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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A recent survey by CESI Debt Solutions found a whopping 80% of us hide purchases from our partners. Ouch! Some 18.5% of married couples have credit cards their spouse don’t even know about! I’m not sure how that is possible. Wouldn’t they see the bill, notice transfers out of a bank account, or wonder where new items around the house came from?
According to the survey of more than 200 Americans, spouses are secretly buying:
- 34.5% clothing and accessories
- 24% food/dining
- 19.5% beauty/personal care items
- 16.5% gifts
- 13% alcohol
- 9% entertainment
- 9.5% music/cd/mp3
- 8.5% childcare/items for children
The last item makes me think the survey included in the “secret” category purchases not explicitly mentioned, which would inflate these numbers. The survey was conducted by a company that makes money from helping people pay down credit card debt so I suppose the more people overspend, the more their business is necessary. But forgetting to mention a purchase is different than keeping something secret. You took the kid to JC Penney for new underwear? Not exactly scintillating dinner conversation.
Most financial cheaters kept their spending on the down low to avoid problems at home, the survey found. Ya think?! Oh honey, I forgot to tell you I owe $6,000. Guess we won’t be going on vacation, after all.
- 46% are currently paying off the debt and feel s/he doesn’t need to know
- 43% want to avoid an argument
- 27% will never tell their spouse about their spending
- 19.9% are concerned it would end the relationship
- 11% plan to tell their spouse, but are not ready yet
So the question is not whether you have cheated financially on your partner, but what purchase were you hiding? Or perhaps you have a story to tell about discovering a secret purchase?
One of the biggest fights I ever had with a significant other was when I discovered he had purchased a TiVo in secret. The purchase price was not the issue, however. I was strongly against a TiVo as I was convinced I would watch too much television if we had one. He was strongly for the TiVo as it would allow him to easily record shows he liked. A great sale came up and he couldn’t resist. I found the thing in the closet about a week later and blew up – it felt like he had lied to me. Looking back, we both could have compromised and avoided the whole argument. Sigh. Live, and learn.
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This is a post by BargainBabe.com writer Yazmin Cruz.
I have a confession to make. I am addicted to coffee – the pricey frapps and ice blended drinks. But that’s not my only problem. In order to keep up with my caffeine addiction I’ve been charging the drinks on my credit card. Not smart at all, especially when I carry a balance.
I didn’t realize how bad it had gotten until I was reviewing my e-bill and noticed almost half the charges made were at coffee shops. My addiction began about six months ago when I took on more responsibility at work and couldn’t get out of the newsroom until 10 or 11 p.m.
Waking up extra early didn’t help either. By 3 p.m. I needed a pick me up and walked to a local coffee shop for my fix. If I didn’t have cash on me I would simply charge my $4 drinks. In no time my habit added up to $20 a week. Now I pay for my indulgence plus interest.
I shared my dilemma on the Bargain Babe Facebook page and many readers offered solutions that I am implementing. Here’s my plan. First, I’m going cold turkey. I had my last ice blended drink this weekend. I am not frequenting any coffee shops for a while and most importantly I am working hard to pay off my credit card debt. Note to self, don’t use plastic to pay for food or drink!
I am also fighting my expensive coffee addiction one tea bag at a time. Compared to coffee, tea is less expensive and doesn’t add extra calories (unless you add cream). I am using my coffee maker at home more often, as reader Janna suggested:
“I make my own cappuccinos now. I have a Senseo, which I *love* ($.25 per cup). I warm up some milk in the micro, then foam it up with an Aerolatte; simply awesome. For the counter space saved over a home espresso maker and the cost you can’t beat it.”
Having worked at a juice bar, I have enough experience to tackle making coffee at home. I also have an Aerolatte so I just need to commit to doing it myself.
Related posts:
What tempted me to use my credit card this month
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AARP is an organization for older people, but I love its pro-consumer bent. A recent AARP Bulletin shared tips to make yourself look better to lenders. The list regurgitates old advice but is a good reminder to maintain financially healthy habits. Here are AARP’s credit tips on what harms your score and how to act:
Paying bills late - Car payments, electricity bills, even a late library fine can get reported to the credit bureau. Mark your calendar to pay bills at the same time every month or arrange automatic payments with your bank. My two cents: if you use Google calender, a reminder pops up for every item so you won’t miss a payment.
Closing credit cards - If you really want to close an account or two, close the most recently opened cards and the ones with the lowest credit limit. My two cents: doh! I just closed a longtime credit card because I no longer needed it.
Not checking your credit reports – Be vigilant about checking your credit reports at least once a year; nationwide consumer credit reporting communities such as Equifax, Experian, and TransUnion offer free credit reports. My two cents: true, but the free credit report does not include your credit score, which is like getting a paper back from a teacher marked up but without a grade.
