Category Archives: Money Management

Basic budgeting can help you lose weight (without costing you money)

Money Saving Mom wrote an insightful and realistic post today about frugal weight loss. Because I’ve struggled with both debt and my weight and I believe the two are alike in more ways than one, it inspired me to throw in my two cents.

Two years ago I lost 40 pounds without spending a dime. No gym membership. No diet program. No special meals or exercise equipment. I think it’s really important to stress to frustrated dieters that you don’t have to spend money to lose weight. In my personal experience, stressing about finances often led to overeating. The more I spent, the more I stressed, the more I ate. So for me spending money on weight loss was counterproductive.

The single most effective part of my diet was planning my meals and tracking each and every calorie that I ate. In essence, I created a “food budget.”

You can’t expect to get out of debt and save money without a budget, so how can you expect to lose weight without being accountable for what you eat and when you eat it? Every day I planned what I was going to eat for breakfast, lunch, dinner, and two snacks, and I tracked how many calories I “spent” on different foods in my food budget.

I determined how many calories I needed to be consuming (you can do this by entering your information into this handy calorie calculator). Much like a budget helps you avoid spending more than your income, a food budget helps you avoid eating more calories than your daily allowance.

It doesn’t have to be time consuming. I used FitDay to track calories, exercise, and goals. Registration is completely free, and the site has a huge database of common foods so you can estimate how many calories you’re eating. I compared the database information to many of the foods that I knew the nutritional information for, and it was pretty accurate. All you do is search for the food you ate and add it to your online food diary. You can also manually enter the nutritional facts for your favorite foods and save them to add them again later.

The site keeps track of your most common foods and makes it easy to add them without searching. It does all the math for you, so it’s easy to stay on track.

Not knowing exactly how many calories there are in a food is like buying something without even looking at the price tag. Would you hand over your debit card and walk out of the store without at least looking at the receipt? I don’t think so.

I learned more about nutrition and dieting in the first two weeks of tracking calories than I had in a lifetime of yo-yo dieting. Like a financial budget, my food budget mapped out where I was “overspending” calories so I could make targeted changes.

For the first week of my diet, I ate a bagel with a tablespoon of cream cheese for breakfast. When I looked at my food budget and realized I had been wasting 100 calories every day on cream cheese alone, I quickly determined that it wasn’t worth it and switched to high fiber cereal to save the calories. Sound familiar to you budgeters?

Tracking calories wasn’t just informative, it was empowering. I loved being able to make informed choices about what I ate. Knowing that a piece of cake would cost me more than half a day’s calories made it a lot easier to turn it down. On the other hand, I was pleasantly surprised when I found out that a mini Reese’s cup was a minuscule 40 calories, an amount I could easily afford to work into my budget and enjoy guilt free from time to time.

The point is, if you have the tools to manage your finances, then you have the tools you need to manage your weight. Discipline, basic math, organization, planning, and budgeting are the keys to staying physically and financially fit. You wouldn’t spend money to get your finances under control, so why spend money on weight loss?

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Our first zero-based budget

We’re trying a zero-based budget this month for the first time. In the past, we’ve tried setting arbitrary limits on our spending (which didn’t really work). Other than that, we didn’t really track our spending beyond trying not to buy unnecessary things.

That philosophy has kept us from blowing our money, but we haven’t tracked our spending in a measurable way or designated a certain amount to a savings account until now.

A zero-based budget is a plan for your money that accounts for every single dollar of your income. After budgeting for fixed expenses and assigning limits for other expenditures like groceries and entertainment, you also assign a purpose to “extra” money by budgeting it toward savings, investing, or debt repayment.

I like the idea of a zero-based budget because it forces us to do something with the little bit of “extra” money we have after covering expenses and paying down debt. In the past, we’ve kept all of our money in our checking account. Anything we didn’t spend at the end of the month stayed in the checking account where it collected almost no interest. We were more likely to spend it – if not that month, then the next month or the month after that.

Our new plan is to keep only a cushion amount in our checking account to avoid catastrophe in the event of a spending mistake. We’ve cleared the rest of our money into savings. To avoid spending more than we make, we’re considering the cushion amount to be “zero.”

For the first time, we’re tracking exactly how much of our monthly income is left at the end of the month (if any) and putting it toward savings or debt (in ADDITION to the money we’ve already budgeted for savings and debt). If there’s nothing left or we spend more than our income, we’ll adjust our spending habits to ensure that we’re not spending more than we’re making.

I’m looking forward to having a solid number for our monthly expenses. It will give us more control over our spending and saving habits and help us determine how much we need for an emergency fund.

Rather than setting our budget in stone or setting arbitrary spending limits, we’re creating a flexible budget by tracking our expenses with Mint. New expenses spring up every month and some months our income may be higher than others, so our budget will be different each month.

We’ll sit down at the end of every month and set the next months’ budget based on what we spent last month, what we need to spend this month, and what we expect to make. Every dollar of income will be assigned somewhere. We’re challenging ourselves to spend below the budgeted amount where we can so we’ll have money left over at the end of the month.

We set our first zero-based budget at the end of last month, and we’re on track so far. More updates will follow as I’m sure the closer we get to the end of the month the harder it will become to stay within our budget.

A cash budget just doesn’t work for me

Since I started reading books and blogs about personal finance, there’s been one tactic that has jumped out at me that I don’t plan to ever use: the cash budget.

I understand that the point is to really pay attention to what you’re spending and to view money as a tangible, finite thing. It makes sense if you view cash that way. Unfortunately, my perspective on cash is much different.

