Practice Makes Permanent

For the last three months, I haven't been keeping up with our budget every day like usual.  I got enamoured with this blog and started blowing off all the little, detail-oriented tasks I used to do like updating out budget every day or two.  In fact, I've simply been entering all of our numbers at the end of our monthly budgeting cycle and looking at the results.  So far, so good. 

It seems that practice makes permanent.

We used to look at our food budget at least once a week so we'd know if we needed to cut back the following week.  Now it seems we have found our happy spot without needing to keep an eye on it all the time.  We have successfully stayed within our food budget three months in a row without having a "come to Jesus" moment halfway through.  I am so proud.

Even though large, unexpected expenses like vet bills, car problems, and dental work keep popping up, we are doing fine.  Our many excess accounts are taking the slack as expected and we're still staying on track.  I'm hoping that a few unexciting months will help us build up more padding again, but all in all, we're feeling pretty good about our situation.

I think this may be a permanent change to our budgeting habits.  I'll still enter all the numbers once a month.  I'll still make sure we're not going hog wild in any specific area.  I'll also make sure we keep hitting our savings goals without fail.  BUT, we seem to have reached the point that we no longer need constant monitoring in order to pull all of that off.  WOOT!

How are your budgeting situations working out?  Do you have a written budget?  If so, is it updated weekly, monthly, or annually?  If not, what works for you?

Three Levels of Budgeting

These last couple of months have been filled with all sorts of unexpected monetary hurdles, so I thought this would be a good time to bring up the three levels of budgeting we use to keep ourselves on track.  Our monthly, annual, and random expenses are all taken into account on our monthly budget.

Our Monthly Budget

I use three columns of an Excel spreadsheet to list all our budgeted categories, the target amount for each category, and how much we actually spent.  This makes it easy to do spot checks.  It also has helped me to have detailed records of our expenses. 

It's amazing how often I want to know how much we spent on food, vacations, or grad school in any given month.  I used to simply be curious and anal, now I have a blog to think about.  Having those records makes blogging so much more fun for me since I don't have to estimate my numbers.  It's hard to have full disclosure without having the actual data, right?

For non-bloggers, long-term budgeting data is useful in order to see how you are looking overall.  It also can be used to track spending differentiations that may lead to budget changes in the future.

Annual Expenses

Like everyone, we have several annual expenses.  We used to pay for these out of our emergency fund, but it always hurt to watch that fund get hit for easily remembered events like homeowners insurance.  Now we have a spot on our monthly budget for these annual charges. 

It's much less stressful to pay that $800 insurance bill when I can see we have the money waiting in our "Insurance and Tax Account" at ING.  Contributing $67 a month to that account is also much easier than watching our emergency fund take an $800 whack in the face.

Random Expenses

Some things just can't be budgeted for very easily.  You expect to buy new tires every two or three years, but you don't know exactly when.  You know your dog may require money for a big vet bill someday, but how do you know when it will get sick? 

We budget for these items by putting a set amount into extra ING accounts every month.  Spending $500 at Discount Tire can really hurt, but it stings a lot less if you know your "Home and Auto Account" will be able to cover it.

Does your budget take into account all your expenses?  If not, how do you cover annual and random bills?

We Have Updated Our Monthly Budget

Since hubby's last grad school payment is ready to go and I severely overestimated our property taxes for 2009, we needed to revamp our monthly budget.  We want to pay off our car loan ASAP, so this is our new budget until December 2010:

• Mortgage - $900.00
• Car Debt - $650.00
• Roth IRA - $300.00
• Opportunity Fund - $120.00
• Car Payment - $330.00
• Car Insurance - $115.00
• Gasoline - $200.00
• Electricity - $200.00
• Water - $30.00
• AT&T U-Verse & DSL- $100.00
• Sprint - $85.00
• Groceries - $300.00
• Fast Food / Restaurants - $200.00
• Medical - $100.00
• Misc. Bills - $100.00
• Joint Entertainment - $100.00
• Hubby's Fun Money - $125.00
• My Fun Money - $125.00
• Housekeeper - $100.00
• Lawn Services - $50.00
• Netflix - $20.00
• Pet Account - $100.00
• Car and Home Account - $200.00
• Vacation Accountt - $250.00
• Property Tax & Insurance Account - $0.00
• Emergency Fund (currently has $10,000) - $0.00
• Cash - $200.00
• Total = $5000

That comes to $60,000 a year and we make $78,000 jointly.  Taxes, the pension, the 401k, and our benefits account for the other $18,000.

