Weekly Money Checkup | Oct. 3, 2011

1. The most I’ve spent this last week was on:  Bills!  Luckily though, they are paid, and now the rest of my paycheck can go to savings... What a nice feeling!

2. Today I am thankful:  for General Conference yesterday.  There were so many inspiring words spoken!  I had such a wonderful time just hanging out with my family, and feeling uplifted!

3. Money can’t buy happiness. One free thing I did last week that made me happy was: I made cupcakes for an activity tonight.  Sometimes I really enjoy cooking/baking, it can be so relaxing.

4. I will consider this week a success if I:  Pass all of my exams.  I didn't study at all this weekend, and now I'm kicking myself for it!

5. I like Fall   because  of the beautiful colors, the crisp air, boots, and the reminder that holidays are just around the corner!

Month 3 | Binge Spending

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I'm sitting here calculating this month's numbers, and I gotta say, it doesn't look good.  I began this month with a trip to go meet the new boy's parents.  I have to say, I set a budget of $300, and I came in at just under $200!  However, I think the fact that I had so much financial aid left over kind of screwed me.  I think that my subconscious mind was thinking "Ooo, look at all the money you've already saved this month.  You don't need to stick to your budget.  Heck you don't even need to look at your budget."

And I didn't.

Until this morning...  I seriously have not tracked one item I have purchased this whole month!  If you want a sneak peak into what my-old-spending-habits-that-are-not-changing are like, I've posted my monthly spending tracker below.  UGH!  Do you see all of the red?  Red is not good.  Red is money I could have saved. 

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$957.00!

I think I'm going to be sick!

As usual, I'm hoping next month will be better.  I'm hoping that this sick feeling lasts long enough to force me to get my butt in gear and not screw around for another month.

Start a Spending Fast by Next Week | Week 5

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You're almost ready to start your Spending Fast.  How are you doing?  If you're just joining us, you can catch up here:

Week 1

Week 2

Week 3

Week 4

If you have debt, I recommend going back to Week 4 and working on that until you're debt free.  Once that happens, it's all gravy, and you're ready to start the real saving!

Here's my personal Spending Fast savings process:

I get paid on the 1st and 15th of every month, so I split up my savings deposits the same way. At the end of each pay period I look at everything left over after my "necessities" have been paid/purchased. I then literally "empty my checking account" and distribute my savings to a few different places based on my savings goals.

If you haven't set financial goals for yourself, I suggest doing that now.  Once you get your goals on paper, they become real.  They are easy to accomplish when you can see them, and the feeling of crossing off each item is so satisfying. 

My personal savings goals go as follows:

• Roth 401K (as much as I can)
• Emergency Savings account with a goal of 12 months of expenses (necessities)
• Money Market account (this is where I put most of my savings because I want $20,000 for a down payment on a house)

Usually on the 14th and the 30th/31st of every month, I look at what I have saved, and divide it into these three accounts.  I try to do it like this:

• $200+ to Emergency Savings
• $400+ to my Roth 401K
• Everything else to my MMA account.

Once the money has been deposited, I don't touch them. This is key. What's the point of saving money if you're just going to dip into your piggy bank?

It takes discipline, and it's hard, especially when you're like me and spend money because you're bored, or just because you have it. This is why I recommend emptying your checking account twice a month and putting the money into savings. That way, you won't be able to spend it with that oh so easy debt card swipe.

Also, I suggest using Internet savings accounts from places like ING or Sallie Mae. You don't get checks or debt cards, so it's harder to access the money you save.

Repeat these 5 steps for one year.  You'll be surprised how easy it becomes.  You will save so much money, and kick yourself for being so wasteful in the past!

Start a Spending Fast by Next Month | Week 4

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This post is talking all about debt repayment.  Most people don't do a spending fast to save money.  A lot do, but a Spending Fast is sort of extreme, and people usually only go to extremes when something more serious is involved... Something like debt.

If you have debt, you need to consider your debt repayment BEFORE you begin saving for a rainy day.  Saving is important, but can come later, get out of debt first.  Why?  I'll tell you.

If you have $500 worth of debt but you save $500 next month, you have three options regarding what to do with your money? 1. You could spend all $500 on anything you want (bad idea).  2  You could put your $500 in a savings account at >1-2% annual interest (great for no-debtors).  3. You could begin paying off your $500 of credit card debt at 18% interest (yes for everyone with debt). 

If you're just saving, by all means, put the money in a savings account, or add it to your retirement fund, buy some CD's, shoot, just save it.  But for those of you paying off debt this is not advised.  Let's say you save $500, and no more, over the course of the year.  Let's see what happens to that money.  Right now, the economy is not great.  The national savings rate for a "High Interest Money Market account is only about 0.057%/year."  So after one year, your hard saved $500 will earn $2.86 in interest.  Wah wah.

