Sunday, January 17, 2010

Budgets and Cut-backs

We have always kept a budget...or at least I have and then imposed my "budgeting strategies" on D. when we joined ourselves at the financial hip. Scary move for most couples, but it seemed sensible to us...and simpler. We share the load of weekly checkbook care-taking. He does the checkbook itself and balances it with the bank website...and then I take the receipts and tally them into our spreadsheet budget that I create each month to plan out how much money we will take in, expenses, and then overages/underages. That way, each month, we avoid going in the hole, since I can manage the money weekly, re-evaluate, move things around, take from one category, add to another, etc. But we always have a starting point, and every penny is tracked and accounted for. May sound like a lot of work, but it keeps us under-control and makes it easy to see where we tend to overspend and assures that we will have enough throughout the month to pay every bill on time.

So, this year, the budgeting spreadsheet will continue, but I am re-evaluating some categories that allow a little room to change. I set up my spreadsheet with income at the top.

Then, expenses are broken down into debt (I write it out in the order of our "debt snowball hierarchy" - revolving accounts, school loans, mortgage), then variable categories like groceries, household needs/misc., gas, followed by insurance payments and savings that are fixed amounts, utilities that are variable by season, communications, daycare, entertainment, and "this month only" expenses. I basically divvy out the entire month's income into the categories until every penny is in one category or another. Any left over cash (which, let's face it, rarely happens) goes into savings or is added to make a debt payment higher.

I've found a few ways to lower some categories:
1)go back to the two dvd netflix plan instead of the 4 (we just don't watch enough, and so many of the t.v. shows and movies are now on instant play and don't effect your overall monthly bill)
2)bundle Verizon cell service with Qwest internet service (apparently this can cut our monthly bill by 20$)

Two possibly highly controversial items that will take some discussion with D.:
1)go back to maintaining our own garbage rather than paying for garbage recycling could drop our bill by 200$ per year - this would involve visiting the dump on occasion, composting, and taking our own recycling in
2)downgrade to less fancy phones (the blackberry just doesn't seem as necessary as it did in the beginning...and paying over $150 per mth. for it seems silly...we could drop our yearly bill by almost 800$ and still be connected sans internet capability)

So, there you have it...budgeting and cutting back...two useful, difficult, important activities if you want to ever find financial freedom. Currently, I have a 10 year plan. According to my math...if I use the "debt snowball", we can be out of debt (that means the house and the school loans, too) in 10-12 years. Then, it's all about savings, retirement, and travel! I think I can live with that.

(FYI - I got most of this wisdom from Dave Ramsey's baby steps, though I'm not willing to live his advice to the letter, eating rice and beans and depriving myself and my family of all fun in order to get out of debt more quickly. I'm also not willing to work an extra job and lose time with my family. But, we're still following the steps as closely as possible with our own modifications and a longer time line: 1) pay minimum on everything until you create a $1000 emergency fund, 2) pay off all personal debt using the "debt snowball", 3) create a 3-6 month survival fund, 4) create retirement accounts - 15% of your income - and re-evaluate your insurance plans, 5) save for college if necessary, 6) pay off the house, 7) build wealth and be charitable)

Though patience is not a virtue I was born with. I guess it's all about having a plan, putting the plan in writing, and reviewing it often so you remember why you made the plan in the first place. It isn't easy to say no to yourself. But, having the budget helps me...if I can't figure out how to squeeze the money out of a month's given income, then we just can't have it (whatever "it" is). We have to wait till the next month and see if we can work it in, or do without it altogether.

Good things may come to those who wait...but better things come to those who make a plan, work hard, and stick to it.

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