Walk With Money » Money

Budget Once, Spend (or Save) Twice!

admin — Wed, 28 Jul 2010 09:20:02 +0000

Since passing my CFP^® exam, more and more of my friends are coming to me for financial advice. Sometimes they have a specific question, sometimes they want to create a plan to get out of debt, and sometimes they just want some advice on how to manage their finances going forward. No matter what they ask for, I always start with the same thing – do you have a budget? When they say no (which they almost always do), I set out to help them make one. And then, I give them my most valuable piece of financial advice. The one I’d write a book about if I ever got a book deal. My answer to David Bach’s “Latte Factor” and Dave Ramsey’s “Baby Steps:” whatever you spend (or save), do it twice — or as many times as you get paid each month.

Photo by Yutoobin via Flickr

How it works

When I started working, I would get paid on the 30^th and pay my rent on the 1^st. It would take about 70% of my take-home pay. I would worry for the next 15 days about every dollar I spent on food, clothes, and entertainment. And I did basically no saving. Then on the 15^th, I’d get paid and have exactly one obligation: my $100 student loan payment. I would pay that and then live high off the hog until the 30^th…and start the cycle again.

One day I woke up — what if I paid half my rent out of each paycheck? It’s not revolutionary, but it did wonders for my cash flow, my morale, and my savings account.

Now, I do everything twice — I use an Excel spreadsheet to help me track my income, spending, and savings. I created a budget that estimated my total monthly expenses and divided each number by 2. For things like food, I keep the money in my checking account and use it until the next paycheck. Fixed monthly expenses are treated a little differently: Half my rent is put into savings each paycheck. The total amount is then transferred over on the 30^th to make my rent payment on the 1st. Similarly, half of my student loan payment is put into savings each paycheck, then transferred back to checking on the 15^th to make the payment …

The Simple Dollar Weekly Roundup: Rainy Days Edition

admin — Wed, 21 Jul 2010 14:20:02 +0000

It’s raining outside. My children want to go to the park.

That means it’s time to come up with an indoor solution. That means, of course, that it’s time for an elaborate blanket-and-chairs fort in the living room.

Live Within My Means? How? It’s not too hard to live within your means if you just follow one rule: spend less than you earn. The hard decisions of what to cut are up to you. (@ studenomics)

With perspective, it’s normal to feel an emotional attachment to your possessions For me, perspective was the real key to this. I’ve reached a point where, if I have too much stuff, I recognize that I don’t have the time to adequately spend with any of it. That’s a problem – it takes up money and space and gives me no positive value in return. I focus on keeping my stuff down to the items I have time for and actually bring positive value into my life. (@ unclutterer)

Future Proofing Your Passion The message here is that the way to keep your passion alive is to keep your life simple so your passion isn’t strangled by the life clutter. Good message. (@ 43 folders)

Cheap Wedding …

Save Money on Restaurant Week Deals

admin — Mon, 19 Jul 2010 12:20:29 +0000

Some prix fixe meals offer better bargains than others. How to decide.

Eleven Effective Ways to Reduce Your Laundry Costs

admin — Sun, 18 Jul 2010 11:20:02 +0000

We currently have five people living at our home. Let’s say, hypothetically, we all change clothes twice a day (it’s often more than that due to the nonstop accidents, spills, and other things that go on in such a household). That’s ten outfits’ worth of clothes to wash each and every day. We also cloth diaper our youngest child, so that piles on an extra burden of laundry.

Needless to say, our washer seems to run all the time. Every time the washer runs, a little money goes straight down the tubes. Because it runs so often, it’s always useful to find little ways to reduce that cost per load. Here are eleven tactics we’ve found that work for us.

Make your own detergent. We often make our own laundry detergent (here’s how we do it with pictures and I also made a video of how I made a later batch). According to our calculations, it reduced the cost of detergent per load from $0.20 to about $0.02 – an $0.18 saving per load. Considering we average multiple loads daily, that savings adds up pretty quick. The best part is this detergent has no perfumes or other such allergens in it.

Use vinegar as your softener. We basically don’t buy fabric softener unless we literally find a sale that makes it virtually free (or at least less than a jumbo jug of vinegar). Yes, a cap full of vinegar in the softener spot does the trick. Not only that, it also helps greatly with any lingering odor that might be in the washing machine or in the clothes themselves.

Wash only (very) full loads. With the exception of the cloth diapers (which we wash separately and which we don’t have enough of to fill an entire load), we strive to have very full loads of laundry. Yes, we mix together colored and whites from all family members, washing a little boy’s t-shirt together with my jeans, for example. A very full load means less water used and less energy used per item of clothing.

Dry your clothes by hanging them. If you can, hang your clothes to dry instead of sucking down energy in the …

Automate Your Savings Accounts

admin — Wed, 14 Jul 2010 21:20:03 +0000

One of the best ways to avoid dipping your fingers into your savings (especially your emergency fund for non-emergencies) is to automate your savings accounts so that your money flows through your personal economy without much interference from you. When you automate your savings accounts, you can force yourself to practice financial discipline — and work toward financial freedom.

