Do you have a budget? Do you like it? I explain my 15-minute budget in this 1-minute video. The first time I tried this budget I saved $2,000. Let me know if it works for you!
alancleaver_2000/Flickr
This list intrigued me because I continually ask myself if I am spending and saving responsibly. If many of these behaviors ring true it is time to consider changing your ways. How many of these habits are you guilty of? See my answer below.
The following list comes from Billshrink, a site that compares plans for cell, cable, and other services to see if you are getting the lowest price.
1. You charge group dinners on your card and keep your friends’ cash to spend.
2. You spend more than 40% of your total income on rent.
3. You’re constantly transferring your balance to get 0% interest on your credit card debt. (more…)
By Bobbi Burger Brunoehler of Bobbisbargains.
pupismyname/Flickr
I am against paying retail. Hence my motto, “Friends don’t let friends pay retail.”
However, sometimes even I have to go to a store and purchase something new. Hey, it happens to the best of us.
Let me assure you that when I do this deed I also ENSURE that I know the store return policy and keep my receipt, packaging and tags. If I am not 100% satisfied with my purchase, I return it.
I am amazed how many times I see items at yard sales, thrift shops and swaps that are brand new with their tags still attached. I always wonder about the economic condition of the seller. Are they wildly wealthy? Did they lose the receipt and figured they couldn’t get their money back? Or did they think it wasn’t worth the trouble?
I doubt anyone that is wildly wealthy is reading my blog (but if you are and want to make a donation to me, I am a willing recipient.) As far as returning items without a receipt; many stores will give you (more…)
By Bobbi Burger Brunoehler of Bobbisbargains.
HikingArtist.com/Flickr
I have just 25 minutes to speak about budgets at an upcoming conference – such a short period of time. As I started to prepare my talk I realized staying on budget and out of debt has only five key points.
1. You have to want it. No seminar, book or popular online money management software will help you to stay on budget unless you really want to. It’s like quitting smoking cigarettes. You must make a firm and true decision to DO IT!
2. Spend less than you make. Oh so easy to say but that is the bottom line. Somehow you have to increase your income and/or decrease your outgo until you are spending less than you make. It’s simple math.
3. You have to spend time looking at actual numbers. Our finances have become so automated that you can get paid, buy your food, pay your bills and transfer money to your significant other’s account without ever having to actually confront your economic condition. I spend at least one day a month going over my finances with a fine tooth comb. I examine all the receipts and evaluate where we are spending money. I balance every month’s statement and earmark money for upcoming expenses (like my daughter’s birthday or a new mattress.) I do most of my accounting with pen and paper. Bargain Babe has a 15-minute budget that is fairly simple.
4. Spending should not be an emotional decision. I don’t buy something (like a $750 leather jacket) because I “just HAVE to have it” or I “can’t live without it.” If I want it so badly, I should plan for it. Most often, all the items you buy on impulse won’t stand the test of time. Of course, I have a slush fund built into my budget that allows me the luxury of buying a little something (like a pretty hair clip) for myself when I see it – IF I really want it.
5. Ensure that the entire family understands and agrees with the above four items. It is vital that everyone is on the same page when it comes to budgeting. If necessary, have family meetings to go over these points until you have agreement. It just won’t work if everyone isn’t on board.
I’d love to hear any of your budgeting tips.
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Do you remember Cori’s comment about saving $5,000 on a salary of $22,000 that she left on Yazmin’s book review two weeks ago?
Um, more details please! Cori emailed me on how one little sticky note saved her big time. Here is her story.
So my little post-it note that I carted around with me while living on $22k/year just laid out the details of exactly how much I could spend each day on certain things (not including the rent/bills), just the stuff where you have choices. So if I wanted to get a shirt dry-cleaned, I had to save up a weeks worth of daily dry-cleaning $.I didn’t allow myself to go over budget and I kept all the leftover money in a savings account.
It took a lot of discipline, a lot of bus rides (over cab rides), and a lot of saying “no” to things like mani/pedis/sushi/drinks out, etc. But I managed to make it happen. A little cheesy, but to my 23-year old mind, it worked for me at the time. San Francisco is an expensive place to live, but I was happy living on less there. And you just get creative with your entertainment options.
And with my $5k I saved I took a month off work and went to Costa Rica and took a yoga teacher training course. Thankfully now, I own my own event planning company and no longer have to survive on $22k/year, but the lessons I learned were invaluable.
