Write it down

[ProfMoneyWise]

Starting today, write it down.

Write down everything you spend. Does not have to be fancy just the basics of Date, Item, Where and Cost.

Yes, this means that cup of coffee. Yes this means the MetCom bil you paid. Yes this means that newspaper. Yes this means that Walmart run. Yes that tank of gas. Yes . . . you get the idea. Everything you spend money on gets written down.

Do you need to itemize everything in the cart at Walmart? No you don't. If you do a grocery trip then you can call it groceries. It is up to you if you want to call that new set of tires groceries but I would recommend separating those out on your list.

This is a simple exercise. It is just between you and you and you. And no, you don't need to keep the receipts.

This simple exercise will show you where your money is going on a monthly basis. This simple exercise has been known to "find" people money.

Go on, give it a try, what can it hurt? And if this month happens to be vacation month who cares? Write it down. All of it.

(I'll post in a month on this topic and tell those of you that are interested what to do with this information.)

 

[smilin]

This is a great idea.
Since we are in the computer age and I'm stuck on this thing I thought I would use Quicken Online. It got my technology juices going to see how it automatically and securely hooked up to everything I do: Checking, credit cards, savings, etc. all accounts. It updates itself daily.
It sends you a weekly update as to how much money you have, or not.
I was shocked to see what I spend in groceries alone. I have changed my spending habits.
Neat interface when you do your taxes: It categorizes your taxes!
All these ideas are great. Try them, whatever fits.
Thanks for the idea.

 

[ProfMoneyWise]

Starting today, write it down.

Write down everything you spend. Does not have to be fancy just the basics of Date, Item, Where and Cost.

Yes, this means that cup of coffee. Yes this means the MetCom bil you paid. Yes this means that newspaper. Yes this means that Walmart run. Yes that tank of gas. Yes . . . you get the idea. Everything you spend money on gets written down.

Do you need to itemize everything in the cart at Walmart? No you don't. If you do a grocery trip then you can call it groceries. It is up to you if you want to call that new set of tires groceries but I would recommend separating those out on your list.

This is a simple exercise. It is just between you and you and you. And no, you don't need to keep the receipts.

This simple exercise will show you where your money is going on a monthly basis. This simple exercise has been known to "find" people money.

Go on, give it a try, what can it hurt? And if this month happens to be vacation month who cares? Write it down. All of it.

(I'll post in a month on this topic and tell those of you that are interested what to do with this information.)

If you played along you have quite a list by now. Personal finance is personal. The way you id'ed what you bought is yours and yours alone and now you have a real good start at figuring out how much you are spending in a month on things. Now you can categorize those and see how much you spent. Use that as your guide for this month. (Goodness, we have the start of the dreaded "B" word here).

List down the left on a piece of paper the categories you come up with.

List in the next column how much you spent in total last month in those categories.

Again, these categories are yours. I have twenty myself. These are the regular monthly expense categories, not the yearly (i.e. Christmas, vacation, car replacement) funds. Those are separate.

Now you have a list of categories you spend money on. You have a corresponding amount you spent in July next to that list. Add up the amounts. Got enough income coming in to cover? If not it is time to cut expenses or increase income. If you are upside down you are going to crash and burn. If you are to the good where is that extra money going? Tell your money where to go or it will disappear.

If you have non-house debt I suggest you start a debt snowball and become debt-free as soon as possible. Yes, for some it could take years but to prosper you must be out of debt. It cannolt be said any simpler.

A good motivator is The Total Money Makeover by Dave Ramsey. Go to the library and check it out, or it is available at Dave's site (chepeast I have found) and no he does not take credit cards.

Will check in next month and see how you are doing . . . and we'll talk about the Debt Snowball. This month is about making your budget work for you. Go get em and do not spend what you do not have.

 

[ProfMoneyWise]

Whew. August on a budget is over. How did you do? Find any cash you were leaking and did not know where it was going? Cut back on some frivolous spending because now you know about it . . . and admitted it? How about the big one? You know the one that showed you had more going out than you have coming in. This you?

Time to refine, peak and tweak, and get September on paper. Yes, you have to do this every month. You need to look at it weekly. If you change anything you have to make sure it works in the big picture called YOUR LIFE!

Food, Housing, Utilities, Transportation. There are your four basics.

What about credit cards? Car Loans? Consumer Loans? Student Loans? Why are we keeping these around for ever?

If you have extra money and have debt it is time to SNOWBALL that debt out of your life. How? Here is how.

First, promise never to borrow money again. If married. . . promise each other. You guys have to do this together or it won't work.

List all your debts, smallest balance to largest. I don't care about the interest rate. Just use the amounts.

Look at any non-retirement money you may have and slash and burn that money down to $1,000. The $1,000 goes into a separate account for a Baby Emergency Fund. This is for EMERGENCIES. Not dining out. Not Drinks. That transmission better be dragging or the baby needs a shot before you even think of this money. If you do have to use some of it for a real emergency . . . then you fill it back up. Always keep $1K. That is your shield against life because life happens.

Anything after the $1K goes to the smallest debt. If you can knock out a few great. Because then you are going to take the amounts you have been paying on those you knocked out and attack the next one in line. Remember, smallest to largest. This is called snowballing. And when you pay these off close them, cut them up (if a card). Get them out of your life and never return.

Smallest to largest and keep your interest rate arguments to yourself. If you were that good at math you would not owe the money in the first place. Pound that debt. Get motivated. Get another job(s). Sell stuff. And one more thing and this is huge: CHANGE YOUR BEHAVIOR CONCERNING DEBT AND BORROWING MONEY FOREVER!

Next month . . . The Envelope System.