Unplanned expenses are taken from the appropriate target accounts.  Extra money from our hobby jobs is either put towards debt or split between the Emergency Fund (50%), the Vacation Account (25%), and our two individual Fun Money Accounts (12.5% each). 

As always, I am still donating my time and both of us donate our own fun money to the charities we love to support.

That's it - our new budget for quick car loan annihilation!

What do you think?  How has your budget been faring?

Our Food Budget

After reading other blogs and seeing the comments left on this post, I realize that my husband and I have a very different food budget than most others in the personal finance world.  That spurred me to come clean...here's where our food money has gone in 2010:

1.  Kroger's - We spend about $125 a month for perishables like whole milk, Country Crock margarine spread, real butter, potatoes, tomatoes, bananas, other fruit that is in season and cheap, Digiorno pizzas, hot dogs, Manager Special steaks, frozen Tilapia, and necessary parts of a menu that we don't buy in bulk.

2.  Sam's Club - We spend about $30 a month on steaks, boneless skinless chicken breasts, pork chops, frozen green beans, frozen corn on the cob, Honey Nut Cheerios, Nature's Own Honey Wheat bread, and potato chips.  I usually make a Sam's Club run once every 2 -3 months.

3.  Angel Food Ministries - Whenever we like the monthly menu for their Signature Box, we buy 1 or 2 boxes at $30 each.  Each box gives us enough food for at least 10 meals and sides for a few more.

4.  Walmart - We spend about $50 a month on cleaning supplies, hygiene products, hamburger meat, sandwich meat, and miscellaneous food items that are cheaper there than at Kroger with my coupons.

5.  Restaurants and Fast Food - We eat out at least 1-2 times a week and it adds up to about $200 a month.  It would be more if I wasn't such a fan of value menus and soups.

Altogether we spend about $400 on food every month, which is actually down from the $600 a month we were spending last year.  We've started eating at home much more which allows us to buy in bulk and throw less away. 

I do use coupons, but not to the extent of true couponers.  I simply spend 20 minutes at work every week cutting out ones that may come in handy and putting them into my wallet.  Before checking out, I pull my cart over in a vacant aisle and spend 2 minutes grabbing out the coupons that match cart items.  I do not even look at the coupons until I'm done shopping since I don't want the coupons to entice me to buy something that wasn't on my list or buy a different brand.

Our dinners usually consist of a grilled protein seasoned by hubby and two sides.  Most frequently, these sides are mashed potatoes, green beans, corn on the cob, carrots, or rice.  We also make salads, Pizza Hut Sandwiches (the most delicious and fattening toasted sandwich ever), soft tacos, chili, pasta, taco salad, hamburgers, and hot dogs every month or two as well.  We try a new recipe every once in a while and add it to the normal rotation if it was good.

As you can see, our diet isn't the healthiest ever, but it looks way better than last year.  Please just take this as the food confession it is and a quick summary of our personal food budget.

Does your food budget include more organic and free range choices?  Or does it look similar to ours?

Multiple Accounts for Easy Budgeting

Budgets, like the people who use them, come in a variety of packages.  Our budget lists our basic expenses and a few different savings accounts we push money into every month (few being like 7...).  As the manager of our budget, I find it much easier if I have separate accounts for each of those goals.

Here are the extra accounts we have at ING (currently at 1.1%) and Smarty Pig (currently at 2.15%):

• Emergency Fund - The cash we have set aside for job loss or anything unexpected that the other accounts won't cover.
• Taxes and Insurance - We don't escrow, so we put aside money every month for property taxes and homeowner's insurance.
• Auto and Home Maintenance - Ever since we paid my car off, we've been paying ourselves that payment for future car and home costs.  We upped that amount when we bought our house but are keeping it somewhat minimal since we're trying to pay off my husband's car as quickly as possible.
• Roth IRA and Stocks - We put extra money here even though we also contribute automatically to the Roth IRA.  We use this extra money as an opportunity fund.
• Vacations - We save here for our big annual vacations and our smaller weekend trips.
• Hubby's Fun Money - This is for anything he has a craving for.
• My Fun Money - This is for my hobbies and habits like Shirt Woot.

