Category Archives: Money

TGIF Link Round Up: Surviving the economic crisis edition

With everything that’s happened in the economy in the past two weeks, there’s been a lot of buzz in the personal finance blogosphere and the news on the topic. Though the topic of tonight’s presidential debate is officially on foreign policy, the candidates have agreed to spend some time on the economy as well.

In times like these, the question on the minds of most everyday Americans is, “What can I do to protect my own finances?” In my opinion, the best thing you can do for yourself is spend less and start saving more. Today I’m sharing some tips from other personal finance bloggers on simple ways to minimize living expenses and cut back spending.

  • Our Fourpence Worth shares an exhaustive list of 101 ways to save money in everyday life. It’s amazing how “tiny leaks” can add up to a bucket throughout the month. (Check out the fun design on the post, too!)
  • Not Made of Money shares a great method of organizing your pantry stockpile. Stockpiling is a great way to take advantage of store sales a minimize grocery costs, but organization is key to making the most of this system. A cluttered, disorganized pantry can lead to wasted food and overspending.
  • Lynnae at Being Frugal challenges herself to plan meals based on her leftover pantry stockpile once a month to clear things out. This is a great method for taking stock of your pantry and ensuring you’re not letting things go to waste. It can also be a good way to cut spending if you’re having a particularly tight budget week.
  • Paid Twice discusses what to do if your current grocery budget (or other budget) isn’t cutting it, but you don’t have the extra money to increase it. It’s important to make sure your budget is constantly updated to reflect your current needs, but it’s also important to ensure you’re not increasing your budget due to unnecessary overspending.

I’m off to see what the candidates say about the economy. Happy Friday!

Budget weddings: It’s ok to spend a little more on what’s important to you

Every couple has a different set of priorities. Some couples choose to spend next to nothing on the wedding so they can take the trip of a lifetime for their honeymoon. For some brides, a designer dress is the budget buster.

For us, it was photography. When we first started planning, we weren’t going to hire a photographer at all. My mom has a professional-grade camera that she uses to take photos for fun. We were going to put her in charge of photographing the day.

Then I started talking to my married friends. Their advice? “If you’re going to spend money on something, it should be the pictures.” Why? Because the day flies by so quickly, you probably won’t remember any of it without the photos to remind you.

When I really thought about it, I realized they were right. I wanted a permanent keepsake that would last long after the food was gone and the flowers had wilted. Tony and I will never be that dressed up again. We wanted professional photos to remember it forever.

We started looking for a photographer who could take professional photos at amateur rates. After interviewing several people and looking at their work, we just weren’t impressed. Their portfolios matched their amateur rates.

In the end, we decided to hire a professional photographer who was highly recommended by a friend. We spent less in other areas so we could devote almost half our budget to photography. It was worth every penny.

Because we were married in our college town, the pictures serve as a reminder not only of the wedding, but of the place we met and fell in love. The picture above is us in front of our favorite college bar. Ha!

We were married on campus, and our reception was held in a restaurant downtown. We walked from the chapel to the reception, and the photographer followed and took some great pictures of us in the heart of Bloomington.

It’s only been four months since the wedding, and I already feel wistful when I look at the framed wedding photos on our bookshelf. I know I’ll cherish these photos even more when we’re old and gray.

If you’re getting married in the Indianapolis area, I hope you’ll consider Zach Dobson Photography for your photography. All of the beautiful wedding photos in this series were taken by Zach Dobson. We were thrilled with his work.

Maybe your top priority is the honeymoon. Maybe it’s an open bar or a professional DJ. If it matters to you, then it belongs in your budget. The important thing is that you’re not going overboard on everything.

Figure out what your priorities are, and adjust your budget accordingly. If there’s something really important to you, it’s ok to work it into your budget even if it’s expensive. Just remember, you’ll have to cut corners in other areas to make room for it.

What about you? What was your wedding budget buster?

Exchanging gifts with joint finances

My husband’s birthday is this Saturday, and I’ve been struggling to come up with a special gift for him that won’t blow our budget. Exchanging gifts with joint finances is tricky.

Our birthdays are 2 weeks apart, and we’re taking a trip to Seattle the week in between, so we both agreed to a very small gift budget. We considered skipping gifts for each other all together, but that just didn’t feel right. We enjoy choosing gifts for one another and exchanging. Our solution is to limit our gifts to something small and thoughtful.

When we first opened our joint account, we decided to keep separate personal accounts with a bit of money in them specifically for this purpose. The idea was that the personal accounts would be used for discretionary personal spending and gifts for each other. We didn’t plan on the personal accounts getting lumped in with our regular money. That’s kind of what happened, though.