 

[my-thyme]

I'm following this with great interest...keep 'em coming!

 

[millertc]

I'm following this with great interest...keep 'em coming!

 

[smilin]

I am so depressed. Truth hurts, even when you are doing this on a computer. NOW I have a better idea of where to start...

 

[ProfMoneyWise]

The Envelope System

There are a few things in your budget that you tend to overspend on. One of the reasons you overspend is that there’s nothing to tell you when to stop.

You may write down $800 for Groceries ($400 per 2-week period), but between the checks and checkcard purchases, you can go over the budget, because your money is going in 14 different directions.

To get on the Envelope system what you do is, every 2 weeks, write a check for $400 and cash it. Put the cash in an envelope and write “Groceries” on the envelope. Never buy anything out of that envelope except groceries, and no groceries are bought unless it is with money that comes out of the envelope. The point is that you can’t overspend what’s in the envelope. If you run out of cash, then you don’t spend any more from that category. If you get to the cash register and don’t have enough cash to cover your items, you have to take some of them back.

By this point if you have been writing down what you spend you have a good idea how much you are spending on groceries so for your first envelope I recommend this one. You can have more envelopes as you get the feel of this and as stated Personal Finance is “Personal” so there is no wrong answer. I have six myself, but I know a guy who has fifteen.

And for those that did not know how to get this much cash from a check you write the check out to “Cash” and walk in with your ID to your bank and ask to cash it. You get to meet the nice people at the bank and to help them out let them know what denominations you would like your cash in. As you get into this you will get all scientific and get $100’s, $50’s, $20’s and $10’s.

Eventually you will get to where your auto-pay type stuff and deposits are all you use your check register for and using cash will help you not spend what you do not have.

Simple? Yes. Just like it should be.

Next Month . . . The Emergency Fund.

 

[luvscats]

we started tracking our money like this a few years ago and it led to us paying off our house and being debt free. We were in awe of how we nickled and dimed our money away. I was really really bad about frivolously spending money to make myself happy. we paid off our credit cards, our cars, everything. It took a while but we did it! I gotta tell ya, it feels really good.

 

[ProfMoneyWise]

Ask yourself, "Self, what would it take for you to live for three to six months if you lost your income?" Your answer to that question is how much you should save. Remember, this stash of money is not an investment; it is insurance you're paying to yourself, a buffer between you and life.

Go through your budget you have been tweaking if you have been playing along. What would you really keep doing/buying if the income was gone? How much would your health insurance cost on a monthly basis (if employed talk to your HR about COBRA)? You have to keep your health insurance so don't even think of shorting that one. Medical is the number one cause of personal bankruptcy. Don't mess around with this one.

Three to six months in a separate, safe, account. This is not a credit card. Last time you want to be taking on debt is in a crisis. This is not a mutual fund. Market tanks and your emergency fund is now 1/2 of what it used to be. This is not an investment this is a shield.

Three or six? Answer: Yes. Actually in these times I like eight. If single go high. If your family is dual income you can lean towards the lesser amount based on the stability of the incomes. Your call, but be honest. I always say to go to the high side and if you never have to tap into this money guess what? It is still there and it is still yours.

Christmas is not an emergency. Disney is not an emergency. New school clothes for the kids is not an emergency. An emergency is something out of the blue that knocked you upside the head. Emergency is not replacing a leaking hot water heater that has been leaking for a year. You have had a year to plan for that. Now if you get home and have a basement full of water . . . because the hot water heater unexpectedly went boom . . . then that is an emergency.

Oh, and if you ever tap into the fund your first priority after the storm has passed is to?

You guessed it . . . replenish that fund up to the amount you have set for yourself as your Emergency Fund.

Murphy lives and he likes those that are not prepared. He brings along his cousins, Desperate, Broke and Stupid. Don't allow them to move in with you by not having an Emergency Fund.

 

[ProfMoneyWise]

Hello again and welcome to the next installment. This month, What a Budget Really Means by Chris Russell of Dave Ramsey's Total Money Makeover Staff:

It's known as "the dreaded B word." That's right—the budget. People hate doing a budget because they think it restricts them. It's true that a budget is the boss of you, but only after you are the boss of it.

To make a budget, you need to turn off the television, sit down with your spouse, and write down your income for the month on one side of the page. On the other side, list every expense you have for the month. This includes food, utilities, rent, transportation, clothing, phone—everything that you are going to spend money on for the upcoming month. The income minus the outgo must equal zero. That's it; you've now made a budget.

Did you notice something? The budget only has what YOU put on it. This isn't some cruel dictator marching up to your front door with a piece of paper saying, "This is how you will live." This is you deciding what you are going to spend money on.

A budget is a battle plan, not a strait jacket. If you were going to find buried treasure, would you call the map a strait jacket? Of course not! The map shows you where to go, what to avoid, and how to do things so you don't waste your time. A budget is the exact same thing. Using one even produces the same result as a treasure map—you'll have riches at the end of it!

There are two reasons why people hate the idea of a budget. First, they feel like a budget is constantly looking over their shoulder like a hall monitor. That's not what it is, so don't think of it like that.

The second reason people don't like the budget is because they automatically assume that a budget equals no fun. That's not true. Budgets can include categories like eating out, movies, fun money and more. Unless a person is under an extreme debt load and needs to cut the lifestyle to beans and rice, they can budget for some fun stuff within reason. If he or she can't afford any fun, then they definitely need a budget!

A budget is telling the money what to do instead of wondering where it went. The sooner a person makes one and sticks to it, the sooner their situation starts getting better. It works every time!

Next month the "Dumbo, DRANO, FLAME-O Fund for Homeowners"