January Month In Review

January is over and it is time to fess up and do a little review.

It was actually a good month with some challenges, a crop of Ninja Bills and staying on track with all of my goals, I even got some great news last night!

High Points:

• Net Worth Increased $1,217 - This is from the debt reduction, got below my minimum that I keep in checking, but this was really artificially low as I was paid Friday and checking is back to normal levels
• Debt Decreased $1,310 - Car come down a chunk and this is the next Snowball debt after my State Farm CC. I am looking forward to no more car payment!
• Did my taxes Friday Night - My rebate is way better then I thought it would be. Between State and Federal I will get back $8037.15! This is good and bad news. The money will go to fully fund Property Taxes for 2008 (due in October) and Christmas 2008. The remainder will go towards Snowball #6 effectively cutting it in half! The bad part is I gave the government a non-interest loan of $8037.15! It was our first year in the house and we had unexpected medical bills as well that we could deduct, so I won't beat myself to bad.

A quick funny story; after I finished the taxes and e-filed then I went to my wife and said with a long face "well, guess how much..." as I poured a cocktail..."Looking that you are pouring a drink, we owe, huh"...I say, "How much do you think?" She says, "Well we have $2200 in savings, so $2300." I say "No, it is a much bigger number..."

"Great" she pauses, "not so much it will make us use our credit cards, we've been so good... (what a turn-around BTW)" I say, "it is $8037.15..." She goes completely white..."What are we gonna do..." I say, well first we are gonna put our 2008 property taxes and Christmas money away and pay off half of debt three :)"

She hits me smiling!..and calls me a jerk...then asks me to run it again :) I pour her one too, and we toast!

Points to Work on:

• Ninja's of my Own Making - Besides two of the kids needing new winter coats, we had a really high Gas bill and Electric Bill. We cut Entertainment and Dining to help pay them, everyone is more motivated to do better! However, I didn't plan for the following...my Mother-in-laws birthday, My step-Fathers Birthday or...my birthday, doh! We did a great job at planning the girls birthday funds in completely slipped my mind to build their gift amounts in to Microsoft Money...Won't make that mistake again. We all chipped in to cover the amounts, but we did go over budget there, effectively erasing other gains.
• Balancing out Payment between check - A bunch of my payments are due when our house payment is, and given that takes most of my check I need to do a better job planning when to pay debts and bills. Built a little tool into my master sheet in Excel to help!
• Got over zealous - Moving money into saving that looked like extra...not so fast Hoss...had to move it back due to NinjaBills and poor income allocation...Doh!

Goals:

• Pay Off StateFarm CC - $2836.22 - Payment is due 2/10 you'll see a good drop next month along with extra payment due to taxes
• Pay Off Car - $4594.87 - Down to $4316, or $280 less!
• Pay Off CC CitiBank Platinum - $8989.16 - Minimums here until the Snowball show comes to town
• Pay off all CC Debt - Working it!
• Save 100% 2008 PropertyTaxes - $5000 - w00t! Should be checked off by the end of the month...ahead of time!
• Keep Snowball 100% Intact - Yo Joe!
• No CC Use - For the Fourth month! Never thought it was possible! Now can't believe it wasn't!
• Increase Average FICO-Score to 720 - Moved from an average of 692.7 across the major three to 699.0, so close to my short-term goal. At one point 5 years ago we had a 510 score! You CAN repair your score, believe me. I check this every month through www.truecredit.com (I am NOT and affiliate - just like the service) For $14.95 a month they monitor and email me any issues with my credit report. In addition I can a report with FICO for each whenever I want, even multiple times a month. For a stat junkie like me it is awesome.
• Stick to Cash Budget System - Yep, and loving it!
• Net Worth increased by $20,000 - Only up $1200 this month, but a lot of pluses coming down the pike. 2008 Tax rebate, Tax Stimulus money (hopefully the Senate doesn't kill it!), my review is Monday and bonus in April...It will be tight, but I believe we can do it!

Well, that is about as full disclosure as I can get. I guess if I am gonna spew advice, the least you can do is see where I am. I am not a financial adviser, just a marketing slub trying to get out of debt and build a bright future just like you using our budget, debt reduction and basic money management to get there...it is a marathon, not a sprint!