Now I’m faced with two dilemmas: he’s requested ideas for what I’d like for my birthday, but I’ve kind of shut off my “want” mode for the past year. It’s easier to live frugally if I’m not constantly wanting things. You would think I’d have a ton of ideas built up over time, but I don’t. Everything I think come up with just seems so frivolous. Is it completely terrible that receiving gifts used to be a lot more fun when they were coming out of someone else’s budget?

I also have to figure out what to get for him. The problem is, when it comes to gift giving, I still struggle with the urge to go overboard. All of the ideas I’ve come up with are out of our price range. In short, I don’t want him to spend anything on my gift, but if I had it my way I’d way overspend on him. Funny how that works, huh?

So I’m asking you: Do you exchange gifts with your partner? If so, what kind of budget rules do you set? And how do handle the joint finances issue?

As a newlywed, I’d love to know how all of you handle all of this stuff.

Subscribe

5 ways that budget management and weight control are alike

I’m pretty proud of our financial success in the past few months. My husband and I have improved our financial health immensely since our wedding. Unfortunately, the same isn’t true for my physical health.

I’ve been avoiding the scale for the past month. I didn’t want to confirm what I already knew. Last night, I finally decided to face the inevitable. I’ve gained 8 pounds in the four months since my wedding. Yikes. I was 3 pounds below my regular weight on my wedding day, but I’m officially 5 pounds above my “happy weight” – the heaviest I’ve been in two years.

One of my first posts was about how I lost weight using basic budgeting skills. Now that the honeymoon’s over, and it’s time to get real and lose these pounds I’ve put on since the wedding, I wanted to revisit the topic. Only this time I’m talking about why constant monitoring and reassessment are crucial to staying physically and financially fit.

Here are some tips I’ve found helpful when managing my weight and my budget:

1. Be realistic.

Sometimes it’s necessary to go on a strict budget to pay down massive debt. You may have to cut all discretionary spending for a little while to overcome a major financial hurdle. However, if you try to maintain that level of restriction for too long, it’s harder to stay on track and meet your own high expectations.

Your best bet is to find a comfortable balance between necessary bills, discretionary spending, and saving. Maintaining a reasonable budget requires constant monitoring, but it shouldn’t be incredibly difficult or make you feel deprived.

The same is true for weight management. Find a comfortable weight within your healthy range that you’re able to maintain without going to extreme diet measures. Once you get there, maintaining that weight requires constant monitoring, but it shouldn’t be a terrible struggle as long as you’re eating well and exercising.

I’m able to stay at my healthy weight pretty easily just by avoiding overeating and staying active. When I try to venture below that weight, like I did for my wedding, every pound is an incredible struggle. My body just doesn’t want to be that thin. So I’m happy to compromise. I may not be thin enough to feel comfortable in a bikini, but at least I know I’m in a healthy weight range.

2. Frequently monitor your progress to catch yourself before you veer too far off track.

Once you find a comfortable budget, it’s crucial that you measure your progress regularly. Without careful planning and monitoring, you could easily throw your entire monthly budget off track with one weekend of bad decisions. Imagine how bad it could get if you just stopped monitoring your spending for months at a time.

Just as you check your budget frequently to make sure you’re not overspending, you must weigh yourself regularly. A slight increase in weight could alert you to a problem in your diet and activity before you veer off track to an unmanageable degree.

3. The longer you avoid the problem, the harder it is to resolve.

It’s much easier to pay off your credit card balance every month than it is to pay down several thousand dollars of debt that’s accrued over months or years. It’s also a lot harder to lose weight when the pounds have packed on over time. Overcoming a 1-pound weight gain usually just involves watching what you eat closely for a few days. I’ll have to work a lot harder to lose these 5 pounds. It would be even harder if I waited until I was 40 pounds overweight again to get back on track.

4. Constantly adjust according to your changing needs.

When it comes to budgeting, everybody knows that you can’t continue spending the same after a major pay cut. When your income decreases, your spending must decrease, too. Likewise, when you welcome a new baby, your discretionary spending is probably going to take a hit to accommodate for diapers and formula.

You must find the same balance between activity and calorie intake for weight management. I think part of the reason I’m struggling more to maintain my weight is because I changed my job. In retail, I was on my feet 8 hours a day running around the store, moving heavy objects, and constantly moving. I didn’t watch my diet as closely as I should have, but the constant activity made it easy to keep extra weight off. Now that I’m sitting at a desk all day instead of moving, I need to seek out more activity outside of my job and become mindful of what I eat to avoid weight gain.