Taking it to the limit- Aim to keep your charges to 30% or less of your available credit. If you’ve almost maxed out your cards, use them as little as possible for a while and pay them down.
Using cash over credit- If you don’t want to pay interest on credit cards, just pay the bill in full every month. My two cents: I disagree! My month-long credit card-less experiment revealed I spend significantly less – about 16% – when I use cash over credit. I think building savings is more important than building a high credit score.
Not shopping around for lower rates – Spend some time looking at cards and rates at Creditcards.com and Bankrate.com. My two cents: these are just two of the many great sites for finding a credit card that fits your habits.
Applying for extra cards- Too many inquiries at one time make you look desperate for credit. My two cents: but how many is too many? 2? 5? 13?
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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My friends at AOL’s Lemondrop blog (I blog for AOL’s WalletPop) wrote a helpful article about how exactly to pay off high-interest credit card debt. I don’t carry a balance and I found this article fascinating. The story offers five approaches to paying off the debt, some of which might help you.
Her sitch: In June 2008, Tiffany owed $14,611.47. She’s managed to chip away at the balance by using gift money, tax refunds and watching her spending, but she still owes close to $8,000, and she’s not sure what else to do.
“I don’t have any real system,” she says. “I tried fun Excel spreadsheets and advice from friends, but nothing really panned out. In the end, I just kept throwing any money I could at it, from $50 to $200, as often as I could. But I’m hoping to move in the upcoming months, so I won’t be able to set much aside to pay off the debt. Help!”
How’d she rack it up? Tiffany lives in a college town and has had trouble committing to long leases, so she’s moved five times in as many years. “Every time I moved, I would put extraneous costs on the credit card, telling myself I’d pay it off right away,” she says. “But one new thing always leads to another when you move into a new place.” On her expense list: paint, shower curtains, rugs, cleaning supplies and lots of takeout food. “It always caught me off guard when it added up,” she says.
The glitch: Tiffany has plans to move to New York City in May, where she’ll look for another nonprofit job. Currently she works for a women’s transitional home and brings home about $1,750 a month after taxes. She expects to make $35,000 to $45,000 in a similar position in New York. “What I make now is barely anything, and in general the pay isn’t great for nonprofit work,” she says. “Having a salary that can just wipe the debt away is unlikely. What do I do?”
The expert’s take: First of all, the fact that Tiffany has shaved more than $6,000 from her balance in less than two years is fantastic. But her plan to move to the Big Apple with $8,000 still hanging over her head raises th e eyebrow of Boston financial planner Cheryl Costa. “I would suggest she look long and hard at whether she can afford the move to New York,” Costa says. “Does she have an appreciation for how much it will cost her to live there? If she makes this move, it may take forever to pay down her debt.”
Keep reading to see what five steps the expert recommends for Tiffany.
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I was not the only one who regretted making a particular credit card purchase last month. Readers had plenty of regrets themselves. Post your own regret as a comment to be automatically entered to win a hot pink BargainBabe.com T-shirt. The contest ends Thursday at 11:59 p.m. PST so leave a comment today. The winner will be announced Friday!
Becki can’t say no to flowers:
I not only bought flowers I didn’t need, it is too cold to plant! I love pansies, and they were only 67 cents apiece, but now they will sit till it gets warmer, and then they will die when it’s hot…if only I had bought them last fall…It’s an addiction I have, I have to stay out of the nurseries!!!!! Someone please help!
ChrisM is kicking herself for paying shipping:
My 17 year old daughter wanted a pair of TOM’S shoes for her birthday in February, so I went on line, ordered them, paid for shipping. $17 for shipping–only to realize they came from Valencia and —we live in Sylmar.
Wish I’d looked into shipping fees first.
Tami regrets her hasty purchase:
Our microwave suddenly ceased to work after having it for about 6 years. We thought we couldn’t live without one, so we rushed out and bought a generic microwave oven at Target for $80. Fast forward to a week later and we noticed one for $20 at the local Goodwill shop. Goodwill stands behind their products and will refund purchases if you bring in the product/receipt, so by being hasty, we wasted $65. Next time we’ll comparison shop.
Blakely fell victim to a sale for something she doesn’t need:
I purchased a waffle iron at Kohl’s. It was only $25.00 with a $10.00 mail in rebate. I haven’t used it yet and I haven’t found anywhere to store it. It was something I wanted, but not something I needed.
Have you ever been laid off? Then you know what a blow it can be financially and emotionally. On BargainBabe.com I mostly deal with surviving financially, so I welcomed Harlan Kidwell, Jr.’s book on the emotional fallout of job loss. Harlan’s self-published Creative Unemployment: How To Transcend Job Loss
With so many personal stories, Creative Unemployment is cathartic.