It would be totally possible to use just one account for all of these, but I like being able to take a very quick inventory without worrying if I remembered to update my Excel sheet that month.  It works for us.

What works for you?

Fit in a Fun Friday - Stuff We Don't Skimp On

My husband suggested this post and the idea caught my fancy. We skimp on a lot if there is a viable alternative EXCEPT the following:

Name Brands We Buy Regularly

• Nature’s Own Honey Wheat (hubby was right, this is good bread)
• Kroger Brand Brownies (taste better to us than the name brands)
• Kroger Brand Real Mayo or Hellman’s (Miracle Whip makes me gag)
• Kellogg’s Poptarts (my morning crack)
• General Mills Honey Nut Cheerios (my other morning crack)
• Kellogg’s Frosted Mini-Wheats (my I’m-not-eating-lunch-for-a-while option)
• Dr. Pepper or Cherry Coca-Cola cans (yeah, yeah, I know. I wait for the 4 packs for $10 sales at Kroger and stock up...we try to keep the habit to a pack or less every three weeks)
• Charmin Toilet Paper (hubby scoffs at Scott’s…this is soft, but it’s only tp)
• Tide for regular clothes (hubby swears it’s better…I’ve decided this is a battle I’ll forfeit)
• Oxyclean for grass and mud stains from sports officiating (it does work and saves freaking expensive reffing gear)
• French’s Mustard (this is totally my hubby…I cannot taste a difference to save my life, but again, I choose to forfeit)
• Wolfbrand Chili with no beans for hot dogs (smells like wet dog food, but it gets my hubby to eat hot dogs at home sometimes)
• Foo-foo dog food like Nutro and allergy free stuff for the Pug (I have to have a dog food that's first ingredient is a meat or I feel taken advantage of)

Other Items We Have Splurged On

• Tempurpedic mattress (my husband hasn’t had back pain since we got one a year ago...I think it’s too hot during the summer months)
• Dream Fit Sheets (they fit and don’t come off when we toss around at night…plus they have lasted us 5 years already, which is good since they cost about $100 a set)
• Miche Bag (I love the magnetic shells and I never have to move my stuff to a new purse)
• Crocs (they aren’t all clown shoes anymore and feel great…you can also find big discounts online like my $60 leather work Crocs for $35 on Ebay)

There are probably a few more things I can’t think of right now, but you get the point. There are some things we have become loyal to…gladly we didn’t discover these addictions until we could afford them, but I sort of wish I never tasted the difference between $1 bread and Nature’s Own Honey Wheat...

What about you? Any favorite brands? Anything you refuse to skimp on?

BFS has a Guest Post about Recurring Expenses at Free From Broke

Free From Broke was kind enough to let me guest post today with Recurring Expenses Will Kill Your Budget-Choose Wisely. 

It's my personal take on prioritizing recurring monthly expenses.  What's on the top of your list?

Spending Less Than You Earn

I hit on the main ways of diagnosing your financial health in this past post.  I'm going to use Wednesdays to go further in depth on each point since I truly believe that financial health leads to less stress and happier lives.

The first point was to spend less than you earn.  This means that the money you have going out needs to be less (hopefully a lot less) than the money you have coming in.  Constant, overwhelming debt is not healthy for you or your future.

List Your Income and Expenses
In order to spend less than you earn, you need to know how much you earn and how much you spend.  I'd suggest writing down your known monthly income and expenses first.  Then spend a whole month adding anything you missed to that list.  Not only will this be a definitive picture of your spending and salary, but it will give you a great start on beginning a budget as well.

Ways to Widen the Gap
If you are not where you want to be once you've seen this list, you do have options:

1)  Decrease your spending.
2)  Get a better paying job.
3)  Find other income sources.