I had my original post-it stashed in my desk, but one of my kids got off with it. But here’s my best relocation of what it said…
Cori’s Daily Spending
Food: $10
Dry Cleaning: $2
Transportation: $3
Entertainment: $2
Drugstore Stuff(shampoo, makeup): $1
House Stuff (cleaning supplies): $1
Cori, the simplicity of your system and your dedication to it is inspiring!!! Thank you for sharing how you saved money. I hope it helps someone else. Got an interesting success or failure story? Email me at julia@bargainbabe.com and the best will appear on the blog.
David Hilowitz/Flickr
I was having lunch (using a coupon, of course) with one of my most frugal friends when she laid a bomb on me: there are only two types of frugal people.
I have always believed there are many types of frugal folks because financial situation, upbringing, and goals vary widely. But when she explained herself, I realized she was right.
Type No. 1 – Frugal by Nature
Type 1 folks are frugal by nature. Spending money causes us pain and we often go without spending even if it would make our lives easier. We will go without, postpone, or delay to save. We will spend extra time researching a product irregardless of how much – or how little – we stand to gain, dollarwise. We will drive extra miles to shave a few bucks off a purchase. The bottom line is that we get an emotional hit from snagging a hot deal and are willing to deny ourselves to score.
Type No. 2. – Frugal by Necessity
Type 2 folks are frugal because we have to be. We recently got laid off, have a partner/spouse who lost a job, or left a job or to raise a family. We want to use coupons and look for sales to save. We are savvy enough to recognize we need to budget and alter our spending behavior, but get hung up because spending money brings us joy, even if we later feel stressed out by our cashflow. We do our best to distinguish between needs and wants. Bottom line is we get an emotional hit from having a new thing, regardless of price.
I know I’m type No. 1 because I am such a firm believer in doing things myself to save money that I often get into ridiculous situations, like the time I made my summer intern create thousands of homemade raffle tickets. Or the time I decided to distribute flyers across Los Angeles via bicycle on a 95-degree day to save gas money. Or the time…
Which type are you?
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By Mike Barclay of 10CentsWorth.com
A lot of you may be surprised to know that I’m not the most financially savvy person. What might floor you even more is that I’m still learning. Here’s what I’ve learned and where I need your help. Deal?
Priorities and Will Power
If you were faced with the choice to pay rent or your cell phone bill, which would you choose? The logical choice should be rent, right? For a while, I would actually choose my cell phone. I figured it was okay to accrue late fees so I could text my friends. Well no more!
I have a file on my computer that sums up my bill priorities in the order they need to be taken care of and reminders on my calendar to check it periodically. Here are the top 5 things on my list as of right now:
1. Rent (I always make sure my rent is set aside. Being homeless = not a good idea.)
2. Court Fees (Speeding tickets people, speeding tickets. I’m no criminal.)
3. Cell Phone (For me, I need my phone on for potential employers, etc.)
4. Car Insurance
5. Credit Card Bills
I’ve conditioned myself to take care of the important priorities by having my friend reward or punish me with small things, like taking away my laptop for a couple of hours, or we’ll grab a bottle of wine as a reward. With proper budgeting I have enough to take care of everything.
Planning
I was an impulse buyer. I’d go grocery shopping with no list, a rough idea of what I needed, and a wad of cash. I’d walk into the market and out with a whole bunch of random food, inevitably forgetting an essential, like milk. I’d end up spending way over what I’d planned. Now, any time I go grocery shopping, I make a detailed list beforehand and, most importantly, I don’t deviate.
Banking Alerts
If my bank gave me the money they charge for over drafting, I’d be sitting on a beach somewhere drinking wine and doing nothing. I was horrible at looking at my account balance daily and making sure I had enough to spend. Thankfully, we now have modern technology. If you bank online, there’s a way to set up email and text alerts if your account drops below a certain amount. And (depending on the bank) you can even make it send you your balance text after every purchase. I don’t have an excuse to over-draft anymore.
Savings Accounts
My dad taught me the value of a savings account, I just never paid attention. “Have money, will spend” has always been my mentality. What I’m trying to do now is put away 10% of my check into a savings account and never look at it again. If I ever need car repairs or have an emergency, I’ll have money ready to go.
Some of these strategies I practice now. Others, I’m not fully on board with yet (e.g. putting money in a savings account). Do you have any advice to make it easier to manage my finances? What have you learned from your moments of weakness?
kevin/Flickr
This post is brought to you by Mint.com, an excellent source for a budget planner.
