New Year, New Goals! 2017’s Bucket List

Resolutions, goals, 2017, new year

I am not very good at new year’s resolutions, hence the fact that it is March and I am just now declaring my goals for 2017! If you are not the type of person that has ever written down your goals, and have no idea how to start, you may want to go back and read my post here. It outlines simple steps to setting short term and long term goals. Today, I want to focus on short-term goals; ones I hope to complete by the end of 2017. Continue reading “New Year, New Goals! 2017’s Bucket List”

Money Challenge Weekly Wrap Up Week 1

Money challenge, wealth, budget, debt, finance

Have you ever done a money challenge? With your whole family? Exactly one week ago we decided to start a month-long money challenge for March. We allotted ourselves $930 for the month and outlined the rules in our 52 Week Money Challenge in a Month post. If you missed that post, you can go back and read it here. Continue reading “Money Challenge Weekly Wrap Up Week 1”

5 Easy Ideas to Reduce Spending

Anyone that knows me has heard me say time and time again, “It is not what you earn that matters, it’s what you spend that makes the difference.” I believe too many people focus on making more money; instead they should reduce spending to expand the money they already earn. Last week we reviewed how to tweak and make a budget that fits your lifestyle. If you missed that post, you can read it HERE. Today, I want to focus on the expenditures. I want you to take a moment and really look at how much money you are spending in each category. Does this spending represent the lifestyle you wish to live? Most individuals have some type of financial goal. Whether it be to stop living paycheck to paycheck, get out of debt, or just get to a place where they have an emergency savings so they are not worried about the “what if” that could happen.

Financial freedom, to me, means being able to sleep well at night, knowing you have a plan for your money, and understanding where your money is going. Increasing your income is always one way to help your overall budget, but some individuals are already working two or three jobs and are struggling to make ends meet. They do not physically have the time or energy to add another job to their day. This post is to try and help those of you in that situation. I remember a time when I would eat dinner only three nights a week because I had to choose between gas money to get to work or groceries. Below are some tips I used to cut expenses and reduce spending.

1-Get away from the large rent or mortgage payment. There are several ways to handle this. If you have an apartment with an extra bedroom, check into getting a roommate to share the monthly rental fee. If you have a large house, you can either downsize, or again, think about renting out a room to cut costs.

2-Cut all unnecessary monthly bills. I canceled the TV cable and home phone. I did not have gym memberships or anything like that to cut, but if you do, nature provides an amazing gym for FREE! I read books for free from the local library instead of watching TV, and chalked it up to another time I was able to reduce spending.

3-Reduce utilities.
a. Heat / Air: It is nice when the heat is set at 70 degrees, but I promise, you won’t notice if you set it at 65 and throw on a sweater and socks. If you are lucky enough to have central air conditioning, you can set it at 75 and still won’t be uncomfortable. All while saving money!

b. Electricity: Be sure to turn off the lights for as long as possible and always when you are not in a room. Do you have any natural light that you can use instead of turning on the house lights? Are you unplugging things when they are not being used? Even if they are off, they are using electricity if still plugged in.

c. Water: This may not be popular, but try to shower every other day instead of every day. Of course, if you have body odor issues, adjust as necessary, but if possible, try it and see if it works. When you are in the shower, time yourself to 4 minutes. Focus on getting in, getting clean, and getting out, and cut down how long you are in the shower. Same with brushing your teeth (do not skip a day!) but you can turn the water off while you are brushing and only turn it on while rinsing. Are you making sure the washer is full when you run a load of clothes? If you have a dishwasher, are you making sure it is full before running a cycle? Is there a way to capture rain water to use for watering plants?

4-Car pull or walk / ride a bike when you can. Do you have two vehicles? If so, do you need two vehicles or is it more convenient? Are you making payments on both vehicles? Is your vehicle more than your needs? Just like your home, downsize if your car is more than your actual need. You don’t have to have a vehicle that seats 7 if there are 4 in your family. Gas for your vehicle is an expense most people chalk up to being necessary. You can ask around at work to see if there is someone willing to pick you up and drop you off, or if you are within 10 miles, you can ride a bike for free. Remember, anytime you don’t drive the car is another time you can reduce spending!

5-Use coupons and grocery bonus cards. I never really got the hang of coupons until my 30s when I had to feed a family of 4. It was different when I was alone and could skip meals. The first real success story was at a local CVS store. They have deals each week and offer bucks back on certain items. I would pair those deals with the weekly coupons and get almost all our hygiene items for free. Talk about a great way to reduce spending! I treated it like a game, and I loved the feeling of walking out with free stuff. One trick I learned – you don’t have to wait until your next trip to use your bucks back. I would checkout all the items that get bucks first, then have a second order and use the bucks to pay for that order. For me, it was easier because I wasn’t losing the bucks or forgetting to use them the next week.

These are just some ideas to think about if you need to reduce spending. Feel free to share what has worked for you in the comments below.

