1)No savings. You don’t have a rainy day and
an emergency fund.
2)Your credit card(s) are maxed out.
3)Once you have paid down your card you go
shopping.
4)You don’t pay your credit card off in full each
month (unexpected expenses are not an excuse. You should have a rainy-day fund
and an emergency fund. See #1). You only
pay the minimum.
5)You apply for a new credit card because yours
are maxed out.
6)You have been denied credit.
7)You take cash advances on your credit card.
8)You are still spending money on non-essentials
when you have credit card debt and no savings. You know, stopping for a latte,
going out to eat, doing every activity your kids want to, buying your kids new clothes for every function under the sun when they have perfectly good clothes at home….
9)You keep refinancing your house and taking money
out. You owe more than your house is worth. Or you have two or more mortgages.
10)You can’t refinance your mortgage to take
advantage of low rates because you credit score is lower than a politician’s
IQ.
11)You haven’t pulled a credit report in the past
year, or ever. Want one? You are entitled to one free one each year. Don’t go
to one of those websites that you see ads for.Go to www.annualcreditreport.com,
the only official site, to get them. All other sites are trying to up-sell you something.
12)You borrow from friends and relatives to meet
everyday expenses.
13)You have no money leftover at the end of the
month.
14)You bounce checks.
15)You lie about your finances to your spouse,
family and friends.
16)You are stressed about money and can’t sleep.
17)You fight with your spouse about finances.
If more than a few of these apply
to you. Through your own fault (overspending, not saving etc...). Or through happenstance (long term unemployment, medical emergency etc...) Get help. There are plenty of free financial counselors out there.
Check local organizations first; churches, civic groups, your town government, assuming your town actually balances their budget.
Weather: 75 and sunny
Time of Day: 11:30am Distance: 6.03 miles Time: 52:46 Pace: 8:45
Running Shoes: Saucony Mirage in red
SCD Running Shoe Ranking: 9 Comments: Slow easy run. Great weather for July. Love the Saucony Mirage's, great shoe. Run Streak: Day 981 in a row
Step 3 – what to do with all this extra money you now have lying around
Now that you have tracked you spending and created a budget, you should have some extra funds to allocate each month. Once one stops buying more junk and eating out a lot, there tends to be a bit of extra cash at the end of each month. In some cases a Large Bit. In our case we were able to trim about 15% from our spending. All of which is being dumped into our investment/retirement accounts. We are already debt free, including our mortgage, and we have sufficient savings for an emergency. So our #1 priority is saving for retirement.
What should you do with it? Payoff debt, start an emergency savings account, invest it,
put it in your retirement accounts, get liquored-up, buy a Harley and get tattooed?
Priorities in my preferred order:
·Start a rainy day and an emergency savings
account (2 different things). In conjunction with this also start on the next
step. A rainy day fund is a few thousand dollars set aside for smaller
problems. Car breaks down, house needs minor work, the wife decides she needs Botox
etc…an emergency fund is much more money, usually defined as 3-6 months of
living expenses. This is for when something really bad happens: job loss, car
needs to be replaced, the zombie apocalypse, teen gets arrested, Obama becomes
dictator for life…3-6 months seems like over kill to me. Do whatever is comfortable for you.
·Payoff credit card, student loan, auto and any
other consumer debts (excluding your mortgage). More on debt payoff in a later
post, but for now an easy way is to pay as much as you can on the debt with
the highest interest rate and just pay the minimums on the others. Once that
debt is paid off, keep repeating the process with the other loans. Some people prefer the "snowball" method, Google it. Basically you payoff the smallest balances first, then attack the next smallest and so on.
·Invest for retirement
oContribute enough to your work 401k to get
the employer match
oMax out your IRA (Roth or regular depending on
your circumstances) and your spouses. $5,500 each. $6,500 if 50 or older*
oMax out 401k. $17,500 max currently. $23,000 if you are 50 or older geezer.*
oSave in non-retirement accounts
·Save for the kid's college. We don’t do this. Our
kids pay for their own schooling. More on how that has worked out for us in a future post.
All of the above will be discussed in greater
detail in future posts.
*401k's have lousier investment selections than an IRA at a place like Charles Schwab, and they usually change very high fees.