This book offers a positive look at the potentially damaging psychological aspects of underemployment. This book is not about finding a job. It is a book about finding yourself…When you find yourself, you will find employment – a vocation – a life purpose. The issues in this book can also be useful to people who are aware or alive and still employed who want to gain the benefits of increased self-awareness before the trauma of rejection and loss of income.
Each chapter of the 284-page book begins with a 1-3 sentence description of what you’ll get out of that chapter and ends with a 1-3 page review of the major points. Chapters 1-8 are about recognizing and accepting the emotional journey that follows unemployment. Chapters 9-15 are about moving forward and taking action.
In chapter 10, Harlan breaks down the emotional journey of unemployment into six practical steps you can take to move forward.
1. Become self-aware.
2. Decide what you want.
3. Write your goals down.
4. Imagine or visualize your achieved goal. (emphasis his)
5. Take action.
6. Reflect and select.
The book’s introduction lacks sources for the statistics cited, which makes me uncomfortable. However, the point of the book is to help one heal emotionally, not provide economic figures. The nut of this touchy-feely (and I don’t mean that in a bad way) book is that it is okay to to feel how you feel, you should believe in yourself, and definitely go for it!
Leave a comment on this post by the end of Thursday, March 4 to win my review copy of Creative Unemployment: How To Transcend Job Loss
Just got some interesting economic factoids from the website BillShrink.com. Are you part of the savings trend?
- 46% of credit card holders paid their bill in full each month in Feb. 2009
- 59% of credit card holders paid their bill in full each month in Feb. 2010
- The average American family had $2,000 in unexpected expenses last year
- Americans have reduced their debt by $101.2 billion in the past 14 months ($1,874 per household)
- We are currently saving at record rates, setting a 15-year high (Check out BillShrink’s super cool graphic about American’s personal savings and debt, which goes back to 1960).
- We still over pay for lots of stuff, including ATM fees, credit card late fees, and dealership auto maintenance (though I’m seeing coupons from dealers these days)
To get this data BillShrink surveyed 154,000 users on its site from February 2009-January 2010. The pay off rate has been steadily increasing each month, according to the responses below.
Yes, I pay off balance each month No, I don’t pay off balance each month
02-09 46.03% 53.97%
03-09 45.92% 54.08%
04-09 41.75% 58.25%
05-09 43.19% 56.81%
06-09 46.28% 53.72%
07-09 46.92% 53.08%
08-09 48.72% 51.28%
09-09 51.21% 48.79%
10-09 51.99% 48.01%
11-09 54.73% 45.27%
12-09 57.25% 42.75%
01-10 58.63% 41.37%
I’m curious how BargainBabe.com readers compare to the national average.
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I talked to Laura Rowley, author of “Money and Happiness”
1. “Female” versions of products are often more expensive. Consumer Reports did a study and found that products with his/her versions, like shaving cream, deodorant, and razors, perform the same but cost $1-2 more for the version targeting women, Laura said. All that pink packaging is cute, but not worth an extra dime.
2. A coupon toolbar saves time. Research shows more people do at least two online searches before they buy. First to find the product and then to find coupons for the product. Laura likes the coupon toolbar at Dealio.com, which automatically finds coupons when you search for products on Yahoo, Bing, or Google. Having a toolbar helps you get more value out of a single search.
3. Certain debit cards earn cash rebates. Laura says she earns 3-4 percent on the account tied to her debit card. To earn this high interest rate, you generally have to do five things. One, swipe your debit card 10-12 times a month. Two, set up direct deposit into the account. Three, use the bank’s online banking program. Four, get statements by email not snail mail. Five, bank locally. You aren’t going to see any of the major banks offering this perk.
But do the benefits of using a high-interest debit card surpass credit card perks? “Totally,” Laura said. “It’s way better to get 3-4 percent interest than credit rewards.” What about not building your credit history by using a debit card? “The people with the best credit scores only use 8-10 percent of their credit capacity every month. By using a debit card 10 times, you are getting the best of both worlds.”
Still interested? Go to CheckingFinder.com, plug in your zip code to find a local bank, and compare offers. The banks can afford to give you this interest rate because they are making money on the interchange fee. Every time you swipe your debit card, retailers pay about 2 percent of the sale, Laura said.
This deal works best for people who are comfortable banking online. Laura recommends using a high-interest debit card for small purchases between $10-$50 and a credit card for bigger charges. She makes the most of this deal by transferring 3-4 months of savings into her high-interest account. But only do this if you can stop yourself from spending your savings!
I just checked for my zip code and one bank is offering 4.09 percent interest on balances up to $25,000. That’s a far cry from the 1.25 percent interest rate ING Direct is offering for a 18-month CD.
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The LA Times recently had a story suggesting 10 simple ways to save. I boiled it down to the best tips and added two of my own. Add yours to the mix!