Decrease Spending
To decrease your spending, I'd suggest first cancelling or discontinuing any expenses that you really don't want or need.  Don't go crazy or be regretful...simply cut the fat.  I was surprised at some expenses I forgot about when we started tracking our spending.  It was easy to cut out an $8 monthly online game membership fee and a $25 a month gym membership since we had stopped using both of those.

If that doesn't solve your problems, then look to cut expenses that you might want, but don't really need.  Luxury expenses can wait until your income increases.  I'd consider internet and a cell phone as almost-necessities, but cable isn't.  I'm sorry since I love cable, but if you aren't making more than you spend, it has got to go.

Income Ideas
If you still aren't there yet after getting back to the basics, then you need to look at increasing your income. 

Obviously, only you know you well enough to get a better-paying job.  Other income sources are also a personal matter.  I worked for a book store for $7 an hour for 3 months in order to make a little part-time cash.  I've also babysat and taken care of pets.  I've most recently started a blog, although I wouldn't consider this a great way to make fast money (I've made about $10 in 2 months).  My husband is a contract sports official for middle school and high school football and basketball.  He can also tutor.  What sounds good to you?

In short, you need to spend less than you earn to stay fiscally sane.  I prefer to spend much less than we earn since we have an early retirement goal.  Look at your situation and access your options to make this happen.  Good luck.

Are you spending less than you earn?  If so, are you happy with your position?  If not, did this article help?  Does anybody else have any suggestions on this point?

The Fun Stuff in My Budget

Today, Mr Credit Card from www.askmrcreditcard.com is going to talk about the fun things in his budget. He has also compiled his thoughts on the best credit cards offers available today if you looking for one. Hope you enjoy this post

Your budget serves many purposes. The most obvious one is to plan how much you intend to spend your money on different things. Budgeting is such a useful tool to know where your money goes and helps you decide where to put your limited resources to good use. However, very often, budgeting feels like to drag especially if you are looking to reduce debt or squeezing every cent to make ends meet. But as the title of this blog suggest, budgeting can be fun too! So in this post, I would like to touch on some of the fun things that I budget and plan for in our household's budget.

Saving For Vacation - This one is a biggie for us. We take a couple of family vacations every year. And we try to see different places each year. Our budgets for vacation vary every year depending on the circumstances. Normally, we have to save for airline tickets and hotel bills plus the usual meals and attractions if we intend to do the "Disney type stuff". Since vacations can be "relatively big ticket items", we do a few things to try to save money. For example we earn airline miles with our airline credit card. We book any airline tickets months in advance. We are also constantly searching for deals (which I guess is the fun part).

Budgeting for kids extra cirricular activities - We have three kids. All play baseball (softball for the girl). All play soccer. So there is always costs like new gears (cos they outgrow what they wore last year) and equipment. Our daughter also takes ballet lessons which she loves and two of our kids take piano lessons.

Sports Tickets - This year, we are going to get some season tickets for the Phillies and our new soccer team, the Philadelphia Union. I find that taking my kids to games is a really good bonding sessions. The kids really enjoy it too. I have found that getting season tickets is cheaper than just buying them before the game.

Gifts for Mrs Credit Card - Birthday, Anniversary, Christmas - Too be honest, buying gifts for Mrs Credit Card can be fun but stressful (hey, you know what I mean). I find that anniversary and birthday presents are most stressful. But yet at the same time, Mrs Credit Card does not like surprises. So she normally tells me what she wants. And we actually end up debating if it is a good buy and then put it in the budget!

Gadget purchases - I find that every year, I always buy some form of gadgets. Four years ago, I got Mrs Credit Card an iPod for her birthday (this one was a total surprise). Then the year after that, I got her an iPhone. Then last year, I got myself an iPhone. This year, we got the business a laptop. And we've got a couple of computer the last couple of years for the business as well.

The fun part of budgeting for these is that we actually do research on the stuff we intend to buy. That means spending time surfing the net for information (or you could call that time wasting). This year, we are thinking of getting a TV for the bedroom (perhaps 3D Plasma!!). I know most folks say it is a bad idea, but Mrs Credit Card and myself really like to veg out in front of the TV after putting the kids to bed.