Your beanie baby collection is not going to pay for your retirement. Neither are your Precious Moments figures, Hummels, Velvet Elvis and Dogs playing Poker pictures, Pet Rock, Mood Ring or any other silly fad. Collect them for fun if you want to, but don't expect others to want to pay you a small fortune in 30 years for your Tickle me Elmo.
Monday, July 29, 2013
Weather: 65, Sunny and breezy Time of Day: 7:30am Distance:10.16 miles Time: 1:20:08 Pace: 7:52 Running Shoes: Nike Lunar Glide 4's in Black and Green SCD Running Shoe Ranking: 9 Comments: Progression run. 10 second per mile decrease in pace. from 8:40 down to 7:10 Run Streak: Day 980 in a row
Place a 12-32 ounce plastic bottle in each of your toilet tanks. Place some rocks and/or water in the bottle to weight it down. You will now save 12-32 ounces per flush. You can try larger bottles but you might end up flushing twice and defeating the purpose.
Our toilets are the newer 1.1 gallon tanks. When we had the older 2 gallon toilets I could put a gallon jug in the tank and they still flushed fine. I have a 16 ounce bottle in each of my toilet tanks currently and they flush without issue. Except when one of the little kids decides to use half a roll of TP to wipe.....pee.....
Saturday, July 27, 2013
Weather: 70, Sunny and Humidity creeping back in. Time of Day: 9:00am Distance:12.97 miles Time: 1:48:04 Pace: 8:19 Running Shoes: Nike Lunar Fly 2's in yellow and green SCD Running Shoe Ranking: 8 Comments: Good running weather for July. Had a decent run. Legs felt good. Only a few crazy yard-sale people tried to run me down. Women looking for bargains are dangerous behind the wheel.....them and the Nigerians. I think they learn to drive too late in life and they love garage sales.
Budgets? We ain't got no budgets. We don't need no stinking budgets!
It is tough enough juggling (its akin to cat-juggling) and paying for a large family without
the added stress of having a financial mess that rivals the current mess that
is The Kardashian’s. When dealing the extra challenges of raising a
large family (all worth it of course, wink wink), do you really want to be in financial distress?
I didn’t think so.
No a budget isn’t a magic wand that makes everything alright.
But it will help give you some financial peace of mind. And any task that can
reduce stress is a thing worth doing (smoking weed being an exception).
I’ve seen budgets with anywhere from 3 (needs, savings,
wants) up to 70 categories, yes 70. My current budget spreadsheet as 22
categories and next to each category is a column labeled “budgeted” and one
label “actual”. There is a 3rd column labeled remaining that tells
be how much is left in each category or how much I have gone over. Plus the
columns are totaled at the bottom for the big picture view. I also have a table
to track my income. And then there are columns and rows were I list every
purchase made it each month as they happen.
It may seem like a lot of work. But once you have the initial
setup done it’s not hard to use at all. You do have to enter everything you
spend money on but I enjoy doing it. And it gives you a great handle on your
finances. And at the end of each month you know exactly how you did. You are
either in the red, black or even-Steven.
If this seems overwhelming than maybe a simple 3-category
budget might be better at first. You first list all your needs and how much
they will cost you. Mortgage, food, utilities, charity, insurance etc…and no,
going to Five Guys for a burger and fries is not a need (although it is pretty
close). Neither, sadly, is shopping at Victoria Secrets a necessity. Second, you write down the amount you want to use for savings and paying down
debt. Then whatever money is leftover goes in the “wants or blow” category. Just remember
once you have spent everything in the “wants” category, you are done for the
month. So plan well. This is an easy way to get started on budgeting until you
feel that you are able to switchover to a more detailed budget. Some people do
just fine on the simple budget but I find that I do better on the more detailed
one.
Just because you have money left in a category doesn’t mean
you can spend it. Let’s say it is the last day of the month and you have $10
left in your food category. Should you rush out and buy a box of Ritz crackers,
a can of Cheese Whiz and a bottle of Mad Dog 20-20? Or should you add that $20
to your retirement account or apply it to a credit card balance?
Here is a mocked-up sample of the spreadsheet I use.
Where does one start? For beginners or those in trouble or those
whose finances just need an overhaul, you have to start somewhere. You can’t do everything at once. You’ll be overwhelmed
and do a half-bottomed job at it. So if you are swimming in debt and can’t get
a handle on your finances, don’t fret. Just do like Bill Murray in the movie What about Bob? And take baby steps.
