Category Archives: Budget

Taking Control Step 2: Where Are You Going?

It’s been almost six months since I started this blog… and it’s taken me almost six months to finish this post…

Once you know where you’re at financially, it’s time to see where your going.

To find out, track your expenses. Just because you have money left over every month doesn’t mean you aren’t wasting  any. And I’m talking about wasteful according to your goals and desires, not what others might call wasteful, so if you really like that $4 cup of coffee and you can afford it, enjoy. On the other hand, if you don’t have any money left over, is that $80-120/month really that important to you?

I use to track my expenses. It’s automatic, I just have to go in every once in a while to make sure transactions are categorized correctly. I like automatic. If I had to write each purchase down it would never get done. Mint isn’t perfect, it doesn’t track my car loan because I don’t have a web log in for it, but it works for all my other accounts.

If you aren’t comfortable giving Mint your account log in information there are other options like Quicken and You Need a Budget where the information stays on your own computer.

Some people like doing it by hand. A notebook, spreadsheet or mobile budgeting app is all they need. Having to write down every purchase does make you more aware of what you’re buying and can even help curb spending. If you’re good at journaling this probably is the best method.

Whatever method you choose, the idea is to know what you’re spending your money on and how much. How much do you spend on clothes every month? Or eating out, or any number of categories? Add up the numbers. It might be painful, but look. Don’t judge. If it’s bad remind yourself that you’re doing this exercise so you can do better. Don’t make excuses, either. If the money has been spent it’s been spent and it is what it is. Most importantly, don’t beat yourself up over the totals.

Once you know where you’re heading now, it’s time to decide where you want to go, short and long term. Maybe you have some definite goals already, like get out of debt or save up a down payment for a house. If you don’t, that’s okay. Figuring out what I want from my money was a fairly lengthy process for me and I’m still revising my plan. If you have no idea what to do I’d start with the big three: deal with any debt you have, make sure you have a healthy emergency fund, and start preparing for retirement.

Getting out of debt is generally pretty simple – pay more money each month. Whether you get that extra money from savings, working a second job, or cutting spending is up to you.

Figuring out the right amount for an emergency fund takes a bit of work. At minimum it should cover your insurance deductibles and max out of pocket for your health insurance, expenses for however many months you could be unemployed if you get laid off (or at least enough to cover what unemployment doesn’t), and any other large expense that could come up with little or no notice. If you don’t have health insurance or comprehensive car coverage, you’ll need a larger emergency fund.

Figuring out what you’ll need for retirement is a lot more work and relies on a lot of guesses – how much inflation should you account for, what returns will you get from the stock market, what will your expenses be, etc. The farther you are from retirement the more guessing you need, but that’s no excuse not to start saving (was that listed in my excuse post? If not, it should be.) Start saving something, even if you don’t have a plan yet. If you want to take early retirement save more.

Personal finance is just that, personal. Retiring in my 30s isn’t a high priority for me but some people make it their ultimate goal. The trick is to decide what YOU want – and it’s okay to start simple. My goal right now is basically to keep my expenses low, max my Roth IRA, contribute to max the match in my 401k, and start investing in non-retirement accounts. Obviously I need to do some refining – what number should I keep my expenses under? If my income increases can I increase that number? Should I make a goal to increase my income? I used to have some other short term goals regarding cash hoarding to buy a house but that’s been done so it’s time to make some new ones.

I’m a fairly laid back person, the kind who takes a “if it ain’t broke, don’t fix it” type of attitude. Buy while my finances aren’t necessarily broken, they could be better. Fortunately I’m also a geek who likes making things more efficient so I have to draw on that side of myself to do this kind of work. ‘Cause it is work.

Alright, I’m off to think about goals. Again. What are your goals that you’re working on?

Blowing the Budget. On Purpose

Budget – “an amount of money available for spending that is based on a plan for how it will be spent,” according to Merriam-Webster. When I make a budget, I don’t want to budge from it. That’s the plan, let’s stick to it. But sometimes things happen and sticking with your budget is more about being stubborn than smart.

I’m getting ready to sell my house, which means completing all those little projects that I haven’t gotten around to yet. Nothing major, painting the kitchen is probably the biggest, just lots of little things to really get the place touched up to get a good offer. I have a savings bucket of $500 for paint and other materials. I planned to do it all myself with some help from my youngest brother on the weekends.

Unfortunately my sleep disorder has been flaring up which makes getting to work hard enough. Working on the house after I get home? Not happening.

And so I’m caving in and hiring a pro for some of the tasks. My mom’s happy, she’s been after me to hire someone for a while. I’m not so happy, I enjoy working with my hands and really take pride in my work. I also like saving money. My mom’s position is that it will be done quicker and I’ll be contributing to the economy, which is true. I’m finding the prospect of working with the handymen more stressful because it’s something new. At least when I was doing it I knew what to expect.

I’ll be pulling the extra money out of my savings for the new house if I don’t just cash flow it, so it isn’t an issue of not having the money. It’s an issue of not wanting to spend the money.

But budgets aren’t set in stone. They’re guidelines that can be crossed if the situation warrants it, and this is such a situation. If I don’t spend the extra money I’ll either have to wait longer to put the house on the market or settle for a lower price. If I do spend the money I will recoup the expense and more at sale, I’d guess around $5,000 minus the cost, and I’ll be able to get listed before the summer rush, or at least at the beginning.

I could work through the exhaustion but I know from experience that when I’m that tired I get sloppy, it takes longer to do even simple tasks and I can only do it for so long before I crash. My mom’s right, it’s time to just get this stuff done and move on. Even if it blows my budget.