5. Sticking to it and making the right choices are the hardest parts.

Everyone knows that the easiest way to stay ahead of the game financially is to spend less than you make. We also know that the best way to maintain a healthy weight is to burn more calories than you consume. It all sounds so easy when you break it down into those simple equations, doesn’t it? The truth it, it’s not that easy.

The part that’s left out of that equation is the constant struggle every day to make the right choices and stick to your commitment. After all, if it was as easy as it sounds, nobody would struggle with their weight or their finances.

The best thing that weight control and budget management have in common? They’re both totally worth the struggle.

Photo credit

My personal (student) loan experience

As part of the Extended Group Writing Project at the Personal Finance Bloggers Network, I’m sharing the story of my biggest financial mistake: my student loan debt.

I was in the same position as many high school graduates. I knew I needed to go to college if I ever wanted a chance at a successful career. Unfortunately, two of my sisters were also in college at the time. I didn’t qualify for grants or financial aid, but my parents simply didn’t have enough money to cover the high cost of tuition for three children simultaneously. My grades were good, but I didn’t think they were good enough to earn me scholarships, so I didn’t apply. I know, stupid.

I didn’t choose an expensive Ivy League or out-of-state school. I was happy to attend a state school. State schools are still expensive, though.

I often hear people say that living in an off-campus apartment is a luxury that students on a budget can’t afford. I completely disagree. For the first year I lived in the dorms. In addition to tuition, my food and boarding costs alone were $800 a month. It was much cheaper for me to live off campus in an apartment with roommates.

My parents generously contributed by covering my rent. I worked part-time all the way through college, but most of my time was devoted to classes, homework, and extensive work for the campus paper. I didn’t have time to work the hours I needed to cover my tuition and living expenses.

Each year, I took out federal Stafford loans to cover my tuition. Then I took out additional private loans to cover my living expenses.

The truth is, I didn’t really know what I was getting into. I was very young, and I thought, “I’ll be making so much after I graduate, paying these loans won’t be a big deal!” That might be true for low-interest federal loans. Not the case when it comes to $20,000 in private loans at 8-12% interest. Ouch.

I had no understanding of interest rates. I didn’t know the difference between a 4% and a 12% interest rate. I’d never paid down debt, so I didn’t know that the difference between those percentage points was thousands and thousands of dollars.

That money paid for me to eat and live, but I certainly could have lived more frugally. I didn’t really shop for groceries. I ate out constantly. I bought stuff I didn’t need. I had a lot of fun.

Was it worth it? Yes and no. If I could go back and do it all over again, I would still go away to school. Those four years were essential to my personal growth. I became the person that I am today because of those four years of independence and learning. If I hadn’t gone away to school, I never would have met my husband. I’ll take some debt in exchange for my husband and an invaluable education.

I would have stopped at the federal loans, though. I would have taken out as much as I could at 4% interest and worked my butt off in my part-time job, lived as frugally as possible, and earned my education without that extra $20,000 at an average of 10% interest.

I’m paying the price now. My private loans have a minimum monthly payment of $250. If I paid the minimum payment, it would take 30 years to pay them off.

They’ve been in forbearance steadily accruing interest for the past 2 years. I simply don’t have the money to pay the minimum payment and pay off my credit card debt. Paying down this debt is my only way out of it. Like federal student loans, private student loans cannot be discharged even in bankruptcy.

My federal loans are $75 a month, and my husband’s small amount of federal student loan debt is deferred until he graduates. When we finish paying our credit card debt in November, those private student loans will become our focus.

My credit score is very high, so I should be able to consolidate them for a lower interest rate. That will cut the minimum payment almost in half. Then my goal is to pay off the high-interest student loan debt in 3 to 5 years. I don’t want to be paying my own student loans when it’s time to send our kids to college.

My biggest mistake was that I signed up for a loan that I didn’t understand. I will never again do anything with my money that I don’t understand.

I’m overwhelmed by the debt, but we have the tools now to pay it down. It took four years to acquire it. My hope is that it won’t take 30 years to pay it down.

Subscribe

Why every couple needs a prenuptial agreement

This morning, I read this New York Times article on the importance of financial common ground in marriage. These are basic tips that we all know, but it got me thinking about the underlying theme of basic communication.The article discusses the importance of communication during marriage, but the groundwork for good financial communication begins before the wedding.

I am often surprised at how little my friends share financial information with their significant others. I’m not suggesting that you swap credit scores on the first date, but full financial disclosure is an essential part of engagement. It was easy for Tony and me to blend our finances because we started with so little; it’s more complicated for couples who have already acquired independent assets.