Photo via Wikimedia Commons

Pay Yourself First

You can have money from your checking account automatically transferred into a savings account each month; however, you are probably better off having your paycheck deposited into your savings account, and then having the money you live on transferred into your checking account.

Look for a high yield savings account, either in town, or online. Make sure the financial institution is FDIC insured. An online bank account can be a good choice, since it forces you to think things through before making a big purchase. Having your savings account at a different institution than your checking account can be helpful, creating another barrier to raiding your savings.

After you have opened your savings account, build up a cushion in your checking account so that your finances can survive the lag associated with transfers between institutions. Once your checking account is squared away, go to the human resources office at your work and ask about having your paycheck deposited into your savings account. If you own your own business, have money automatically transferred from your business account into your savings account. Once you have your direct deposit into your savings, automate further by setting up a recurring transfer so that some of the money automatically goes into your personal checking account.

If you are paid on the 1st and 15th of each month, and receive $1,500 a paycheck (after …

Getting Things Done: The Power of Outcome Focusing

admin — Wed, 14 Jul 2010 07:20:02 +0000

This is the thirteenth entry in a fourteen part series discussing the time management classic Getting Things Done by David Allen. New entries in this series will appear on Tuesday afternoons and Friday mornings through July 16.

It is easy to set big, audacious goals for ourselves like “spend more time with our kids” or “get our finances in the right order.” The big problem, though, is that such goals often seem enormous and vague. What can you really do to make these things happen?

Allen touches on this on page 250:

“Create a way to regularly spend more time with my daughter” is as specific a project as any, and equally demanding of a next action to be determined. Having the vague, gnawing sense that you “should” do something about your relationship with your daughter, and not actually doing anything, can be a killer. I often work with clients who are willing to acknowledge the real things in their lives at this level as “incompletes” – to write them down, define real projects about them, and ensure that next actions are decided on – until the finish line is crossed. That is real productivity, perhaps in its most awesome manifestation.

The solution to such a big, vague project is to focus on a very small handful of things.

First, what’s the outcome you want from this? Do you want a better relationship with your children? Do you want to have a grip on the money that’s going in and out of your accounts? You need to spend some time imagining what you want at the end of any idea for life change that you have. The more specific you are, the better.

Next, what’s the next step you can personally take to get there? If you want a better relationship with your children, the first step is to push away from your desk and spend some time with them – and then start doing that regularly. If you want to get a grip on your finances, the first thing you need to do is select a software package to help you figure this out. You need an action step that you can actually do that will start moving this initiative forward.

That really covers it. Just execute that next step, then ask yourself “what comes next?” again and again until you’re there.

What if you have no idea what you want? Allen addresses that on page 251:

As an experte in whole-brain learning and good friend of mine, Steven Snyder, put …

When Partners Don’t Cooperate With Setting Goals

admin — Tue, 13 Jul 2010 06:20:03 +0000

Yesterday, I posted an article about setting goals with your partner. In the comments, Brittany left a wonderful question that I felt deserved a post all its own:

What if you have your shared goals, but one partner doesn’t have the financial gumption to see it through? I’m not married, not even engaged, but I’m in a relationship that looks like it might be heading for the long term. But my partner is awful with money and even worse with savings. We have a few shared long/medium-term goals (and one is a life goal of his, so I’m positive it’s not my goal I’m just calling “ours”), but my partner isn’t making any progress towards the goal. He’s far more likely to make a bunch of little frivolous purchases now (”Eh, it’s just $10… its just $20… I’ll save when I have a reasonable amount to save.”)

Normally I try not to push the “gospel of frugality” on anyone, just live my example and take satisfaction from people’s faces and questions when I get to say things like, “Yeah, I know my car (a PT cruiser) is a bit silly-looking, but I paid cash for it when I was still working for minimum wage, so…” But I also don’t have a vested interest in others’ financial futures.

Everything else in the relationship is great, but I can’t see myself becoming financially involved with someone who doesn’t share my financial views (even though this seems like a silly reason to break things off). How do others handle their partners not being on the same financial page as them?

First of all, I would move forward very slow in this relationship. Clearly, the values you have and the values your boyfriend has are in signficant conflict – and if you’re seeing this that early in the relationship, you need to move forward slowly and not jump into anything. I would also, for a very long time, keep your finances as separate as possible.

Value conflicts are the core of virtually every relationship problem out there. Value conflicts are actually resolvable, but they require a willingness by both partners to work through that value conflict, compromise on a solution, and work together to make sure the solution holds.

It sounds as though your partner is not interested in or engaged in long term goals or puts a much higher priority on his own goals than any shared ones you have. That’s in direct conflict with where you’re standing – it sounds like you’re goal-oriented (at least to some significant degree) and are also willing to compromise on the goals you’re both working for.

The only way to resolve this, then, is to simply do what I mentioned above: work through the value conflict, compromise on a solution, and work together to keep that solution in place.

The first part is working through the value conflict. A big part of that is trying to make sure you both understand what each of you value, and how you each act is a very big part of that understanding. By his actions, he seems to put value on short-term rewards for himself.