1. Disconnect your land line. Or find a cheaper plan and call your current provider and ask them to match it.
2. Shop around for home and auto insurance policies. Spend an hour once a year checking if you can get a better price on your home and auto insurance. Do them together so you qualify for a bulk discount. Before you go for the absolute lowest price, check the insurer’s complaint ratio, which will indicate how happy their current customers are.
3. Pay cash (only if you really can’t control your credit spending because you are giving up a lot of perks and cash-back rebates).
4. Adjust your withholdings. The LAT says 70 percent of tax payers get a refund – which means we are letting Uncle Sam keep our money for a year, interest free! Instead, you could be earning interest or paying down debt.
5. Pay off high-interest debt. Focus on paying off your credit cards. It’s hard to get ahead when you’re paying 15-30 percent in interest.
6. Pay into your 401 (k). Making a $100 contribution costs you $70 because of the tax benefits, and if your company matches you are making even more for the same $70.
7. Set up an automatic savings deduction. It will force you to stash cash for a rainy day (which, in Los Angeles, is today).
8. Take care of yourself. Preventive health care really does pay off. Some health plans will reduce your premium if you quit smoking and if you reinvest that money on doctor’s bills and cigarette into your 401 (k), you stand to be $250,000 richer at retirement, the LAT story says.
9. Volunteer. Seeing how others live will no doubt making you feel better about what you have in life.
10. Budget! Check out my simple 15-minute budget. It really does work.
11. Exercise. Going for a walk, run, or bike ride is a cheap activity that can energize you and save you trips to the mall$.
Looking for a good scare? Check out the United States debt clock, courtesy of USDebtClock.org, a group that is devoted to educating people about the country’s debt. A disclaimer at the bottom of their About page says the group is not affiliated with any government, political group, or organization. And yet it doesn’t say who is behind the site, which makes me skeptical…
But onto the numbers. The site shows figures for more than our nearly $12 trillion debt load, so it gives a holistic scare. Also listed are state debt, private debt (like mortgages), social security liability and many other debts, all in red. Positive numbers are listed in green, including gross domestic product, federal tax revenue, small business assets, household assets, and more.
The site is constantly updating the figures, though it doesn’t explain how it does that. Are the figures projected? I can’t image every source for every number in the debt clock is updated so frequently. It’s possible that each number is pro-rated based on yearly growth or decline.
There are so many figures it’s possible to come to more than one conclusion about the financial health of the U.S. What do you make of our debt?
Thanks, Dave!
If you are not convinced that saving is the best path to financial prosperity, TheSmartestWay to Save: Why You Can’t Hang on to Money and What to Do About It wants to convince you. The 205-page book persuades with facts, quotes, and lessons that are down-to-earth and basic. Following all their advice is the hard part.
TheSmartestWay has 23 chapters broken into three sections: your money and you; your money and others; and your money and the world. The book starts with the basics of why credit card debt is bad, how to develop spending and saving discipline and asks 19 questions to gauge your current spending savvy.
It offers advice on creating money harmony at home, including showing the other person they are more important than money, getting consent for major purchases, and being honest about money.
TheSmartestWay also has tips on bargain shopping, where to find good deals, and shares a list of 10 questions you should ask yourself before you try on a piece of clothing. They are so useful I’m sharing them here.
1. Do I really need this item?
2. Is it priced well for the value?
3. Can I afford the expense right now?
4. Would I wear it lots of places often?
5. Is it the right size?
6. Does it fit the image I’m trying to project?
7. Does it coordinate with my other clothes?
8. Is it made well enough to last several years?
9. Would I wear it several years from now?
10. Would I regret not buying it?
I recommend this book if you lack motivation but want to start budgeting or spending less. TheSmartestWay covers a lot of ground but is not overly technical. Amazon sells it for $13.25.
Leave a comment on this post by Friday for a chance to win my review copy!
Reader Tamara shared her Canadian perspective about debit cards. Instead of credit card companies issuing them, banks do!
All this debit stuff in the US is so foreign to me. I was in Chicago recently and most places we went said “we take debit,” but really that means, “we take credit cards, but it’s okay if they are hooked up to your bank account and are kind of like debit.”
In Canada NO ONE carries cash because we all have actual debit cards that are issued by our banks and the money comes right out of our bank accounts. They are not VISA, or MC debit cards, they are *just* bank debit cards. And there is little to no fee to use them, and if there isn’t money in your account, and you haven’t previously set up an overdraft, your transaction is declined and your purchase doesn’t go through.
Also, debit cards are accepted EVERYWHERE from major retailers to 7-11 to the dollar store.
Who wants to move to Canada with me?
I learned about this video through SpendLessTV, which shares clips about saving money from all sorts of stations.
This 4:29 video follows filmmaker and director Karney Hatch as he fights Bank of America over his overdraft fees, something I’ve been writing about. I highly recommend it!
Related:
Debit cards are a cash cow for banks
Banks agree to lower/eliminate bank fees