Drawing up a prenuptial agreement before marriage can help facilitate these discussions. A common misconception is that prenups are only for couples with huge amounts of wealth, or that their purpose is to protect one spouse’s assets from the other in the event of a divorce. In reality, a prenup outlines what will happen to all assets if you divorce, even normal assets like the equity in a home that you bought before you met your spouse.

The prenup has gotten a really bad rap, but it shouldn’t be viewed as a way to keep your spouse from getting your money if you divorce. If you come into the marriage with individual assets, a legal document that says what belonged to whom before the marriage and how shared assets will be distributed makes things clearer.

All couples need a “prenup.” It doesn’t necessarily have to be a formal legal document that distributes wealth. For young couples who have no assets, it can simply be a verbal agreement about how you plan to manage your finances.

A prenup allows you to lay it all out there before you’re married, take stock of your individual and shared assets and debts, and have some very important discussions about money that many financially independent adults are uncomfortable having with their partners. Through these money discussions, you’ll discover common ground from which you can build your financial goals and philosophies.

Tony and I agree that money will be an open topic in our family, not just with each other but also with our children. There will be no secrecy about our budget or how we manage our money. I want them to understand that money management takes hard work, and even a grown-up salary isn’t a limitless fortune.

We also share a mutual desire for security above possessions. We don’t want to spend our income, no matter how much we have, on a lot of “stuff.” Our frugality began out of necessity, but we plan to continue living frugally even as our income increases. We will always drive inexpensive cars, cut corners where we can, and live below our means. As our income increases, the only difference in our lifestyle will be that we’ll have more money to distribute in our savings accounts for emergencies, retirement, and education for our children.

We agreed that I’ll continue to work full-time until he finishes graduate school, and then he’ll take over the responsibility of earning our income so I can stay home with our children for a few years.

Finally, we agreed that once we got married, our assets and debts became shared. This may not work for everyone; for instance, your prenup may dictate that you’re not responsible for your fiance’s credit card debt. Tony and I decided it would be easier for us to blend everything and work as a team to pay down debt and continue saving together. The important thing to is figure out what you’re comfortable with before you tie the knot.

We moved in together shortly after we got engaged, and we opened a joint bank account. The lines between his and hers were immediately blurred. Communication eased the transition tremendously, and we’ve had no problems with this system.

Drawing up a verbal “prenup” made it much easier for us to budget, manage our money, and plan our future. We frequently remind each other of our goals during moments of financial weakness (i.e. the clearance cookware that nearly blew our budget last month). These shared goals have strengthened our bond.

Subscribe

My thoughts on automatic bill pay

I’m a firm believer in online bill pay. Who isn’t? Just a few clicks and the bills are paid. No stamps, no checks. It’s simple and fast. Like most technological innovations, I don’t know how people lived without it.

I don’t feel that way about automatic bill pay, though. While automatic debit makes things even simpler (you don’t even have to think about it!), I’ve always been incredibly uncomfortable with the idea.

I really like sitting down once a month and mindfully paying my bills. I like the peace of mind that comes with clicking and checking those bills off my list.

I don’t like the idea of money being withdrawn from my account without doing it myself. We build a cushion into our checking account, so there’s no danger of an automatic payment overdrawing our account. But I like that there are never any surprises when I check my balance. I always have a pretty good idea of what my balance is because I know what’s coming and going from my account. I don’t want to be reminded that a bill was due when I log in and notice that the amount has been deducted.

I like having control over when I pay my bills, too. I like to sit down close to the first of the month and get everything out of the way. When I was in college, I used to wait until the last minute to pay bills. I would check my balance and mentally subtract the bills that were due in order to figure out my “real” balance. I never paid them until just before the due date. This got me into trouble more than once. Why I didn’t just pay my bills and be done with them is beyond me. I most likely procrastinated because I was always strapped for cash, and I didn’t like seeing my balance go down.

Now that we don’t live paycheck-to-paycheck, getting those bills out of the way is liberating. I don’t dread it because I know the money is there, so I like to check it off my list.

Paying my bills myself every month allows me to monitor charges and possibly fix errors before they’re posted to my account. I don’t trust myself to take the extra time to look at my statements if I’m not sitting down to pay the bills.

Does this make me a control freak? Probably. But I think if there’s one thing that we should be control freaks about, it’s money. For me, automatic bill pay is a dangerously hands-off approach. I understand that it may be a real time saver for most people, but even in this automated world, I still like to have some degree of physical control over my money. It’s not going anywhere until I say.