I’m getting fed up with consumers – the little guys like you and me – taking the blame for the economy. We as a nation spent like crazy, lost a ton of money in the housing and stock market, and now are getting blamed for being careful with our money. “Even as the economic recovery plods ahead, many American consumers are refusing to come along,” says an AP story published today. “They’re not spending freely – and they have no plans to.”
The story makes it seem as if “spending freely” were a good thing. Craziness!
The headline of the story in my local paper (it might have been different in yours) is, “Economy’s new threat: frugality.” If so, here is the face of the enemy: Marjorie Feldman of St. Louis, who owns a home that lost 20% of its value and who saw her retirement account shrink by 15%. Marjorie’s confidence in the economy will “never” recover, according to the story.
That’s code for she’s not spending like she used to. Marjorie’s new frugal spending habits, which many Americans have adopted, are important because consumer spending accounts for about 70 percent of our nation’s economy. If Marjorie and others in her situation would max out their credit cards, we could see the economy recover, the story seems to say.
Or…we could recognize that our economy has an unhealthy dependence on consumer spending that is not sustainable.
Instead of spending beyond our means, we could budget and live within our means. We could save money to retire before we croak. We could save so that social security, Mediccare, and unemployment are not our only safety nets. We could save so our kids can get through college without crippling debt. We could save so that when times get tough we have emergency savings to rely on.
Americans currently save an average of 3.1 percent, down from last year’s peak of 6.4, the story says. I save 10-20% of my income because I feel responsible for my fiscal future. Why do you save?
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Reader Diane sent me a darn good question via a comment on my post about approaching the end of my credit card ban. “When the experiment is over, will you go back to spending as before or will you make some changes,” Diane asked. “Either way, why?” My month-long cash-only spending experiment definitely changed the way I will spend money. Going forward I’m going to make three changes.
- I’m no longer going to rely strictly on credit cards because I scrutinize purchases more with cash. My goal is to use cash for everything under $50, which are the purchases that have the most wiggle room. Think I’m giving up a ton of credit cards perks? During the past seven months I earned an average of $16 in cash-back rewards each month. With cash I spent $200 less. That’s a much bigger perk!
- I’m going to strictly use cash for groceries because I spend so much more carefully with greenbacks. My dollars are finite no matter how I pay, but using cash makes my limits feel more apparent.
- I’m going to leave my credit card at home unless I specifically plan to use it. The more I pre-think about purchases before I leave home, the more likely I am to spend less.
Before the experiment I used to use cash for about 10% of my purchases and credit for the other 90%. Now I think my ratio is going to be closer to 60/40. What’s your ratio?
Clemson/Flickr
I was tempted to use my credit card four times this month, despite my pledge to spend only cash. None of the purchases were hard to push off or say no to. (I also put off purchasing airfare and making a hotel reservation for a blogging conference in July.)
1. A letter from my Alma Mater asking for money prompted me to pull out my credit card. Then I remembered my self-imposed ban. The letter is in my queue for May.
2. A coupon to renew my BargainBabe.com domain made me seriously consider breaking my credit card ban to get the discount. But the URL does not expire until June, so I can re-up in May.
3. A deal for a haircut (which I’m in need of) and hair coloring (which I’ve been contemplating) for $95 (orig. $225) landed in my inbox via SocialBuy, a new Groupon-type site for Los Angeles deals. I’m glad I passed, however, because a few days later I got a recommendation for a woman in Glendale who gives cuts for $20. My appointment is next week. (Full disclosure: SocialBuy’s founder is a friend of mine and is helping me improve my site).
4. Last year I forked over a whopping $400 over carelessly losing my iPhone. Ouch. A friend told me insuring an iPhone is super cheap, and indeed AppleCare costs $69 for hardware and software support, battery fixes, and phone support. The policy lasts for two years from the purchase date, so if I buy it in May I’ll get 19 months of coverage, which is less than $4 a month. The policy does not include damage from negligence, loss, or theft, however, so I may pursue other policies.
Frankly, I’m surprised that not a single purchase that required a credit card came up in April. I fully expected to confront 2-3 transactions that required credit. Is credit necessary after all?
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The day of reckoning is here. I sorted through my receipts and tallied my discretionary expenditures during my month-long cash-only experiment. The tally below does not include fixed bills like rent. (New to my forward-thinking budgeting system? It takes 15 minutes to set up.)
Overall, more than a third of my discretionary spending – 35 percent – is unaccounted for because I forgot to ask for a receipt. That means a picture of my spending provided below is woefully incomplete. This is also why some of my category totals, like meals out, seem low.