You can’t really be judgmental here. We all think our values are the best way of doing things or else they wouldn’t be our values (the DINK …

Summer Meal Series #6: Simple Homemade Pasta and Pizza Sauce

admin — Sat, 10 Jul 2010 03:20:03 +0000

This summer, I’m going to be posting a series of fifteen low-cost, tasty, and easy-to-prepare meals that are literally straight from my own kitchen.

Today’s meal looks like a simple pasta…

… and it is, except that we do something a little different than most people seem to these days.

You see, we’re pretty picky about our sauce. We have found a few store-bought pasta sauces that we like, but they’re often $5 a jar or more. That’s a lot of money to pay if you have pasta with any regularity.

Our solution, of course, is to simply make the sauce ourselves.

This solves several concerns all at once. It gives us complete control over the ingredients for health and flavor concerns, but perhaps more importantly, it reduces the cost of a meal’s worth of sauce down to approximately the same cost as the absolute cheapest pasta sauce on the shelves.

In short, we can make pasta sauce at home that’s tastier and more appealing to us than any canned sauce we’ve found – even the $5-10 sauces – for less than $1 per jar (about $1.80 or so if you include lean ground beef in it, as we do).

The trick, of course, is that we make several batches of it at once and freeze all but one of them. In this example, we’re making five “jars” of sauce with a set of ingredients that’s just shy of $5.

A few notes on the ingredients, before I list them.

The ground beef is entirely optional in this recipe. If you want a meat sauce, use it. If you don’t, don’t use it. We used about 2.5 lbs. of ground beef in this recipe, averaging out to about 8 ounces of it per “batch,” or about 2 ounces per dinner plate for our family. I’d recommend using 2.5 pounds.

Second, we used canned diced tomatoes and sauce because, frankly, the fresh tomatoes aren’t quite here yet in Iowa. In about a month, we would be using fresh tomatoes for all of this, but the tomatoes currently in the store are still what I would consider ridiculously expensive. If you want to use all fresh ingredients, wait until tomatoes are in peak season and use fresh tomatoes for all of it. The price will be very reasonable and the flavor will be sublime.

Here’s our ingredient list.

4 medium onions, chopped
2 cloves garlic, minced
2 28 ounce cans diced tomatoes
1 28 ounce can tomato sauce
1 tablespoon basil
1 tablespoon oregano
2 teaspoons salt
1 teaspoon sugar
1/4 teaspoon pepper
2.5 to 3 lbs. ground beef or ground pork (optional – if you don’t wish to use it, you can certainly add more vegetables)
2 4 ounce cans mushrooms (very optional – we didn’t use them)

You …

How Can I Pay Less For This?

admin — Thu, 08 Jul 2010 01:20:07 +0000

How can I pay less for this? That’s a question you can ask yourself when it comes to any purchase, big or small. You can apply this question to just about anything you spend your money on. The economy is slowly improving but it never hurts to save money whenever you can; no matter what the state of the economy. It never makes sense to pay more than you have to.

I’ve recently started to apply this method of thinking when I go shopping for those everyday items I use all the time. I tend to buy the same products each and every month; especially when it comes to toiletries. I know how much my deodorant, toothpaste, mouthwash, etc, should cost. I also know that by shopping around a little, I can usually save money those purchases. If I can find a sale, I’ll pick up enough to last for awhile.

By doing a little research, I’ve learned which stores usually have the lowest prices on the items that I need. Experience has taught me that by purchasing the previously mentioned items from a discount store (Wal-Mart, Target), it will cost less than if I bought them from a grocery store.

Another way to save money on those everyday items is to cut coupons. I subscribe to the Sunday paper for the main reason of getting the coupons. Sometimes, I can find a bunch of coupons for the items I need and sometimes, I don’t find any. …

When Interest Rates Head Up

admin — Mon, 21 Jun 2010 09:20:14 +0000

It doesn’t take any skill at prognostication to make this forecast: Interest rates are heading up. For one thing, they can’t go any lower.

Whether you think rising interest rates is good or bad mainly depends on whether you’re a borrower or a lender. If you run a small business that depends on credit to buy raw materials or inventory, then rising interest rates are bad news. If you’re a member of the rentier class and live on interest and dividends, then rising rates will be a boost to your income.

Of course, it’s an over-simplification to speak of "interest rates" as if they all moved together. There are lots of interest rates, and some of them behave very differently from others. In particular, although we talk about "low" interest rates, there aren’t many borrowers who can actually borrow at low rates — just governments and large financial institutions, really. Mortgage rates have been pretty low (for well-qualified borrowers), and some car loan rates have been low as well. Other consumer rates, though, never fell much to speak of. Rates for borrowers with poor credit started high and stayed that way.

Still, whether you think rising interest rates is a good thing or a bad thing, it’s sure to happen, so you need to be prepared.

Dealing with rising rates

When rates are rising, the rule is this: borrow long and lend short. Now might be a fine time to lock in a good rate on a 30-year mortgage, but do not get an adjustable-rate mortgage, even if the rate seems like a great deal. Similarly, don’t start putting your money into 30-year treasury bonds. (Inflation-adjusted Treasury paper may be an exception.)

When …