked at you funny. First off a couple years ago there was no baby in the picture and only discussions of one so I would never have conceived my life changing so much. While it doesn’t mean that life is slower nor any less hectic if anything more so but the priorities are a bit different. Unfortunately as this month has shown I am still struggling with a few of the same demons financially. Here is this week’s budget:

Budget Actual
Alcohol $65.00 $0.00
Food@Office $25.00 $0.00
Food $125.00 $0.00
Gas $20.00 $0.00
Entertainment $0.00
Smokes $50.00 $0.00
Misc $50.00 $0.00
Transportation $18.00 $0.00
Stupid $0.00
Bills $397.37 $0.00
Baby $50.00 $0.00
Investment $50.00 $0.00
Total $850.37 $0.00
Updated July 27, 2009 – 11:00 pm

Its been a few weeks since I started my weekly budgeting back up again and I am starting to understand where my money is going far better. I know there are a few of you out there ready to throttle me because its rather obvious. For as much as you are correct I wanted to take the slower approach to getting to the bigger picture. I knew I spent too much on smoking and drinking and watching my spending has pointed out just how much. I didn’t try changing my lifestyle in some vain attempt to get everything under control. Convince a hard core smoker or coffee drinker to quit cold turkey without any preparation – my only comment is good luck if you have to live with them.

My goal with this month was not to dramatically alter my spending but to get a strong understanding of where I was spending my money and for the most part it was going where I thought it was. I didn’t think I spent over 16% of my total expenses on the car or some form of transportation; that was a bit of a surprise. The food and housing costs were where I was expecting them – give or take. Now that I really have the bigger picture in August I will start curbing some of the unnecessary spending; in order to get under my budget from week to week. This won’t be perfect by any stretch of the imagination but I think it would be nice to cut back on some of the smoking and drinking spending and put that either onto the credit cards or into investments.

Speaking of investments although I might have had limited success this month with the budgeting I did suceed in one thing and that is to start setting aside some money even if a tiny portion. I’m paying myself first – even if its very little. One has to start somewhere.

Week in Review (July 20-26)

This past week was a bit of a strange week for my wife and I because our baby daughter spent the week with her grandparents at a cottage. Most parents have no problem with the grandparents looking after their child for a week. Many of my favorite summer memories come from weeks spent with my grandparents. There is one difference – I remember these weeks where our daughter is still a baby. It was sad not to have her there and nice to be able to sleep a little. The spending this week was different from most weeks because the food budget was not consumed by grocery bills but by eating out a couple times (mostly because we rarely get a chance). Here are this weeks numbers:

Budget Actual
Alcohol $65.00 $59.29
Food@Office $25.00 $16.73
Food $125.00 $165.09
Gas $75.00 $62.33
Entertainment $50.00 $87.56
Smokes $50.00 $41.06
Misc $0.00 $5.70
Transportation $18.00 $18.00
Stupid $0.00
Bills $140.00 $143.26
Baby $0.00 $38.99
Investment $0.00 $0.00
Total $548.00 $638.01
Updated July 27, 2009 – 10:30 pm

When you look at the bottom line I was over budget and there’s nothing that can change that fact; now the good thing was I was only $90 over budget. Unfortunately I was $90 over budget. But this was a week of spending the way I used, eating out rather than cooking and driving a lot more than I do now. The net result was we spent money where we normally don’t spend money. It was nice for a week to have some fun and eat out but at the same time I forgot just how expensive it was and we just ate out! I can only imagine what it would have been had we gone and ‘partied’ as we did in our twenties.

Now onto the other categories, it seems that I spent less on smokes and drinks than I have in the past couple weeks or at least these were moderately under control which was nice. I did forget to include money for miscellaneous items and I purposely left the baby item empty. While I spent in both areas the misc items were a lot less than they have been which was rather nice.