A number of seemingly random items sucked up my dollars – like bike repairs and gear in preparation for a triathlon May 1. I say seemingly random because unusual expenses like these pop up every month without fail. This is the main reason I created a forward-thinking budgeting system.
My totals for each spending category include tax.
Groceries: $172.22
Meals out, including coffee: $21.12
Drugstore items: $43.10
Bicycling gear and repairs: $169.38, including $100 to ship bike across the country and back
Business supplies: $15.86
Ski trip: $95
House and garden: $45.52
Gas:$41.57
Camping: $40
TOTAL accounted for spending for April: $643.77
TOTAL ATM withdrawals: $1,000
Cash left in my pocket: $11 (to last me until Saturday)
Total unaccounted spending: $345.23
Total rebates and gift cards earned: $29.69
Percent of spending unaccounted for: 35 percent!
My month-long cash-only experiment has taught me a lot about money. I dipped into savings only once, and that was to cover a $533 emergency mattress purchase. I’m telling you it really was an emergency! Grocery shopping takes longer because, with a finite supply of cash in my pocket, I add up the cost of each item I put into my cart so that I have enough money at check out.
By Bobbi Burger Brunoehler of BobbisBargains
Evil_Erin/Flickr
Although cigarette smoking has become less cool than it used to be, there are still millions of people who are addicted to a $5-$8/pack a day habit. You have already heard smoking is bad for your health. I’m here to tell you it is bad for your budget, just as BargainBabe.com blogger Mike Barclay did last month. This post is for anyone who is a smoker or knows a smoker who really wants to stop.
First of all, let me tell you that I was a THREE pack a day smoker. How can anyone smoke that much? If you live on cigarettes and coffee and have a cig burning at all times. I know about smoking and quitting smoking.
A recent study found the cost of cigarettes nationwide is $5.28, plus local taxes. There are places online where you can buy them for less (no…. I am NOT going to put a link.) How much does your pack-a-day habit cost?
365 x $5.28/pack = $1,927
Egad! I’ve has passed out from excessive waste of money. Over twenty year’s time, that would be $38,544 or enough to put a 20% down payment on a $192,720 home.
I wouldn’t write this if I didn’t know about a solution. Allen Carr wrote a book called The Easy Way to Stop Smoking
Carr’s book has sold over 12 million copies so you can certainly find a copy for free through Freecycle or a paperback swap site. Carr’s website has celebrity testimonials on the power of this simple, yet extremely effective method to quit smoking. Check out Carr’s website and book if you truly want to quit smoking.
Have you quit smoking? What method worked for you?
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I’m in the home stretch of my cash-only budgeting month and have four days before I can go back to using my credit card. What sweet relief!
Sort of.
I’ve come to appreciate cash for what it’s taught me. Using cash is messier and makes individual purchases harder to track, but it is easier to remember how much money I’ve withdrawn than to remember how much I’ve charged. If I forget, I can add up my ATM withdrawals online in less than a minute.
I am more conscious of how purchases add up as I contemplate them in the store. I am paying greater attention to prices because I am hyper-aware that what I buy today takes away from what I can buy later. With credit that seems less true. I am also scared of putting more into my cart than I can pay for. How embarrassing to not be able to pay the cashier and have to put something back. This means shopping takes a few minutes longer as I’m tracking the price of everything in my cart, but it is a cinch to stick to my list. During my last grocery trip, I took two items off my list even though I had enough money to pay for them!
Almost everyone takes cash, but there are exceptions. Some airlines do not take cash for in-flight purchases of snacks and drinks. Rental companies often require a credit card to place a hold in case you damage or lose the equipment.
Big purchases are easier with credit. With plastic, you don’t have to stuff wads of bills in your wallet and ask the cashier to count out high sums. If I lost my wallet, I have no recourse other than hoping an honest soul returns my wallet untouched. With credit I am well protected.
Cash has changed my spending habits the most when it comes to purchases under $50. Most of my big purchases, like a plane ticket to NYC for my sister’s graduation, are unavoidable because I am committed to celebrating her accomplishment in person. But the small purchases – like whether to order another drink at the bar, or whether to stock up on groceries – come with wiggle room. Using cash makes me more likely to wiggle my spending downward.
So how do these lessons add up this month? I am on track to spend $1,000 in April, which is well below my target of $1,200. My total spending does not include a $533 mattress, for which I used savings. I have four days left to go so keep your fingers crossed I will make it to May without going to the ATM again!
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At least one reader was shocked by my disclosure that my monthly budget is $1,200. In a comment about whether a $533 mattress purchase should come out of my budget or my savings, Cindy said, “If you easily have $1200 free cash to spend in a month…wow! That’s not being very frugal.”