(BTW - That pic is a calendar available from Barnes and Noble -thought it fit the article!)

Easy Savings to Your Budget Using Cash

For most of us, our budgets don't break due to huge expenses every month. We die from 1000 small cuts and potentially give up since it "is just too hard for us", or, "we aren't good with money like Bobby!"

What I saw with our budgeting struggles was exactly that, we would say "oh we've been so good we'll go out to dinner", or, "It is just a sweater, it was on sale, I Saved you money, that what you wanted wasn't it?" so we would be $20 over here, and $10 over here, it just adds up quickly. Also, once you break discipline, you have to get right back in or you will stop trying soon.

One of the things that I was initially dead set against after reading Dave Ramsey, was the wacky envelope system. I thought that since we were bad with cash this would be a ticket to crash, but really that is the secret of the system...you can't crash, you can't go over!

The system works like this:

• Separate bills - Separate the ones you can pay with cash, true cash, not money orders or checks. For us this was the following: Groceries, Gas for our car, Entertainment, Dining, Kids Allowance, and Our Allowance.
• Set budget for each - If you already have a budget, great! Otherwise you need one for every category.
• Break It up - I get paid every two weeks so our plan was to get cash every Saturday after I got paid. So we divided the budget in two. I understand that I get paid 26 times, but our stomach doesn't know that so we looked at a top down budget and a bottom up and determined our bi-weekly needs.
• Separate Envelopes - You need separate envelopes for each amount. On allowance, one envelope per person. Write on the outside of them what they are for and how much is in them when filled.
• Divide up the responsibilities -Get your spouse Involved! Letting someone else have decision ability over a fund is a great way to stop being the budget police! If it is just you, then still judge each envelope as a separate entity and not as a pool of money.
• Plan out your cash - In order to fill those envelopes to the exact amount, and no more, you will need a wide variety of denominations, in our case, all of them! Plan out what bills work for you in each envelope. If you want to eat pizza, and you know Pizza Hut won't take a $50...don't put a fifty in that envelope. On the other hand, you might not want to bring 200 single $1 dollar bills anywhere...trust me...
• Off to the Bank - I will warn you, some of you will feel weird the first time you go in with a note asking for an odd amount of cash and then want it in all of the possible denominations. Don't stress. The banks don't care, and if they did...who cares! It is your money. In fact I have explained the system to a few teller now and one of them is doing the same now as well!
• The Last Envelope - There is one more envelope; label it Overage. You won't need it yet. But at the end of your period, one week, two weeks, etc., whatever is left over goes in to that fund. My suggestion is to do something that the whole family wants to do; pizza, a movie. Celebrate that you beat budget, which is the only way money is left! Spend it guilt free. You will want to put it towards debt, or some other noble cause, but don't you need to as it is truly extra But you do need it, and so do your loved ones, small motivators. If you want Budget to stop being a 4-letter word? Just try it!
• The Aftermath - For us it is important for everyone to know how we ended up for the month at. IF we went over in some other area of our budget we dock the next envelopes, but not the overage. So for us for example, our gas bill was a Ninja this month, as some folk decided that they preferred it warmer then where the thermostat was set, no surprise, higher Natural Gas bill. So for the next few envelopes we will pay it back via lowered Dining and Entertainment. It is a great reminder to all to do there part...and have my kids tattle on each other (kidding).

So what about those easy savings that I spoke about. They come from making budget every time. If you are not using this method, add up over the last 90 days how much you went over in those categories you could pay for in cash? $20, $50, more? Big time budget blowers and money management killers. Using a debit card, or even worse a credit card, and you can nickle and dime yourself to death.

Us? In 12 weeks we haven't gone over once in anyone of the categories, and had, on average $20+ to spend on a couple extras! We are not perfect by a long ways, but we have been able to work together and still have some creature comforts. I know I drive people nuts by saying this, but It is a marathon and not a Sprint. You have to be able to live your plan...forever!

Hope this works for you. If you are doing something similar let me know, would love to hear how it is working for you.