House Renovations - This is not an annual thing. But for anyone that has bought an older home, or even a new home that was not really done up properly, you will know that there always seems to be a project to work on. Whether it is painting the walls, installing a new bathtub, changing curtains, or simply landscaping the garden, it costs money - and sometimes lots of it. But budgeting for these things can be fun too. After all, most of us take great pride in our homes. This year, we will not have any projects on the house. But the previous years, we had a deck installed and had our driveway repaved and extended.

What Are the Fun Stuff In Your Budget? - So there you have it - some stuff in my budget. What are some the stuff you have fun planning in your budget? Though I do spend quite a bit on these things, they are things I enjoy doing or in my opinion are worth spending on (ok - perhaps the house renovation is something I do not really enjoy!)

The BFS Way to Diagnose Your Financial Health

There seems to be all sorts of ways to measure your financial health, but here’s the list of points I'd keep an eye on:

1)  Am I spending significantly less than I earn? If I’m not, I’d take a look at my spending, make a budget, and cut the unnecessary expenses. If that didn’t fix it, I’d look into getting a better-paying job or at other income sources.

2)  Do I have a solid emergency fund? If I have at least 3 months of expenses (preferably 6 months or more), I’d move on. Otherwise, I’d start funneling cash into an emergency account. Even starting with $50 a month is better than no backup fund at all.

3)  Am I saving enough for retirement? I’d take a look at a few retirement suggestions and figure out if I’m on track. If I’m not, I’d look into my options. Do I have a 401k, IRA, or a Roth IRA? Would one of these work for me?

4)  What kind of debt do I have? If I do have some, I’d make a little list and see what I could eliminate. I’d start paying off high interest debt like credit cards before attacking car loans and mortgages.

5)  Are my investments diversified? If all of my retirement savings is tied to one stock (like my company), I’d DIVERSIFY. I don’t want my entire future to rest on the back of one company.

6)  Am I insured correctly? If I have health insurance, car insurance, short-term disability, long-term disability, and life insurance, I can move on. If I’m missing any of those, I’d look into my options. I don’t want to be at the mercy of anyone if I get into a car accident and can’t work. I also don’t want to die and leave my spouse with a financial mountain to climb while he’s grieving (he better be grieving…)

7)  Do I have estate planning in place?  If not, I need to set it up for the same reasons I need life insurance.

8)  Am I happy? If I’m not happy with my fiscal life, I need to figure out why and make some changes. For example, I didn’t think we had a good enough plan a few years ago. We came up with a system that made my husband and me happy.

I'll be posting further about each one of these points in the coming weeks to flesh out the ideas.

How’s your financial health? Do you think I missed anything important?

How Would You Proceed?

My husband and I are approaching a small financial crossroads. We make his final graduate school payment in June, he graduates in August, and that will bring a small automatic raise (about $1000 a school year minimum). That means that we will have an extra $750 a month starting in August. We’re wondering what we should do with it since we have several options. I know, it’s a good problem to have, but I have a personal finance blog for a reason (I over-think money)…

Here’s the info we’re working with:

• We’re in our mid-20s and want to retire at age 52.
• Our current emergency fund has 3-4 months of expenses in it and our jobs are VERY stable.
• Our mortgage has about $73,300 left at 5.375% and is already on track to be paid off by the end of 2017 instead of 2022.
• Hubby’s car loan has about $10,700 left at 4.6% and is already on track to be paid off by the end of 2011 instead of 2013.
• We contribute 6% to my 401k, which is matched up to 6%.
• We fully fund one Roth IRA ($5000 a year).
• We put about $200 a month into our Scottrade account.
• We put $250 a month into our vacation account.
• We each get $75 a month in “fun” money.
• We also put $200 a month into a home and auto maintenance account.

Mr. BFS and I agree on a couple of things and are wondering about a few other options, so he suggested I ask you. What would you do with an extra $750 a month in our position? Do you need to know anything else in order to decide?

Balancing Your Budget with Online Tools

The following is a guest post by Kevin Fleming. Kevin runs CreditShout, a personal finance blog dedicated to educating people on how to manage their finances and reviewing cash back credit cards.