Let me explain my budgeting system and why I give myself so much leeway.
I have tried many, many budgeting systems, from tracking every penny to estimating monthly costs by category. None of them worked because they all relied on past purchases to predict future ones. What I spend my money on varies widely. One month a plane ticket may eat up a good chunk of my dollars. During another month a wedding or home project may account for much of my spending.
What does not change is my total spending, certain fixed bills, and my income.
I decided to use this information to create a forward-looking budget (the pdf is safe to download). I start with my income, subtract my fixed bills, and am left with a monthly spending amount (my budget).
My fixed bills include basic necessities and any bills that must be paid including my rent, savings contribution, 1-tank of gas, student loan payment, cell phone bill, and regular prescriptions. Everything else comes out of my monthly budget.
- groceries
- second and third tanks of gas
- gifts
- travel
- clothes
- coffee
- movie rentals
- toiletries
- meals out
- drinks with friends
- hair cuts
- yoga classes
- gardening supplies
- car washes
- vacations
- anything else
Still think $1,200 sounds like a lot?
I gave up credit and debit cards this month to try to reduce my monthly budget. Previously, I went on a spending moratorium to learn new habits. My 15-minute budget may or may not work for you. The first month I used it I reduced my credit card bill by $2,000. Give it a try and let me know what you think.
Evil Erin/Flickr
I’ve gotten a lot of questions from readers about my month-long cash-only experiment. Why am I only spending cash in April? What is the goal? Did my “emergency” mattress purchase come from savings or the regular budget? How much money do I have left to spend this month? Answers below.
Q: Is the mission of your cash-only experiment to find out how much money you need to live on per month? How much you want to live on per month? Or some combination thereof? – Concetta
A: Neither. I know how much money I have to spend after bills and savings every month. And most months I’m good at staying within the limit I’ve set for myself.
Q: Is the point just not to use credit? Or is it more about how to use credit smartly? – Concetta
A: Yes and yes! I usually rely on credit heavily because I spend cash quickly, don’t like going to the ATM, and prefer not to carry gobs of money. But studies show people are more reluctant to spend cash over credit. An NPR story from 2008 says psychology is responsible. I was curious if spending only cash would change my habits and reduce my overall spending. In the process, I’m learning how to use credit smartly.
Q: Part of an exercise like this is to be able to defer those expenses until they do fit into the budget. Is the point of this to simply pay cash for everything (no matter if the budget is met) or is it to begin the process of defining wants from needs? – Janet
A: Yes, the point is to pay cash for everything, even major purchases. In my book, defining needs versus wants is unrelated to how you pay for them. Instead, defining needs versus wants is about sitting down with paper, pencil, and a calculator and creating a first budget. Once you have taken into account regular bills, irregular expenses, and fixed expenses, you will know how much money you can actually spend each month on fun stuff like meals out, movie tickets, and clothes.
Q: What happened to the mattress!? – Sarah
Back story: I put off buying a mattress for so long that after three sleep-deprived nights I had to start sleeping on the couch or shell out for a new mattress. I chose the latter, seeing how the couch is covered in dog hair. From browsing mattress sale flyers, I knew I could get one for under $1,000. I researched coils, padding, and natural fibers online and realized only two things mattered. Was the mattress comfortable? If so, did it fit my budget? A good friend highly recommended IKEA and from the website I was confident I could find a mattress within my budget, less than $500.
A: I went to IKEA, found a comfy mattress within budget, and lugged it home with the help of a burly friend. I’m sleeping easy, but debating whether the $533 mattress should come out of my monthly budget or savings? I tossed around the pros and cons for a week, asked readers to weigh in, consulted friends, and decided the mattress will come out of my savings.
Here’s why. I have ample savings to cover a big last-minute purchase like this. Even though I put off the mattress purchase until it became an emergency, for weeks I had been mentally preparing myself for the big purchase.
Q: What I want to know is how you researched this mattress for the features you wanted and price before spending the money. For example, did you consult Consumer Reports? Tell all, BB. – Diane
A: See above.
Q: So how much money do you have left to spend this month? (I submitted this one!)
A: My target spending was $1,200 for April. If that number seems high, hang tight. I’m writing a future post about my budgeting system and why my so-called discretionary spending is higher than other budgeting systems. So far I’ve made three ATM withdrawals totaling $1,200, but the $533 mattress came from savings so I have $667 left to spend this month. Not bad!