Taking 20 minutes out of my day once a month to look over my statements and send my payments gives me the time to give myself a financial checkup. It allows me to double-check my budget to make sure I’m on the right track, and reconfigure things if necessary.

When it’s over I feel a wonderful, peaceful feeling of, “Well, that’s done.” I don’t want to worry about whether a computer glitch might botch my payment or not send it at all. I just want to know that it’s done.

I also love that when I look at my balance a few days later after all the payments have been posted, I know exactly how much money we have. I don’t want to look through my transactions to see if a payment has gone through to figure out my “real” balance.

What about you? Does automatic bill pay save you time or cause you stress?

Subscribe

Working an unexpected raise into the budget

Last week we found out that Tony is getting a raise for his monthly teaching assistantship stipend, which works out to about a $160 increase in our monthly income after taxes. Woo hoo!

This is particularly exciting because we weren’t expecting it at all. We thought it was a mistake when the deposit was higher than normal last week. But he called and they confirmed that yep, it’s a raise, and we can expect that amount every month from now on.

Today when we sat down to rework the budget for September, we were amazing at how much money $160 is when it’s put to work in a budget. In the past we probably would have blown that extra money and still felt strapped for cash at the end of the month. Now that we’re budgeting, this extra money will make it a lot easier for us to reach our goals.

We decided to divvy up the extra money between savings and debt. We’re putting an even $300 toward savings, which is about a $75 increase. We also upped our debt payment by $75, bringing it up to $325. We still won’t make our final credit card payment until November, but our final payment will be small.

We haven’t decided what to do with the extra $10 floating around in our budget. We might tack it on to our entertainment budget just to give us a little extra mad money every month. Snowflakes and other miscellaneous income will continue to go into our savings account to save for Tony’s tuition, our future expenses, and emergencies.

Yay for raises! We weren’t expecting to see an increase in our income so soon, but I’ll take it!

Subscribe

August budget round up

After budgeting for just one month, I am amazed at how empowering it is! I suddenly feel this huge weight lifted off my shoulders. Now that I’m monitoring where each dollar goes, I feel like we have so much more money than we did before.

At the beginning of the month, we looked over our past spending habits (we’d been tracking our spending with Mint.com for almost a year). Based on that data, we budgeted for all of our fixed expenses and set limits for ourselves for discretionary spending like groceries, pet expenses, cleaning supplies and toiletries, etc.

We came in $200 under budget for the month! That’s mostly due to the fact that we paid Tony’s health insurance for August when we signed him up back in July. But, hey, we didn’t go over our budget, so I’ll take it. :)

In all seriousness, we didn’t go over budget in ANY of our categories. It is so encouraging to look at our budget graph and see all of that green! In the past, it’s been a big mess of bright red alerts. We came in $46 under budget in groceries, $13 under budget in our miscellaneous “shopping” category, and $31 under budget in the pet expenses category.

I could probably lower the pet budget from $50 to $25 a month since we began putting money aside for Howie’s vet expenses, but I think I’m going to leave it at $50 for now since he has some vaccinations and a yearly physical coming up. We’ve only been putting vet money aside for a month, so we might need that extra money in the months ahead. In a few months, I’ll average out our monthly pet expenses and use that number for future budgets.

We were able to painlessly send $325 toward our last little bit of credit card debt and throw a total of $300 into our savings accounts.

I’ve only been doing this for a month, but I already can’t imagine life without a budget. Even when we were making twice as much money as we are now, I felt so helpless when I thought about our finances. I felt like we had no control over our spending, no matter how hard we tried to “cut back.” Sticking to a budget was surprisingly easy once we spelled it all out for ourselves.

I’m also looking forward to making changes to our budget coming up. For instance, winters are mild in North Carolina, so we’re expecting our energy costs to cut in half this fall and winter. (Keeping the apartment cool in the high summer temperatures is way more expensive than staying warm in the winter.) We’ll probably pay $40-$70 a month for electricity November through April, compared to $100-$140 during the summer months.

I have no clue what we did with that extra $60-$100 a month last winter. For the first time ever, I feel like we’ll be able to put that extra money to work and make some headway on our debt and savings instead of spending it mindlessly.

Our goal for next month is to lower our grocery budget. This month I set it at a super high $400. Yikes. Now that we’re spending between $50 and $60 a week, I want to lower it to $350. Yes, I realize that’s still super high, but I’m shooting for baby steps here. If we can hit $350 or lower next month, then it won’t be so hard to hit $300 in October. The plan is to keep lowering that until we hit our threshold for savings.

Woo hoo! Budgeting is fun! :)

Subscribe