Step 1 – Track your spending
Track your spending
for a month or two before attempting to make a budget. This will tell you where
all your money is going each month. I bet you don’t know, I sure didn’t. Do this
even before you attempt to make a budget. Having a month or two of detailed
spending will make budgeting a lot easier on you. If you are to ADD or
impatient to do it for this long try and do it for at least 2 weeks.
You may also be able to do this in reverse and go through
the last few months checking and credit card statements. If not, start
recording everywhere that your money goes. From your double-whipped-caramel-skinny-latte
at Fourbucks to your mortgage payment, track it all. Make some basic categories
and first list all the fixed expenses that you know you have each month:
mortgage/rent, utilities, phone etc… Then add in everything else you spend
money on that month, write it all down or use something like excel or an online
tool like Mint. I personally prefer using an excel spreadsheet for expense
tracking and budgeting. Christian Personal Finance has a list of good ones (http://christianpf.com/10-free-household-budget-spreadsheets/).
I use the one called “Personal Budgeting Spreadsheet”. It is in Excel format
and you can customize it to fit your needs, and it’s free.
You might think you know where your money is going, but I think
this will be an eye-opening exercise for some. You might find that you spent $150 last month
on toys for your Mr. buttons, your cat or $300 on running shoes. I’ve done that
before. Running shoes are a necessity, right?
After you have an idea of where the money is going, start
thinking about ways to cut your spending so you can increase your savings rate
and/or pay down debt.
Also think about just how frugal you want to be. Maybe you
are doing alright and just want to cut the fat a bit so you can boost your retirement
savings. Or maybe you are living paycheck to paycheck and drowning in debt. There is no right answer to how much you have
to slash from your spending. Some people, like my wife and me, are very frugal
and refuse to go into debt for pretty much anything at all. We did finance our
house but have since paid it off. We prefer a nice home cooked meal to swinging
into the drive-thru at McDonald’s or Pizza Hut. Besides being very expense to
get meals out for a large family, the food at most fast-food joints and chain restaurants
is nutritional garbage. So let’s see $75-$150 for low-grade dog food at a place
like Burger King or Applebee’s, or $20 bucks for a nice meal at home? Tough choice.
And yes I can feed my family dinner for $20 and no that is not Ramen noodles
and PB&J. We spend an average of $46 dollars per day on food, but that’s a
subject of a future post.
So as you read how we
go about organizing our finances and what we spend our money on, just remember that
this is how we have chosen to live. It’s certainly not the only way but it is
the best way for us. We enjoy seeing how much we can save and we look forward
to actually being able to retire and have some $$$ cause it’s not like we can
count on Social Security.
Personally I’d much rather save my money than by junk-food
and more crapola for the house.
How much can you save after slashing your budget to a more
reasonable level? Well here is a teaser from a future article, we save 30% of
my income each month. And no I don’t have a high paying job, just a regular old
job. Above minimum wage obviously but not some high flying salary. And lower than
most of my friends who have fewer kids and are struggling to make it
financially. It’s about choices people. Sure we all have bad financial luck at
times…car breaks downs, kid needs braces, hours get cut at work…stuff happens. That’s
why you have to plan and be prepared. We live in a very high expense area so it
can be tough at times to save a third of my income but it is worth it to us. My
bride, who works much harder than I, sadly does not get paid monetarily.
After tracking your spending for a while you’ll be ready to
make a budget and get your financial goals on track. Wait! You do have Financial
Goals don’t you? If not, start thinking about them. This can be part of Step 1.
Maybe you want to pay off your student loans or your credit cards. Maybe you
want to expand your garden gnome collection or your vintage Barry Manilow
8-track tape collection. Maybe you are getting older and have neglected your
retirement planning. Maybe you are retired and just need to fine-tune your
finances so you don’t run out of money in your dotage and have to live off of
Alpo.
If you find that your finances are completely hosed, you may want to try a "spending fast" for a certain period of time. Think Lent, but instead of meat-less Fridays, you don't spend any money on non-essentials. We are doing one for the month of July and are almost finished (another future post). I'll be the first to admit that it has been difficult. I thought it would be a breeze for us since we don't shop a lot. I was wrong. You can see my wife's blog for her thoughts on how it has been going. I sure do miss the UPS driver and the lovely Amazon packages he used to bring me regularly.