Living Through Your Budget

Last week we reviewed 3 simple steps to create a budget. If you missed that post, you can read it here. Now that you have a budget, let’s talk about how to actually live with it.

1: Track your spending. The best way to see if your budget is accurate is by tracking your spending for the first month. You can do this several ways. Choose a way that is easy for you and does not create a lot of work for yourself. Remember, SIMPLE is the name of the game. If it feels like added work, you are more likely to give up. Also keep in mind, it has been said it takes 21 days of doing something before it becomes a habit. Keep at it for at least 3 weeks. To track your spending you can use your online banking system, or a notebook and a pen. Again, whatever works best for your household. Be sure to write down every expense. If you are using your online banking system, make note if you take out cash, where did the cash go? During this first month, it is all about tracking, not about changing behavior.   You have to first understand where your money is going before you make any changes.

2: Compare to your budget. Once you have a full month of spending tracked, you want to compare it to your initial budget. Break out the detail by each line item you assigned a budget to and name that column “Actual Expenses”. This way you can review each line item and see where your money is actually going. This step is shocking to most people. They don’t realize they are spending more on entertainment or allowances than they think. For most, it is the small expenses that add up at the end of the month. For the items on your budget that you don’t pay monthly, i.e. doctor visits, you should have zero spending for the month, but should also have that cash in the bank. For most, it is not in the bank because it disappeared at the local coffee shop or that night out with friends.  In the example below, you can see the amount spent in the month was $4,905 out of the monthly budget of $5,500. There should be $595 in the bank to make up the difference, but when you start to look at each line item, you notice the household is over spent for the month. There are items they did not pay that month. If every line item was due in that month, they would be in the red by $265.

Expenses Monthly Amount Actual Expenses Difference
Mortgage 1 1,400.00 1,400.00
Student Loan 1 150.00 150.00
Student Loan 2 50.00 50.00
Car Payment 1 300.00 300.00
Car Payment 2 350.00 350.00
Credit Card 1 50.00 50.00
Credit Card 2 50.00 50.00
Bank Loan 1 25.00  25.00
Bank Loan 2 75.00  75.00
Life Insurance – 1 30.00 30.00
Life Insurance – 2 45.00 45.00
Heat/Gas 280.00 280.00
Vacation 200.00 200.00
Christmas 150.00 150.00
Savings 100.00 100.00
Car/Insurance/Reg. 50.00 50.00
Emergency Savings 50.00 50.00
Allowance 80.00 120.00 (40.00)
Groceries 700.00 500.00 200.00
Garbage 30.00 30.00
Cable 200.00 200.00
Cell Phone 200.00 200.00
Electric 125.00 110.00 15.00
Vehicle Gas 200.00 250.00 (50.00)
Dry Cleaning 75.00 50.00 25.00
Hair / Clothing 75.00 100.00 (25.00)
Entertainment 200.00 350.00 (150.00)
Water / Sewer 80.00 80.00
Doctor 100.00 100.00
Pets 50.00 50.00
Recycling 30.00  30.00
Total 5,500.00 4,905.00 595.00


3: Make some decisions. When analyzing your budget to actual expenses, now is the time you have to decide what you want your money to go toward. Do you have a goal of getting out of debt? Do you want to have cash available when you need heating oil or when your annual car insurance is due? What are your goals? If you don’t have a plan for your money, your money will disappear. It is ok to have long term goals, but when you are starting out, it’s best to start with something small that you can accomplish in a short period of time. Usually people aim to reach a goal within the first year. This allows you to see progress and stay motivated. Maybe your goal is to have $1,000 in an emergency savings account. You already decided to budget $50 a month toward that goal. It will take 20 months to reach $1,000. If you want to reach that goal in 10 months, you need to decide where you can cut spending by $50 a month and direct $100 a month to the emergency savings account. Remember to be honest with yourself and make decisions you feel you can live with. This is not supposed to be painful or feel like you are punishing yourself. Start small and keep it SIMPLE.

4: Tweak the budget, again. Remember, a budget is a living document. It is supposed to change and represent your life. It is ok to change your mind and tweak budget line items. Emergencies may happen before you have the $1,000 saved and you may be forced to tweak line items. Don’t get discouraged. Make the adjustments and start over. That’s the glory of budgeting, you can always start over. You will change your budget every time you pay off debt or acquire new debt. (I am not a fan of debt and prefer to pay off versus get more, but sometimes life happens and it is out of your control.)

3 Simple Steps to Creating a Budget

The word budget to most people is considered a swear word meaning cut back, deprive yourself of fun, and live a restrictive lifestyle. It does not have to be bad or painful if you keep things simple. When creating a budget there all kinds of different methods, theories, and ideas. My number one piece of advice is: Keep it simple. If you get too crazy and try to change too much at once, you will fail; that’s not what anyone wants. If you are familiar with Microsoft Excel, you can use the computer to assist, but a piece of paper, pencil, and calculator work fine too. Whatever floats your boat. Remember, SIMPLE. Don’t stress yourself out over creating a budget or sticking to every penny. Budgets are fluid documents. They are meant to change and adjust as life happens. It’s nice to look at an annual budget but manage it on a monthly basis. We use balanced based budgeting. Meaning, we assign our revenue to expenses every month and adjust as needed to “breakeven” at the end of the year.