The net conclusion from this past week? While it was nice to be a little spontaneous I missed my daughter and wouldn’t trade randomly going out to dinner for seeing her smile before at the end of a day of work. And although I do enjoy going out to dinner once in a while I don’t enjoy the prices anymore. I have slowly turned into a practical parent type and I’m glad for for it. Now I just need to become the out of debt practical parent type.

Saving Idea – Getting Rid of your Home Phone

It seems that everyone has a cell phone now a days and reception is strong and clear in a great many places. This begs the question why do we have home phones? Until recently my wife and I didn’t have a home phone and we only got a land line because my wife was going to be at home with the little one. Since she’s back at work we have gone back to not needing our home phone, yet we haven’t gotten rid of it yet.

If you’re in the same position as us you really don’t need to have both a cell phone and a home phone so why not get rid of the home phone? You can save yourself a bunch of money by doing this. In our case if we were to get rid of the home phone we would save about $40 a month on our monthly expenses if we did. Although this extra $40 per month isn’t a lot it does add up over the course of a year, to a total of $480. If you have a balance of $5,000 on one of your credit cards this is 10% of the total.

Why get rid of the home phone?

The main reason the home phone has become more of a liability than anything else is that you don’t get any benefit from keeping it. A cell phone is equally good and it carries with it the benefit of being portable.

Saving ideas are posted on Fridays as suggestions on how you could save yourself some money. If you have a saving idea send it along to matt@onemillionandbeyond.com

Playing Catch up on bills is a budget killer

My weekly budget for last week looked riddiculous at first glance. Without context seeing that I’m spending about $1800 would probably startle even well off people. Why is this amount so high? The answer is pretty simple, I’m playing catch up on one of my bills.

Last month I wasn’t paying close attention to my finances and I missed a payment on my line of credit. By the time I realized this I didn’t have enough money to cover it without digging deeper into debt. So rather than paying a little and hoping I had enough money for my day to day expenses I decided to double pay this month. I called the bank up to let them know and made arrangements for the payment (I highly recommend this if you happen to miss a payment since banks are often gracious if you do and will forgive a single missed payment).

The impact of playing catch up this way is that I have to pay $900 to my line of credit this month and my budget is a bit tight for the rest of the month. Had this been a credit card payment I wouldn’t have had to pay nearly as much but it turned out it was my second largest bill (next to my mortgage).

This is a perfect example of what can happen if you’re not paying close attention to your finances. A simple slip up means that I am now going to have to be very carefull till my next pay. This is also another example of why you need to have an emergency fund. We all make mistakes from time to time and haivng some money saved can help prevent the need to play catch up.

Week in Review (July 13-19)

Last week was a very expensive week for me in that I was playing a little catch up with my bills. The net result is that I spent almost two thousand dollars last week. Other than the bills I spent a bit too much money on a few items but before I get into the details here are last weeks final numbers:

Budget Actual
Alcohol $65.00 $123.30
Food@Office $25.00 $26.87
Food $125.00 $148.91
Gas $75.00 $105.50
Entertainment $0.00 $0.00
Smokes $50.00 $59.60
Misc $115.00 $35.85
Transportation $18.00 $23.50
Stupid $0.00 $0.00
Bills $1337.37 $1313.19
Baby $0.00 $63.14
Investments $50.00 $50.00
Total $1860.37 $1961.35
Updated July 20, 2009 – 12:29pm

My bills ended up being a bit less than originally budgeted simply because I was guestimating one of them to be $140 and it turned out to be $115 when the amount came out of my bank account. This was a pleasant surprise. What was an unpleasant surprise was my spending in pretty much every other category with alcohol spending being the largest surpise. I spent nearly double my budgeted amount on this; other than simply purchasing more expensive items and a bit more than we would normally buy I can’t see any reason why this ended up going up so much. We purchased a bit more because we went up north to a cottage and got some for everyone but this wouldn’t account for the large discrepancy. This will be an item that needs a lot more attention going forward.

