Tuesday, September 29, 2009

Budgets and a few disclaimers. Let's start with the disclaimers.

1. I am going to say some things in this post that might make you think I am a total idiot. At the very least, you might question my/our priorities and think I/we act kind of entitled/spoiled/wasteful. Please don't let these observations keep you from sharing some budgeting tips and tricks. I have talked to you and read your stuff, and I know that lots of you are real life adults who, like, budget and stuff.

2. Even if I claim in some of my ridiculous rants that will follow that I will not cut out X or cannot live without Y, feel free to tell me why life without X and/or Y is great or that cutting out those things is exactly what we should do. I want to hear your real life experiences and learn from your financial voodoo powers.

3. I might cuss because talking about not spending money makes me cuss. Damn it. See?

4. No need to tell me, Sarah, if you are looking to save a few bucks here and there don't buy giant framed glamour shots of yourself, YOU IDIOT. Because, dude? Totally get that. It won't happen again (until Ben loses the beard and my haircut changes).

I mentioned yesterday that we hit up Barnes and Noble for Dave Ramsey's _Total Money Makeover_, and our purchase of the book in hard back for $2.50 more than it cost at Target the previous day (when we declared the price tag too high) is exhibit A in the case of WHY WE NEED A FRIGGIN' BUDGET.

We quickly determined that the book is not exactly for us, mostly because it's really, really creepy. Culty creepy. But I occasionally listen to Dave's radio show, and I am always struck by the callers who make less than grad student wages and own their houses and cars debt-free and tithe 40% of their paychecks and STILL stockpile money in their savings account while watching their retirement fund grow to the millions. You don't have to look at my closet full of Snuggies, Sham Wows, and Magic Bullets to know that "too good to be true" is not a phrase that registers with me.

After reading the book, which is full of the same rags to riches, debt to miser kind of stories (featuring single income families who barely make 5 figures and have like 6 kids), I kind of think these stories ARE true because the strategy is ruthless. Unlike other financial planners who tell you to pay your savings account first and pay your debt from highest to lowest interest, Dave says pour all of your money into the debt pit, and pay your debt from smallest to largest. He advises saving $1000 for true emergencies (and he offers a very sharp definition of emergencies which are NOT things like regular car repairs, spontaneous trips, and outgrown/worn clothes) and then taking all of the rest of your money in your accounts and throwing it at your debt. He calls it a debt snowball-- you pay off your smallest debt first, then you take all the extra money you can scrape together plus the old minimum payment from that bill and roll it onto the next largest debt. Eventually, you have an avalanche of debt relief. And this, my friends, is the best metaphor in the whole book which is full of the very worst allusions and comparisons I have ever read (like diaper rash, which figures prominently as an extended metaphor. Poetry it ain't).

Where do you come up with this extra money? You live like a total pauper and you get some odd jobs (he frequently recommends delivering pizzas). And then, apparently, you get so high on the rush of living debt free that you continue the snowball and pay off your cars, your student loans, your mortgage, etc. That's when the real hoarding fun can begin, and you can squirrel your money away for retirement. "Live like no one else," Dave says," And later, you can live like no one else." He also asks "Aren't you sick and tired of being sick and tired?" and he proclaims, "There was too much month at the end of the money" so many times that I imagine these phrases are chanted by his teeming masses of followers who assemble at his Financial Peace University seminars where they wait in line to weep on Dave's shoulder and thank him for sharing his healing vision with them.

He has this great metaphor about being financially fat and standing in front of the mirror and sucking in your stomach and thinking you're skinny, and as I write the scathing paragraph above, I realize that's where Ben and I are right now-- sucking those credit card receipts in and turning sideways so all we see is nice rack of a balance in our savings account. I know when I whine and say we can't do Dave's plan because there are things we just *can't* give up, I am that idiot he's talking about who thinks I can afford something if I can just afford the payments on it. ("Stop paying for yesterday and live for tomorrow" is another phrase that's bandied about quite a bit.)

Some things we cannot live without according to a brainstorming session we had this weekend? DiorShow mascara (duh), name brand wrinkle cream, nicotine gum, high speed internet, 700 digital cable channels, DVR, Blockbuster online, using iTunes like an all you can eat mp3 buffet, Little Gym, our smart phones. Clearly, we are trimming down to the essentials. **snort**

For us, the credit card comes out when we want to buy something that we feel uncomfortable paying cash for because it costs so much. So stop using the card, right? Only buy things you are happy to afford, right? Riiiiiight. We'll get right on that. (And we have, really. We just have some residual debt that we can't get ahead of and instead of using our extra money to pay it off, we use our extra money to pay cash for even more shit. Which, we understand is a step in the right direction, but only a baby step.)

We're not comfortable halting all savings to snowball our credit card debt, but we DO need a budget that allows us to live comfortably, save money, AND make more aggressive payments in a few areas.