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We Saved 33% on our Grocery Bill

Since we have began our Personal Finance and Budget journey, we knew we needed to get one of our largest bills in line as well, groceries. This was one of the largest "bills" in our budget and it was creeping up. With three growing kids, me (kid four?) and my wife being an amazing Chef, our bill was out of control.

We had a lot of big dinners at the house to entertain family and friends and always insisted on doing everything ourselves. But besides packing on the pounds, we were packing on the bills as well.

So how did we cut our bill by $400+ per month? Here is what we did:

• Set a More Realistic Budget - We looked back to when we were running better in controlling our money and then set a goal that was took into account what was reasonable for a five person family with the Holiday coming.
• Started by Meal Planning - What were we going to have to eat and when? My wife being the chef, didn't want to fall into the Tuesday is Meatloaf night sort of house either. But being 100% flexible was costing us with one-off trips to the store, where we always came back with more then what we needed.
• Went to cash ONLY on Groceries - The best way to not overspend is to make it impossible. Use cash. I get paid every two weeks and when we do we take half the budget and use the envelope system. The potential embarrassment of having the store put things back will keep you paying attention! If we go over, it comes directly out of our Entertainment and Dining Out money. Then out of our small personal allowances! Ouch!
• Put Chef in charge of grocery money! - They make it, and knows what and where they can substitute to save money.
• Take advantage of store loss leaders - Almost all grocery stores print a set of coupons and deals during the week. Here it is Tuesday. These are the stores products that they take short margins, or even a loss to get you in the door. We take 20% of our grocery money for stock-ups of these deals. This can be Costco money as well. BE Warned: Do Not stock-up on non-needs! You do not need to buy a 55 gallon drum of pickles! It isn't a deal if they are never/half used!
• Multi-Store It!- Usually store will have a specialty to try to be different then the other local stores, so it doesn't turn into a blood bath margin-wise every week. So in other words, Albertson's won't make a big push on hamburger when Ralph's does, if possible. Work the food ads and go to separate stores, it will take more time, but I would almost guarantee if you aren't doing this step it is costing you 10%+. Even with gas prices it pays for itself.
• Only go with a list - Then only buy what's on the list. If something else sounds good, you have to cut the other stuff right then. Part of the power of cash! It is such a pain to do, it will be the exception rather than the rule moving forward.
• Incentivize - If you beat the grocery bill have (or some amount, goes Into Entertainment or dining. Your kids will start trying to help cut things if there is something in it for them, like an extra DVD or Video game rental if you beat budget.
• Snack-itis - Limit snack foods or cut them out. They are bad for you and are some of the highest margin items in a grocery store! If you do buy some, make sure everyone knows when they are gone, they are gone. This is the best tip for those of us with teenagers, who eat EVERYTHING!
• Dinner Parties with family and Friends - Make it potluck! In fact, try to have one of these at least a month. It s great to get everyone together and it is cheaper then a hosted Sunday meal.

We aren't perfect by a longshot, but this has been one of our significant savings on our budget. Money that goes right to our debt reduction or savings...Oh yeah, one last thing...don't go to the store hungry either...they are right about that one...unless it is Costco on Saturday; Free sample laden Lunch!

Zen Through Better Budgeting...

It has been three full days since Christmas morn and I feel something strange. A much lower stress level! I was asking myself, why I was truly not stressed out Christmas Night. Then it hit me, it was through better budgeting, managing our bills and cash management. I just wasn't as stressed out as usual Christmas night.

"It is all paid for!" I told myself. I have made it through the month of December actually lowering my indebtedness rather than adding to the pile. There are NO bills coming in January, as we saved and paid for everything in cash. In fact we have begun (albeit slowly) to save for next Christmas.

Here is how we did it this year:

When we decided to get real with ourselves, one of the realisations was, " What will we do about Christmas this year?" We just couldn't do what we had before and rack up huge credit card bills. One we cut them ALL up, except our debt card. And secondly we wanted off that Tilt-a-Whirl of Doom.