For as long as I’ve been budgeting my money and paying my own bills (about 5 years now), I’ve used a debit card. In the beginning, I balanced a checkbook to track my purchases. Then online banking became so advanced that my purchases showed up on the site instantly.

I got into the habit of checking my online bank account balance daily. This is obviously risky if your balance is low (I almost overdrew my account a few times in college because I cut it so close). Now that I’m not living paycheck to paycheck, though, I always have a safe amount of money in my account. It’s just easier for me to use a debit card.

Now with sites like Mint, you can track your spending AND your budget. I used to watch my mom crunching the numbers and paining over receipts for hours every Saturday when she balanced her checkbook. The digital age has automated the process for us. Why not save some time and let my online banking and Mint do it for me?

Maybe I’m in the minority, but having cash doesn’t make me think harder about my purchases. Somehow after years of tracking my funds electronically, the way I view cash has been distorted.

I’ve come to think of the balance in my bank account at any given moment as the amount of “real” money to my name. Once it leaves my bank account and becomes cash in my hands, it’s no longer part of that bank balance, so I feel like I’ve spent it already. I’m more likely to spend it on something stupid.

On the other hand, when I swipe my debit card, I think of my bank balance – my “real money” – dwindling, and I’m more likely to think twice about my spending.

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Back on track after a minor derailment

I have to admit, when I finally found a full-time job two months ago, my husband and I temporarily lost sight of our goals. It started with a celebratory dinner, which we had been planning since I started the job search process. But then we found our financial plans quickly derailed by several dinners out per month, some out of control shopping trips, and a general spending craze.

For the first time in a year, we were making enough money to cover our expenses with a little left over, so we succumbed to the urge to spend more. That was exactly what I wanted to avoid, but it’s a tough temptation to resist. It was easy to spend less when we had no money to spend; it’s a little harder to make the right choices when you do have extra money.

I also partly blame a “honeymoon mentality” that extended beyond our actual honeymoon. We agreed that we could afford a little extravagance on our honeymoon because we’d worked hard to save and we’d chosen a frugal destination (Washington D.C.) for our trip. We were only gone for a week, but I was hired at my job the week after we returned, and the extra income paired with the temporary lapse in frugality was enough to bump us off track.

Now I’m looking at our finances and realizing that even a full-time salary doesn’t go as far as you’d like without proper budgeting and goals.

With a new income, new budget, and new goals, I feel like I’m starting all over again. For the past year, the goal has been to keep from financially drowning without feeling financially deprived. Now we’ve got the opportunity to make real choices with our money, and I’m feeling a little overwhelmed.

I’ve updated our budget to include additional debt repayment and savings that we couldn’t afford before, but now it’s balanced with nothing left over. I need to find a way to magically find additional money to put toward debt and savings if we want to reach our goals, so my first step is finding ways to cut back on spending we can control.
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Getting started …

After almost a year of lurking in the personal finance blogosphere, I’ve picked up some great advice and finally feel like my husband and I are on the right financial track.

It’s taken me this long to start my own blog because I didn’t really feel like I had much information to add – I still have so much to learn! But I think it’ll be good for me to get my goals in writing to keep me honest and on the right track.

I originally got into frugal living when I moved to a new city with my fiancé (now husband) right after we graduated from college a year ago. He’s in grad school earning a small living stipend as a teaching assistant, and I struggled to find an entry-level job in the stalling economy.

When I finally settled on a temporary part-time job, I realized that we weren’t making nearly enough to maintain our lifestyle. The savings we’d built was quickly depleting. I didn’t want to feel deprived because, honestly, things were pretty bleak at the time. While I didn’t want to increase our debt by living above our means, I did want to live well and live healthy. So I started looking for ways to cut our spending without sacrificing our comfort too much.

What have we accomplished in the past year?

For starters, we kept our heads above water and avoided the dreaded paycheck-to-paycheck lifestyle despite our low income.

I’m also proud to say that instead of increasing our debt, we’ve paid off about $4000 in credit card debt left over from college. (We’re scheduled to make our final credit card payment in November.)

We paid cash for a beautiful wedding with a $5000 budget thanks to our own savings and help from our parents. We also went on a lovely frugal honeymoon in Washington D.C. where we enjoyed free admission at the nation’s museums and landmarks. We spent a little over $1000 on the hotel and food (also paid in cash from savings).

We’ve saved about $2000 in a high-interest ING account, and I’d like to see that grow now that I’ve finally found a full-time job.

What are our goals?

Now that I am working full-time, I’m faced with some tough decisions about how to use the small amount of extra income that we have. The last thing we want is to fall into the spend-all-you-have trap.

Some of our goals include:

  • Paying off a significant chunk of student loan debt.
  • Building and maintaining an emergency fund.
  • Starting a retirement account in the next year or two.

I’d like to make headway on our emergency fund, savings, and student loan debt before I start a retirement account. We’re only 23 and 24, so I think we’ve got a little time, but I want to begin contributing to a retirement account by the time we’re 25. My employer doesn’t offer a 401K, so it will be an individual account. I’m fine with that because I’d like to keep the bulk of our retirement savings in a Roth IRA anyway.

Most importantly, since we’ve only been married two months, I want to start developing good money habits now when we don’t have much. My main goal is to live comfortably and well without spending every penny that we earn.

I’ve lived above my means through credit card spending, and that certainly wasn’t what I’d call living well. I was constantly stressed about money and never had extra money without putting myself into more debt. If we can get ahead of the game then we’ll have extra money, less stress, and a richer life (though not necessarily more “stuff”).

I like to think that if we can do that at our current income, then we’ll be able to maintain those good habits as we start to make more money. In the future, I want to devote the majority of our income to savings and cash purchases and avoid excessive debt.