On Saturday, instead of going out to dinner, we went to a local butcher shop that we have been meaning to try for YEARS (and instead of spending $50+ on a restaurant tab for the 4 of us, we spent $8 on sweet corn and burger patties. And another $40 on wine. FAIL). On the way home, we drove through a preshus little neighborhood we've never seen before with tidy old houses, big, shaggy trees, quiet dead end streets and a tiny little park. Petty much the cutest place we could imagine. We wanted to move there RIGHT NOW. Or at least before H goes to kindergarten.

That's what spurred our quest for a money makeover, even though we are stopping short of a Total Money Makeover. Tomorrow night, we're going to curl up with the doctor:

and put together our first ever budget (I know; I know. We're idiots). So please with sugar on it, hit me with your best tips.


  1. Anonymous10:40 AM

    - Try giving up just one of the "can't live without" items for a month. You might be surprised.

    - Check out budget/self-help books from the library instead of over-paying for them at B&N.

    Rachel :)

  2. The thing that has made the biggest difference to us is to use CASH for all daily purchases. We have an envelope for groceries, one for dates, one for miscillaneous that covers non-food incidentals (diapers, wipes, cleaning supplies, light bulbs, etc). We also each have a personal budget of $100 a month for all lunches out, coffee, books, music, etc. When the money is gone, it's gone and we don't get to spend any more. It's worked really well for us in terms of keeping things predictable and under control. And you really learn to pace yourself after you run out a couple of times and have to make do with what is in the pantry or not go out any more.

    We also save a lot of money by not buying anything new, almost ever. When we need furniture we get it on Craigslist. When we need kids' clothes, we go to the consignment store. If I need something new I usually go to Ross or something similar, so it is new, but marked way down.

    When we need a big luxury item (like my car or our new TV a couple of years ago), we save the cash until we feel comfortable paying for it in full.

    Ryan is a total saver (never buy anything) and I am conservative but much more likely to go nuts than Ryan. This was a good way for us to come to an agreement and both get what we want. We don't have any long term goals, except retirement and college, but I feel confident that if Ryan lost his job we could make it about a year before things got bad. Hopefully one of us could find something before that point.

    Sorry for the book, maybe I should have emailed this!

  3. One of my IRL friends with a blog is going through the Dave Ramsey program right now. Here is her blog: http://coachmom2000.blogspot.com/
    She says it is tough, but they are getting there! Really, the budget is the biggest key. Just paying $10 extra a month on a credit card can make a big difference (if you don't then spend $10 on the credit card that is). Luckily, AJU1 and I are fairly frugal and have avoided credit card debt. But, it is a trap that SO Many have gotten into!

  4. Anonymous11:44 AM

    Two more that I thought of (one from me and one from my mom)...

    Set arbitrary limits on credit card use for yourself. For example, my rule is "if I can't pay for this in two months" I can't actually afford it. Obviously, that isn't "really" true, as far as the credit card company is concerned I can take as long as I want, but setting your own limits is helpful.

    If you have store-specific credit cards (I think my mom has Sears, JCPenney, BestBuy, etc. - Yours will vary but this will still work), don't keep them in your wallet. My mom keeps hers in one of her dresser drawers. That way, if she wants to make a purchase at one of those stores, she has to deliberately go get the card and take it with her when she goes out - she can't just wander into the store while she's at the mall and buy random stuff.


  5. Years ago Eugene and I put together a financial mission statement. It has been awesome. Any financial decision that we make (small or big) need to align back to this mission statement. It's good way to keep you focused and on the right track.

  6. Anonymous12:33 PM

    I suggest you keep receipts for every single purchase you made for one month--that means EVERY PURCHASE--even a $.25 gumball. Record all purchases in a program like Quicken. At the end of the month, you will see how much money you have spent on things that aren't really important. Until you see in writing where you money is really going, you'll never get the spending under control. Most people do not realize how much money they're throwing away on unimportant things--which, over time, prohits you from getting the things you really want (like a new house). Think about this: if you go to Starbucks twice a week and spend $10 every time you go, that amounts to $1,040 a year.

  7. The key for me is to figure out where my money is actually going. I realized that I was spending a lot more than I thought on convenience/impulse stuff (e.g., go into Walgreens for a Diet Coke between sections, come out with a Diet Coke, fancy pens, a headband, and lip gloss...)

    I love the budgeting tools at Mint.com - you can keep track of bank accounts, credit cards, loans, etc. in once place. It lets you track and categorize your purchases, and you can set budgets for those categories and it will e-mail or text you if you're getting close or go over the limit you've set.

  8. mint.com, you input all of your accounts, really all of them, and it will reward/terrify you with pie charts, graphs and summaries of your spending in ways you haven't even considered. You can then input your budget by all kinds of set or custom categories. It has been an interesting way to understand where the cash is going, how little things add up, etc.

    We had lots of people recommend it before we leaped into it. We've liked it so far. There are a few other sites that do the same.

    I'm also slowly going through and pulling stuff we never use, have stored forever, etc. and putting it on Craiglist or ebay. No need to take up space with stuff. And it makes me think a little harder about getting new stuff.

    I have not done it, but I have multiple friends that swear by consignment shops. Using them and selling to them.