Tracking finances, budgeting funds, and paying bills is one of the most important jobs you have. With one lost bill or skipped payment, your credit rating can suffer inordinately, so properly budgeting your finances is absolutely essential.

Many people shrink away from financial planning because it seems difficult—and face it, no one really likes the idea of spending hours working out a budget in a ledger book, surrounded by receipts from transactions you can’t even remember.

The solution to the issue may be a free online program, which allows you to monitor your debt, manage your credit cards, and track your spending habits over time. Here are some of the best budgeting tools you’ll find on the internet and how they can help you take care of your finances week by week.

Mvelopes – Mvelopes is an intuitive and award-winning online money managing envelope, and it comes with a free trial. While some online solutions are difficult to use and understand, Mvelopes uses the old-fashioned “envelope” method of saving and budgeting out your money. Most of the payments that you need to make—including payments to credit card debts—can be made automatically through the program as well, resulting in less work on your part to manage your finances. The feature can also help you avoid accidentally making late payments to your credit cards, which could trigger a late charge and a ding on your credit score. Mvelopes can help you use your credit cards wisely in a lot of ways. It even has a credit card spending tracker that sets money from your other spending envelopes aside, allowing you to pay off credit purchases in full every month. Remember, Mvelopes is only free for a limited trial, so if you plan not to continue using it, cancel your membership.

Wesabe – Wesabe has been online longer than many other online budget tools, and still touts itself as the best money management tool and financial issues community online. In fact, Wesabe is particularly attractive, as it touts a user-friendly interface and interactive forums that allow you to get finance tips from people just like you. You can add your credit union, credit cards, and bank accounts to Wesabe for easier money management, and you can tag and track your credit card purchases, along with your other spending, to see where your money is going Wesabe also allows you to check your credit card balances from multiple cards all in one place, facilitating debt repayment.

YNAB – Just like everyone else, you need a budget. YNAB (“You Need a Budget”) is a fantastic tool that uses four unique steps to help you take control of your earnings. It helps you to stop living from one paycheck to the next, to save money for a “rainy day,” and to adjust according to your under- and overspending. You can tailor repayment plans to target and eliminate your credit card debt right within the budgeting tool. The software also contains functions to track credit card payments, calculate debt payoff, and transfer money between accounts. While a one-time purchase of the software costs about $60, you can try it out for free for seven days and decide if you actually like it.

Mint – Like Wesabe, Mint has been a leading money management tool available free to online users since the mid-2000s. It has become so popular that it eclipsed, and ultimately took over, the Quicken budget tool many had become accustomed to using. Mint is extremely easy to use thanks to pages that are short on text and heavy on graphics, allowing for simple debt repayment to get you back to financial stability. If you’re interested in changing credit card companies, tracking credit card interest, comparing your spending habits with others in a similar financial situation, or getting to the bottom of your spending habits, Mint is probably the right tool for you. Best of all, Mint is completely free for users.


Using Online Budgeting Tools

The best way to use these online budgeting tools is to set up a budget and stick to it. Ideally, your budget should involve making aggressive debt payments to get out of credit card debt. While credit cards can be a great tool to earn rewards for spending (with the exception of some horrible store rewards cards like the best buy credit card ), the interest you pay can end up costing you hundreds- if not thousands- of dollars over the course of a year and quickly drain your pocket book.

Set up a plan to get out of debt and use the online budgeting tool of your choice to make that dream a reality. Once you've paid off that last debt payment, make a commitment to use your budget in order to pay off your cards in full each month. Track your credit card spending so you can find problem areas and always make sure you have the cash on hand to pay off your bill in full each month when the credit card statement arrives.

Pro Athletes that Wasted it All

I saw this article on Yahoo that made me cringe - people making more than I will ever see in my life and throwing it all away. It makes my stomach hurt.