If you don't put that money towards your $500 of credit card debt, and don't charge anything else, or make any payments on the card; after a year that $500 debt will end up costing you $108 in interest, and close to $420 in fees.  That brings your total debt to $1028!

See my don't-start-"saving"-yet-point?

Alright, so what if you're feeling overwhelmed by your debt?  How do you even begin to pay it off with what you save from the spending fast?

I like the Snowball Debt Repayment method.

Look at your debt bills. Seriously, look at them. It's amazing how many people don't look at their bills.  The number will be scary, but you need to do it.  Then, make a list of all of your bills, this includes credit cards, and loans.  Next, find out what you're paying in interest and write down that percentage next to your list of bills.  Finally, you want to re-write the list in the order of HIGHEST INTEREST RATE first.  No matter what the largest balance is, you want to list the highest interest rate as #1.

For example if you have a Visa with a $100 balance at 10% interest and a MasterCard with a $30 balance at 20% interest, a Discover card with a $600 balance at 12% interest, and a signature loan for $1200 at 6% interest, your list will look something like this:

1. MasterCard       $30     20% 
2. Discover Card   $600   12%
3. Visa Card          $100   10%
4. Signature Loan   $1200  6%

Every month with what you have saved, you're job is to make only the minimum payments on #2, #3, and #4, and put every leftover penny towards #1. Once #1 is paid off, then you'll make minimum payments on #3 and #4, and put everything you have left towards #2.  Get it?

It's amazing how fast people actually pay down their debt when they're aware of their interest rates! 

Start a Spending Fast Next Month | Week 3

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How's it going?  I hope you're getting excited to start your Spending Fast.  If you missed them, check out Week 1 and Week 2!

Now we're starting Week 3.  By now you have chosen your "necessities" and decided how much you're going to spend on each one every month. On the sidebar of this blog I have created/posted a non-budget-money-tracking-template which I have been using and find SO helpful! Go download it for free.  Seriously, go.  I'll wait.  After that, read through the instructions.

Ready?  Good.  See how it is divided into major spending categories, and then into specific ones?  Hopefully your all of your necessities are listed.  Insert the your pre-determined "necessity" amounts in the "Projected costs" column. As you spend throughout the month, insert those numbers and keep a running total. I have divided the "Actual costs" into two columns so that you can account for the 2 pay periods in the month.

Have you heard of the Hawthorne effect?  From 1924-1932, the company of Hawthorne Works Western Electric Company did a study to see if their factory workers were more productive in low light or higher light environments.  The interesting result was that the workers' productivity seemed to improve study occurred and slumped when the study was concluded. Although illumination research of workplace lighting was the basis of the experiment, the results found that the workers' production rates didn't have a lot to do with lighting; but more with the fact they knew they were being watched.  Once they weren't being studied anymore, they stopped working as hard.  Makes sense right?

Your money works the same way. It seems to grow when you're watching it. If you keep track of what you spend or don't spend, you know how much you have all the time, and can spend based on fact. However, if you're like I used to be, and don't monitor your money, you may go shopping thinking you have $500 in your account (but forgot to take into account the groceries, the boots, and the computer you bought the day before...) when really you're broke.

I find that using some method of tracking my spending, like my spreadsheet, is a total Spending Fast.   life saver!  Because I can see all of my transactions in one place, I can see where my money is going, and how much I have left, faster than my bank's website can tell me. One of the only difference between the wealthy and those who are drowning in debt, is that the wealthy watch their money and know where it goes.

Seeing how much or how little you're saving will also be a good motivator for future months. If you always go over budget in one category, or are consistently under budget, fudge your numbers so they fit your lifestyle. Again, you have to be realistic so if $10/week for groceries doesn't work for you, then you need to increase your numbers. The goal is to save as much as you can, and you can't do that if you're not properly planning.

Start a Spending Fast Next Month | Week 2

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How did Week 1 go?  Not so bad right?  Well Week 2 is going to be a little more tough, but still not too bad, I promise!

Now that you know what your necessities are, it's time to look them over. How many of them are really luxuries that you're trying to sneak in? Come on! Cross those off the list. Do you NEED cable, and Netflix or could your time be better spent doing something else? You're striving for bare minimum! Just think, if you cut your $150/month cable to a basic cable package at say, $40/month, by next year you could have saved $1,320! Thinking about the big picture is KEY!

Next, it's time to figure how much you're necessities will cost and once again trim the fat! A good way to determine how much to budget for each necessity item is to go back over your last six months worth of payments for that item. Add up the total of each individual item and then divide by six. This will tell you, on average, how much you spend on that item in one month and will be your new "budgeted amount/projected cost" for the remainder of your Spending Fast!