We are already a month into 2017. Usually in January, I sit the handsome husband down to review the prior year expenditures and re-set our upcoming year budget. I will walk you through our process and how to set up your own.

1: Start with your Total Annual Revenue. To get to your total annual revenue, you want to look at net income. This is not the amount you make per hour/year. This is the amount deposited into your bank account on payday, after all the taxes, health care, and retirement deductions come out. This is the amount you actually get to live off of until the next payday. If you have a job that you get a salary amount, this step should be straight forward. Use your bi-weekly amount and multiply it by two (most months have 2 pay days) for the monthly revenue, and multiply the bi-weekly amount by the number of pay periods in the year for the annual amount (most often 26). If you have an hourly job and the number of hours is not  consistent, try to take an average of the last three months to figure out the monthly revenue, and multiply the quarterly amount by four to get an average income for the year. If you are self employed and income is sporadic, look back at last year, think about whether or not the year had major exceptions, and make adjustments as you deem appropriate. Example: If you are a contractor and you made $125,000 last year but you know you had a special job that paid $50,000 and it’s unlikely you will get another job like that, use $75,000 for your annual revenue and divide by 12 to get a monthly revenue. It is always easier to adjust a budget if you bring in more income than projected. If you share a household with another individual who has an income, add a line for their net income. Add the two together to get the Total Annual Revenue. This number is important, but not as important as you would think. There is a common misconception that in order to be wealthy, one must have a great deal of revenue. That is not necessarily the case, but is probably a good topic for other post entirely (maybe next week). Below is an example of a revenue template in Microsoft Excel:

Revenue Bi-Weekly Amount Annual Amount
Name 1 2,000.00                    26,000.00
Name 2 3,500.00                     45,500.00
Total Revenue 5,500.00                      71,500.00

2: Make a list of Expenses. Start with the largest payments per month and multiply the monthly amount by 12 months to get the annual amount. When you finish the monthly expenses, think about items that happen once a year like holiday’s and birthday parties. Take the annual amount you normally spend and divide that by 12 to get a monthly budget amount. Don’t forget to include seasonal expenses and items such as allowances. If you are like us, you will have additional heating bills at least 5 months out of the year. Take the amount you paid last year and adjust for exceptions. Example, last year we had an exceptionally warm winter and did not spend as much as we normally would on heating oil. We had to look back a year to a normal winter and see what we spent in order to budget for the upcoming year. Below is an example I created; you may need to add / delete items for your household:

Expenses Monthly Amount Annual Amount
Mortgage 1 1,400.00                  16,800.00
Student Loan 1 150.00                     1,800.00
Student Loan 2 50.00                       600.00
Car Payment 1 300.00                    3,600.00
Car Payment 2 350.00                    4,200.00
Credit Card 1 50.00                       600.00
Credit Card 2 50.00                       600.00
Bank Loan 1 25.00                        300.00
Bank Loan 2 75.00                       900.00
Life Insurance – 1 30.00                        360.00
Life Insurance – 2 45.00                        540.00
Heat/Gas 280.00                     3,360.00
Vacation 200.00                    2,400.00
Christmas 150.00                     1,800.00
Savings 100.00                     1,200.00
Car/Insurance/Reg. 50.00                       600.00
Emergency Savings 50.00                       600.00
Allowance 80.00                       960.00
Groceries 700.00                    8,400.00
Garbage 30.00                        360.00
Cable 200.00                    2,400.00
Cell Phone 200.00                    2,400.00
Electric 125.00                     1,500.00
Vehicle Gas 200.00                    2,400.00
Dry Cleaning 75.00                       900.00
Hair / Clothing 75.00                       900.00
Entertainment 200.00                    2,400.00
Water / Sewer 80.00                       960.00
Doctor 100.00                     1,200.00
Pets 50.00                       600.00
Recycling 30.00                        360.00
Total 5,500.00                  66,000.00

3: Tweak the expense items. When you finish the first draft, take a look at the bottom line. Make sure you assign each dollar to an expense category. You want monthly revenue minus monthly expenses to be zero, but the annual revenue minus annual expenses should be equal to one month of revenue. This is because two months a year have 3 pay periods. Those extra pays should be able to go directly into your savings or to pay off debt because you have all other expenses covered in your budget. Be sure to be honest with yourself when entering figures. If you know you like to go out for dinner and a movie, don’t set a budget amount for Entertainment that restricts you from doing so. Be realistic. You won’t be successful just because you put a number on a paper. It has to be truthful and represent you: your lifestyle, your goals, your desires, your happiness. (And your mate’s if there are two of you.)

Remaining                     –                        5,500.00

Whew!  Congratulations, you have yourself a budget. That was the hardest part to budgeting, I promise! Please tell me what you think or ask questions in the comment section.