Here’s a quick run down on how much each of these pro athlete have tossed away:

• Evander Holyfield - $250 million earned and he is now flat broke.
• Lenny Dykstra – he is currently $30 million in debt.
• Latrell Sprewell - $96 million earned and he is now broke.
• John Daly – he gambled away $50 to $60 million dollars.
• Jack Clark – earnings and debt were not listed, but he’s bankrupt after buying luxury cars.
• Mike Tyson – he filed bankruptcy after wasting $350 million to $400 millions dollars.

Does anybody else feel my pain? I could live very happily on 1%- 5% of what these people tossed away like used diapers. Ugh.

Okay, I’m depressed…let’s talk about what we would have done with that kind of money instead. :-)

If we had $250 million, my husband and I would plan out the house of our dreams and pay for it in cash. It wouldn’t be too big since mansions intimidate me, but it would definitely have a big game room. We’d also pay off our cars and sell our current home. I might hire a driving service once in a while since I hate driving, but I don’t think I’d buy a big, expensive car. We’d also have a weekly maid service instead of biweekly and I’d never have to groom the dogs again. My husband would probably pay to have a Curling stadium built for the Houston Curling Club and be in every weekly league. Yes, they’d still have to pay dues for the ice, but probably half of what they pay now - that would be used to cover the utilities. We’d take some vacations and I’d still want to volunteer with dogs and for Meals on Wheels. I’d also still blog.

Hmmm…that would still leave us with about $250 million since all that could be done with the INTEREST ALONE. Argh!!!

What about you? What would you do with $250 million? Do you also want to slap these people upside the head?

Determining Our "Allowances"

As a few of my last posts mentioned, my husband and I get $75 each every month for “fun” money and $100 to use jointly for date nights or other shared entertainment expenses.  Coming up with this system actually took us a few years. 

The idea of an “allowance” was a turn off in our early twenties.  We thought we were frugal enough that we would just naturally choose not to spend much.  That lasted for a while until I realized that I wouldn’t allow myself to buy anything and I resented my husband’s big purchases.  I’d buy gifts for others, but I kept putting off everything I really wanted (like a pair of discounted Crocs for $30 or even a new pair of $15 jeans).  Then I’d see hubby spend $100 on Magic: The Gathering and feel like the world was ending. 

I think I was somewhere between a nag and an outright b…well, you know.  That’s when my husband insisted on a new system and I whole-heartedly agreed.

We decided that we’d get allotted “fun” money and I’d stop critiquing those purchases.  We chose a total of $250 a month since it would work based on our current spending and that $100 of it should be put aside since we go out together frequently and didn’t want to handle a silly “who’s paying” situation. 

Since then, I’ve developed a healthy addiction to Shirt Woot and a slightly annoying addiction to ABC Distributing…I never knew how much I craved cheap junk…seriously, I have to watch myself.  I still don’t come anywhere near my $75 limit, but I don’t freak out anymore when I decide to splurge a bit (like my $35 work Crocs or my $11-$16 funny shirts).

My hubby saves up for a few months, spends it all, and starts over.  It seems to keep him happy although I know he wishes he had more than $75 to work with…maybe after one of us gets a raise. 

I try much harder to accept his 60,000 MtG card collection and I’m even supportive of his new obsession with Curling. 

All I can say is allowances aren’t just for kids anymore…which is ironic since I never had one then either.  :-)

What system do you use?  How do you successfully budget in the fun?  LOL...shameless plug...

Our Monthly Budget

To lay the last bit of our financial foundation, I wanted to share our monthly budget.  Our exact expenses change a little month-to-month, but this is the basic picture of our spending:

• Mortgage - $900
• Emergency Fund - $500
• Tax Account - $400
• Home Account - $350
• Roth IRA - $300
• Vacation Account - $250
• Cash - $200
• Extra Roth IRA - $120
• Extra Masters Money - $125
• Car Payment - $330
• Car Insurance - $110
• Gasoline - $150
• Electricity - $150
• Cable & Internet - $100
• Cell Phones - $80
• Water - $30
• Garbage - $20
• Groceries - $300
• Fast Food/Restaurants - $200
• Misc Bills/Car Maintenance - $200
• Entertainment/Misc Fun ($75 each and $100 joint) - $250
• Medical - $100
• Maid Service (biweekly $45) - $100
• Lawn Service (biweekly 8 months a year) - $50
• Netflix - $20
• Pet Expenses - $100
• Massage Envy - $50
• Total = $5485

That comes to $65,820 a year.  We make $78,000 before taxes plus the $4000 a year my hubby makes as a sports official.  Taxes, the pension, the 401k, and our benefits account for the other $16,180.