So, did you find those numbers? Good, write them down on the list next to your necessities.

If you have to spend that money, decide if you NEED to spend that much? Do you need a smart phone with Internet package, or could you go back to a non-smart phone and use your Internet at home or work? You can buy a $10 flip phone and then buy a Pre-Paid plan with unlimited talking and unlimited texting for only $30/month. A typical smart phone package costs about $100+/month. That's $840 saved during the course of a year!

I mentioned that I consider my hair highlights as a necessity.  Some people think it's silly, but I need them.  I have been able to cut the cost of expensive salon visits a few ways. Do you know how much your stylist charges for a trim?  Mine considers it a "cut" and charges $35+! So I got rid of those. My hair is long enough to where my mom can trim it for free and it looks fine.  I also only get my hair done every eight weeks instead of every six weeks, and I only get a partial highlight, not a full. Those little changes cut my cost by about 60%!

Make your cuts, but make sure they're realistic. No, you probably make it through a month on one tank of gas, but you could buy a 30-day bus pass for the price of one tank of gas.  Again, though, this would require planning ahead.

Be realistic, but be strict.

Think of how much you'll be spending on that item over the course of a year. Is it worth it, or would you rather have that money in a savings account earning interest? (spending $15.00 on Netflix a month equals $220 a year!)

Start a Spending Fast by Next Month | Week 1

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Do you want to start a Spending Fast but are feeling a little overwhelmed? Don't! This is going to be easier than you thought, I promise. Week 1 is about getting organized.

Did you know that most people don't have a clue where their money goes every month? I didn't. I've always made "enough" money, but at the end of every month, as I was making withdrawals from my savings account to supplement my income, I would sit in the drive through ATM , scratching my head and asking, "where did all my money go?"

The first step of starting a spending fast is do decide "What is essential?  What are my 'necessities'?" These are the things you spend money on every month that you absolutely have to have - for survival - like if Bear Grylls lived with with you, what you guys pay for?  Daily coffee from Starbucks is NOT a necessity; but daily coffee might be, in that case, you would add a can of store brand coffee into your grocery budget.  Whether you're doing the spending fast to pay down some debt, or just to save, you have to make sacrifices. So, what do you HAVE to spend money on (not counting debt repayment*)?

I've mentioned before that Anna considered her gym membership a "necessity." I, on the other hand think $50+ a month for the gym is ridiculous.  Especially when running, push-ups, and crunches can be done at home for free. However, I do consider getting my hair highlighted a "necessity." Decide what's important to you. It's also good to have one "luxurious necessity" item, otherwise you could go crazy.  Keep in mind, the expense should be small, and I said one item, not two or three.  Also, keep in mind, that mostly everything you spend money on can be DIY.  To help get your brain juices flowing, here's a list of my monthly necessities:

Tithing (10%)

Cell Phone

Car Insurance

Groceries

Gasoline

Hair

Social*
Doctor Co-pays
Prescriptions

That's it. That's all the money I'm allowed to spend every month. When I lost my job a few years ago, I was out of work for over a year and had to move back in with my parents. The reason I'm doing the spending fast is to save enough money to put a down payment on a house of my own.  However, because I live with my parents now, I don't have to pay things like utilities and rent/mortgage, etc., which are most definitely necessities. I also have a "social" category. I did not have this "necessity" when I started the spending fast. But since then I have become single, and I don't want my new guy to have to always pay for everything. While he's the kind of guy who insists that the man pay for everything because that's his job as man, sometimes it makes me uncomfortable.   I've set this money aside in case I'm allowed to pay for a date once a month. (If I don't use it this money gets saved, but it's there just in case.)

A word about groceries... I usually only spend about 70% of my grocery budget every month. Notice the category is called "groceries" not "food."  This is because I only buy groceries, I don't grab food.  Eating out is no longer an option on the spending fast.  An individual adult can eat, healthy and well on about $10 a week (yea, seriously, $10!); contrast this with spending $5-$15/meal everyday if you were to dine out.  That's a savings of about $7,300 over the course of a year.  Cutting back on food requires a lot of patience and planning!  I have to plan all of my meals in advance, and  then grocery shop sales, coupons help, but beware of the "extreme-couponing=buying-more-than-you-need" trap.  I also buy mostly "ingredients" and not pre-prepared things.  Again, making from scratch takes time and lots of Google recipe searches, but it's more inexpensive than buying ready made.

So, figure the things you ABSOLUTELY MUST PAY EVERY MONTH and write them down. If you have a few luxury items, really think hard. Do you need it? Look at what that item will cost you over the course of a year, and ask, "would I rather have that money in one year, or not?"

*More on the Spending Fast and Debt repayment to come.