    I've looked at Dave Ramsey and agree some of his phrases are very compelling. I just don't think we can eat beans for seven months straight to keep our grocery bill crazy low.

  9. Cathleen3:45 PM

    I am NOT good with money or budgeting but this recession has forced me to learn some lessons. Here are a few of my tips:

    1. use cash not debit/credit cards
    2. limit trips to target/cvs unless absolutely necessary
    3. bring my lunch (it's healthier AND saves money)
    4. eliminate gym membership - i run outside and instead of paying $40/month and now pay $150/year for a more basic gym in my office complex
    5. go to your local beauty college for salon/spa treatments - you can get a cut/color for less than $50!
    6. don't buy clothes unless yours are falling apart (literally) - it totally sucks but got me out of hte habit of going to the mall at least once a week and now I seriously limit the mall impulse buys

  10. Okay... so I understand the need for a budget & to get out of debt, but I am going to argue the other side of this coin.

    My mom never bought new stuff - clothes, shoes, microwave, furniture and they would never go out to dinner anywhere "expensive" like Olive Garden that my mom liked. She did this to save money so that she could leave something to her kids one day (at least that is what she told me).

    Rewind to almost 6 years ago... She dies. Then my father moves someone into their house after my mom was dead for 5 months. She gets a nice, new, big ring (which my mom was "supposed" to get once they were established), she gets new flooring, new furniture, and a painted house. All of which my mom should have gotten and most definitely deserved. And now? Certainly there is no money left for my mom's kids (which is fine now b/c my father thinks he owns you if he gives you any money... even though, yes, it would be upon his death that I'd get money... but still I don't want any from him).

    Maybe the above is why if I want a new sweater or to eat lunch out, I do. Yes, I worry about paying for some medical expenses and some debt and I would like to leave something for my kids one day. But I am also not willing to go without "stuff" just b/c Dave Ramsey says so. :)

  11. Listen, I get the Dior, I really do. And, really how fast do you go through mascara? Keep the Dior. But wrinkle cream is pretty pricey, and could -- potentially -- be a gateway cream. I just watched a documentary on HBO about this and if you keep your 700 channels, you can, too.

  12. Tripod7:23 PM

    I've got nothing to add. You guys know we are extremely frugal and never buy anything stupid!
    No, seriously, I keep thinking that I want to enjoy the fruits of my labor before I am too old to have fun on vacation, or in case I die early like Kim's mom in her cautionary tale!
    Besides, I get grouchy when I am poor. My life is a gray slog through an endless February when I don't have any discretionary funds.... my sentences end in elipses and never exclamation marks!

  13. I totally agree w/ Anon 12:33--keeping track of every single penny in a spending journal serves the same purpose as a food journal--it makes you hyper-aware of your spending habits.

    It won't lead me to give up Starbucks--ever--but it is definitely good for me to see how much $$ I spend their monthly!

  14. I get the ideas about using cash, but we have a harder time keeping track of receipts that way. We use one credit card and pay it off every month. This keeps track of all of our spending and then we use quicken to categorize and use their trends and goals to figure out what we should do. It's slowly working...but I'm really not ready to give some things up (high speed internet, healthy food, to name a few)

  15. Anonymous8:21 AM

    Funny post! LOL Tripod! You’ll figure it out, Za. Ben could get a couple more jobs, couldn’t he? I’m frugal but adore my daughter (“collect them all” was her first sentence) and BF (who I once traumatized with Suze Orman) and you, partly due to your more casual and fun loving attitudes!


  16. I will fully admit that we don't have a budget - and I'm an idiot when it comes to making one. Hubs is the one who is good with $ (both his parents are accountants and, nerd alert, he loves math).

    We went on a strict (and very sucky) $10 cash a week budget for each of us for a while in order to pay of some credit card debt. The only other money we spent was on groceries and stuff needed around the house - no clothes or 'fun' stuff. And it really did suck but I'm so glad we're out of that hole!

    Now that everything is paid off we pay the balance on all cards in full each month (unless it's something like our TV where there is no interest or payments until 2011 so we're making minimum payments so that when it comes due it's all paid off).

    Also, because we're 'fancy' the only store card we have is a Sears card (I think I almost cried when I cut up the Banana Republic card...) because we buy appliances and fun stuff like that.

    Things are a bit more relaxed now and we buy 'fun' things but realizing that daycare and diapers for 2 kids is $$$$ we're starting to plan our meals more and always bring our lunches to work.

  17. Josh has us on what I consider to be a strict budget and others would consider generous. To pay for this newest remodeling project, though, I have cut way back. I eat lunch at home every day and don't buy books on Amazon, I go to the library. For me, those are two HUGE sacrifices. I am a spoiled brat.

    Here's how bad I am though -- I am in charge of the grocery shopping and I never look at prices. We shop at Whole Foods for 99 percent of our groceries and when Josh asks how much a certain item was, I can't tell him. Bad. BAD. But to me, we eat what we eat and it doesn't matter if turkey costs $6 or $4, we have to eat it. He does not like that line of thinking!