Needless to say, I am anal enough to keep up with every single expenditure.  Unplanned expenses are taken from the appropriate target accounts.  Also, before anyone asks, I contribute considerable time to my charities and we both use some of our "fun" money for the charities of our choosing.

I didn't start this blog to brag.  This is to show that a teacher and an office worker can use their money as a considerable tool to build wealth in less than 5 years.  By spending less than you earn and saving the rest, you can create wealth.  All of my favorite blogs boil down to that basic idea, yet people question it's possibility.  Saving is possible...it's even fun.  I never worry about making our next mortgage payment or having enough to pay our bills.  That is priceless to me.  :-)

Would a budget like this help you?

How We Chose to Budget in the Fun Stuff

As my last post explained, we do make it a priority to have fun now while saving for our future.  My husband and I actually went back and forth on this for a couple of years since I felt we should save everything we possibly could, but he thought we should be able to live a little too. 

He was right, but we had to find a way that could make us both happy.  He asked me what I was worried about, and I realized that I just wanted all our bases covered.  I wasn't pissed that we spent money, I was worried we weren't saving enough.

We started a plan that would make us both happy.

We sat down one Saturday evening and wrote out our big life goals.  We then broke those into financial goals that could be achieved with our combined $78,000 income before taxes.  We set target amounts for each goal.  That sheet looked something like this in a couple of hours:

Targets:

• Mortgage - Continue overpaying $160 a month.
• Tax and Insurance Account - $400 a month since we don't escrow and this would cover taxes, homeowner's insurance, and our CPA.
• 401k - Continue contributing 6% of my salary (maximum that is matched).
• Roth IRA - Continue funding $5000 a year ($300 monthly and the other $1400 whenever the market looks good).
• Emergency Fund - $30,000 (full year) starting with the $10,000 we had plus an additonal $500 a month.
• Home Maintenance and Auto Account - $200 a month (my last car payment) plus our $3000 seed money.
• Scottrade Account - $2500 a year whenever the market looks best.
• Vacation Account - $250 a month so we can take one or two of our normal vacations.

By covering those targets, I felt secure and we figured out what to do with our remaining money.  Check back tomorrow for our full spending breakdown.

What would make you feel secure?  If you have a partner, have you planned long-term with them?  Has a financial realization ever smacked you upside the head?

General Steps to Financial Stability

Before I start posting specific spending scenarios, I wanted to post a general idea of how you could cover your basic financial bases.  Please disregard if you are beyond this of course.  These are the steps we use:

1. Create a budget after monitoring your spending and income for a month.  This will need to be updated with forgotten items as you go.

2. Pay all necessary bills.

3. Set up an emergency fund for at least 3 months (see below for the rest).

4. Maximum matching to your 401k.

5. Max out at least one Roth IRA.

6. Add small "fun" money allowances into the budget.  This is important to keep yourselves on track.  Without a little "fun" money breathing room, you'll catch yourselves splurging more often...this could slow down your progress quite a bit.

7. Overpay your mortgage to at least the nearest $100. We overpay to the $100 after that for a total of an extra $160 a month. Continual extra principal payments will save you thousands in interest.

8. Hit your specific goals - In our case, we put money aside for my husband’s graduate classes, extra into our emergency fund since we want it to be large enough to cover at least 9 months, a set amount aside for stocks, and we put a small amount into our vacation account for annual trips and large "fun" purchases.

9. Open another Roth IRA...we'll be doing this with the unneeded graduate school money this year.

10. Pay down your mortgage or save for future investments.

Even if you can't hit all these steps at one time, simply make it as far as you can...you'll be surprised how fast you'll start building actual wealth. 

We are currently on Step 8 although we are on track to hit all ten steps this year.  I will keep you updated as we go.  :-)

Do you see anything missing above?  What kind of system do you use?