So the next step was to determine how much we wanted to spend in total (a top-down approach) then we said here is our list of people we usually shop for along with us and the kids. At first it worked out to about ,47 cents per person...a bit low. So we went and paired the list to who really was close to us. With having 3 kids, it was still below what we wanted to do so we made two categories of people, Us and Them (pretty original, huh). We came up with a budget per person for the Us category and a pool of funds for the Them's (my English teacher would kill me if he saw that statement...).

The next step was harder, we talked with the kids about expectation level, which we had set WAY too high up until now. We then asked them for their list and reminded them their fate was in their own hands. If they wanted a big gift...that was probably it, or they could have a series of smaller gifts.

We also dropped another bomb...we wouldn't give them money to shop for us or each other, but we expected them to at least shop for each other and established a minimum present price of $5 on each. This price floor avoided my middle Daughter (who will never be broke) from buying a pencil for each of her siblings which was her first offer! She is why the rule was established! Since we started this discussion at the end of September they had plenty of time to save.

Next...the Them's...They are all really good people, but they aren't my kids or wife so they are lower priority. We wracked our brains for what to do here, then we decided to have family pictures shot and given out as many had asked for these. To be fair ,we warned all that we were doing something like this so we could avoid the big gift vs small gift possibility. We also asked those Them's to focus on the kids if they were to buy presents at all, or to do exactly what we did, as we would love to get family pics from them as well.

Now the test...we've saved the money, taken out cash so we couldn't go over, then prepped our list. In order to keep track of what was who's money we separated the money in a bigger envelope with 3x5 cards with the gift receivers name. This kept us fair between the kids, and if we did want to go over, we have to take it out right then, from someone else's present money. This avoided many prior years issues of going over on one, then making up to the other, now #3 wasn't balanced...a never-ending spend spiral!

So how'd we do? Exactly on budget (well, actually a received a gift-card from work so I went over on her, but I used the gift card to do it!). We managed our money, we kept to cash so it was easy to track, and everybody had a great Christmas. Oh yeah, and it looks like we reduced our debt this month by $2,940!

All I can say is this worked for us, we are planning to do the same every year and enjoy our Zen...

Managing Money: Get Everyone Involved pt2...

For the second part of Managing Money: Get Everyone Involved, we are going to talk about establishing a work area, cash management and follow-up. Once again this is just how we are doing it, you may find tweaks that work better for you; go for it! We tweaked the Ramsey system for us take any of this you want and turn it into something that fits your personality. It is the only way to make long-term change.

Work Area - I firmly believe that having someplace, a desk, a box, even a bedroom drawer where everything is kept is an important thing. The second, is to make sure that your significant other knows that space as well. This should have files on all bills to store afterward and your checkbook as well as credit cards, if you aren't prepared to chop them up yet. You want your family to understand where all this information is in case of anything happening to you. Banker Girl has a really good article about why here.

Cash Management - For us, this has been key. We use cash for groceries, dining out, entertainment, gas for the car, the kids allowance and ours. This is where we have made most of our improvement in making budget. My wife didn't want to be in charge of an area, but since we are in this together, she took over all cash funds, except the car and allowances. She is 100% in charge of those funds. She has done so well, and I am not just saying that cause she will probably read this :), we have cut nearly 33% off of our grocery bill through better planning, coupons and using only cash.

This has really also squished the Budget Police mentality around here. As I said before it is OUR Families money, our family should have a say! The kids have their votes on how to spend the money as well. They make their pitches on dinner and when we go. So when they used to push to eat out all of the time, now they are often the first to say, "I want pizza this weekend, we better wait!" 180 degree turnaround!

Follow Up - We have a review every weekend after I get paid to review how we did for the previous two weeks. We then go to the bank and get the cash in the denomination we need. I bring one of the kids each time so they see how much money this really is and where their allowance cash comes from. Initially we got some strange looks asking for $x37 in $50's, $20's, $10's, $5's and $1's but now they know us and it goes pretty quick. I may have even convinced some of them to try it as well.

We will also have a quarterly review to check and see if our levels are right: Did we over budget for Gas? (not likely), Under for Groceries? etc.. The most important part is that we discuss it as a family. In learning these lessons now they will hopefully find that personal finance, budgeting and avoiding bad debt gives them a leg-up later in life.

And that is the best thing we can do for them...and ourselves...