The gas costs and food costs were higher than I expected and this is simply due to the trip to the cottage, although this cost is coming up again this week overall the extra spending here is what I would call within acceptable limits.

Another item that is now visible on the list that was not included in previous weeks is an investment category. I have decided that I need to start setting aside some money in mutual funds every pay or I will likely spend the money on day to day living expenses. A $50 bi-weekly contribution isn’t significant but it will add up over time.

Overall I’m a little surprised at my spending and I’m also glad that I have been focusing on my weekly budgets so much because I am starting to realize why I have been living beyond my means. This weeks budget is less of a data collection activity and more of a target for each of the line items. I think the hardest item to meet will be the alcohol spending simply because it seems we spend way too much money on it.

Weekly Budget – Week 30 (July 20 – 26)

This week’s weekly budget will be a bit back to normal numbers since almost all of my bills were paid last week. The middle and the end of every month always see spikes in my spending which is why I have leaned towards avoiding displaying that information in the past. I have done a preliminary review from last week and it seems that with the exception of the alcohol item I am starting to fall within what seems to be a normal range. Here is this weeks budget:

Budget Actual
Alcohol $65.00 $0.00
Food@Office $25.00 $0.00
Food $125.00 $0.00
Gas $75.00 $0.00
Entertainment $50.00
Smokes $50.00 $0.00
Misc $75.00 $0.00
Transportation $18.00 $0.00
Stupid $0.00
Bills $140.00 $0.00
Baby $0.00 $0.00
Investment $0.00 $0.00
Total $498.00 $0.00
Updated July 20, 2009 – 12:300pm

This will be the last week where I am simply collecting information, I am pretty comfortable knowing how much I spend from week to week and how a change in my weekly routine will affect my budget. This week will also be a bit of a test to see if I will be able to maintain my food and alchol spending as those seem to be the items that are both often over budget and items that could be decreased.

Another item of note is that because the little one is with the grandparents this week we won’t have any baby related expenses; to offset any possible expenses with the baby will be the fact that my wife are going to go out once or twice to treat ourselves. I know that this is something that should be avoided when trying to stick to a budget but we haven’t treated ourselves in months and from time to time its worth it. I’ll be posting my review of last weeks spending later on this evening.

Saving Idea – Get rid of your Cell Phone

Suggesting that you get rid of your cell phone 10 years ago would have been a good idea! Its scary how quickly change happens sometimes. About 11 years ago I purchased my first cell phone and I was one of the few people I knew that had one. Its not that they were uncommon but they were not as popular as they are today. Last week I posted about cutting back on your cable to save money and cell phones fall into the same category (for the most part). You can drop your cell phone altogether and save yourself a bunch of money.

Personally I would rather have a cell phone than having a home phone so this saving tip is not something I would likely do unless I was really strapped for cash. But that doesn’t mean this is a bad idea; if you don’t use your cell phone very much and you use your home phone all the time why would you continue to pay for both? Cell phone packages can range from the pay as you go variety all the way to the hefty data plans that costs hundredsof dollars a month. Cutting this out can save you loads of money.

If you can’t get rid of your cell phone: cut back!

Cell phone providers give away phones now, expensive phones, just to trap you into one of their long term contracts. I know I have one of those phones that would normally cost a couple hundred dollars if I was to buy it in the store. But you don’t have to get all of the extra packages that they’re offering. Again I hesitate to use a specific example because the costs range so much from place to place but I pay $11 a month for my texting package. This package allows me unlimited texting from my phone. Great idea if I sent a lot of text messages but I don’t! I send maybe 20 messages a month and receive just as many. If I didn’t have the package my text messages would cost me 10 cents. Doing the math without the package I would pay $4 a month for my use instead of the $11 (an instant savings of $7 a month).

If you want to save yourself some money get rid of your cell phone! That $50 or more dollars per month adds up to $600 per year! And if you simply can’t get rid of your phone look at how much you’re paying maybe there are cheaper packages out there (or you can remove those that you don’t use).