Category: Budgeting

 

We have been enjoying a period of the lowest gas prices in a very long time. At the end of the past few months, I’ve had to double check my budget for errors because my gas expenses were a lot lower than they would usually be. Many of us are spending almost half as much money on gas as we were six months ago. While the prices are starting to tick back up from the low of $1.99 in many places, we should not let this moment pass by without using this as a way to gain more traction towards meeting our financial goals. Make sure the money that you are now not spending on gas serves a purpose other than evaporation in your budget. Here are five things that you can do to take advantage of these low gas prices:

1. Pay off excess debt.

If you are still working on getting out of debt, then the best option with your surplus of gas money should go toward paying off your debt. It is critical that you get out of debt as quickly as possible as it will make reaching your other financial goals that much easier.

2. Beef up your emergency fund.

Most financial experts recommend that you save anywhere from three months to an entire year’s worth of expenses for emergencies. Emergencies are not just limited to job loss. They can include things like transmission repair, home air conditioning repair, etc. that can cost thousands of dollars. It would be devastating to put so much effort into getting out of debt only to seep back into it when something breaks.

3. Take care of other car expenses.

Not everything the dealer or repair shop recommends is necessary, but things such as oil changes, tire rotations, fluid flushes, etc. are essential to extending the life of your vehicle. Now is the time to get some of those things done that you have been putting off.

4. Increase Your Giving

While the gas bill may be cheaper for everyone, plenty of people are still struggling with job loss or underemployment. Charities still need funding to meet their goals for their communities. Homelessness still abounds. Increasing your giving to those around you or an organization whose mission you believe in is a great way to spend your surplus.

5. Spend on Yourself

Yes. I said it. You can increase spending on those things that you have been putting off doing for yourself. Go out for that extra dinner with friends. Pay someone to clean your house or mow your lawn so you have the time to do things you really want to do. Buy that new device that you have been putting off because you’re hyper focused and your current one is falling apart. Take that online course you’ve wanted to take but just put off. As long as you do it within reason, take a little break and enjoy this season.

Like I mentioned at the beginning of the post, the gas prices won’t be this low for long, so enjoy it while it lasts. However, make sure that the money that you are saving is still used purposefully so that you stay on track to meet your goals.

 

We all have certain brands and  products that we love that perhaps we have used our entire lives. I grew up using things like Vaseline lotion, Listerine mouthwash, Kellogg’s cereals, Kraft barbecue sauce, shopping at Walmart to save on all of those purchases, etc. Many of those products followed me into my adulthood as purchasing was a habit. However, when I decided that I needed to curb my spending, I realized that the products that I was accustomed to using were not always on sale when I needed them. Furthermore, the store that I thought was saving me a ton of money on those items weren’t even offering the items at the best prices.

In order to maximize the amount of my savings, I had to end my brand loyalties by switching brands. That didn’t mean I stopped using certain products forever. I just decided to try other things. If you want to put some big dents in your spending, you must be willing to switch brands and try new products regularly.

 

“How does switching brands save me money?”

 

1. Manufacturers offer larger coupons on new items.– Manufacturers spend a lot of money on advertising when introducing a new product. Coupons are a form of advertising, and they also work with stores to highlight those new products in their sales papers and store displays. Coupons for newer products will be higher in value. I remember being able to get Gillette’s ProFusion razors for nearly nothing when they were first released. When combining the promotions at CVS and Walgreens with the usual $5.00 coupons, I was getting the razors for free after store rewards. However, when the Schick Hydro razors came out, I was willing to switch brands to save money again. I also got to see if the new product could do a better job.

2. Products usually go on sale about every six weeks. Though there are exceptions (like Crystal Light being Buy One Get One Free at Winn-Dixie nearly every other week), many items get their deepest discounts in six week cycles. Unless you have access to enough coupons to buy six weeks worth of product, you’ll have to switch brands as different brands or varieties of the items you buy go on sale. So, if Kellogg’s cereals go on sale during the first week of August, it may not go on sale again until mid-September. If you run out of cereal before then, instead of paying full price for Kellogg’s, you will be better off buying the Post brand cereal that is on sale.

 

“But I just HAVE to have my Eight O’Clock Coffee!”

 

So, if you just have to have that one brand of coffee, toothpaste, or whatever, this is what you need to do.

1. When you see a good coupon for that item in the newspaper or online, buy multiple copies of the newspaper and print two copies of the internet coupon per computer.

2. Stock up on the product when it is at its lowest price.

In most cases, I prefer switching brands and trying different products. You may even discover a new product or brand that you end up liking better than the one you usually use.

Question: What brand or product can you not do without? What new products have you tried in your quest to save more money?

 

This seems like a silly statement to make, right? This is something that I’ve heard Dave Ramsey say a lot on his radio show over the years. We all know that Christmas is on December 25 every year! However, many of us allow Christmas to creep up as if it is on some unpredictable, rotating schedule each year. We don’t plan for it because we fail to make a Christmas budget and don’t think about it at all during the year. Then we end up throwing away most of the progress we made all year in order to have presents to put under the tree.

That’s why it is so important to make a budget and to write a new budget each month to deal with each month’s unique issues. December and that whole season may call for its own separate “Christmas budget.” It is also important to think about other events that we know happen at certain times of the year so we can include those into our budget, especially if we need to save for it in advance. Here are some examples:

• Christmas is on December 25. (We already went over that!)
• The family reunion is in August.
• Mom’s birthday is in September.
• The car insurance premium payments are due in July and January.
• The apartment lease ends in November and it’s time to move, so there’s a new security deposit, fees, moving expenses, etc.
• Your daughter is getting married in November.
• You have been asked to be a groomsman for your college best friend’s wedding in October in another state.

So as you can see, the silly statement announcing Christmas as being on December 25 is more than about saving for Christmas. It is about viewing your financial life from a long-term perspective. There are going to be enough unpredictable things happening in our lives. Let’s do our best to make a plan for the things we already know are going to happen.

Since the Christmas holiday season is most likely the longest event away for many of us, let’s make a plan. It’s pretty easy. There are only two steps to creating a Christmas budget that will help keep the money stress away.

 

Step 1: Figure Out What a Typical Christmas Season is Like for You

 

Here are some questions you should ask yourself:

• Are you traveling or are people traveling to you? What’s the estimated cost of travel?
• How many people do you usually buy gifts for and how much are you willing to spend on each person?
• Are your gifts limited to family, or will you be buying gifts for close friends, parties (i.e. white elephant gift exchanges), etc.?
• What plans do you have to support any charities during the holidays?

Those are a few questions that will help you gather an idea of how money you will need to make it through the season without incurring any debt. Detailed answers are not necessary. It is just necessary to think about these things in advance so you can create your action plan.

 

Step 2: Make Your Christmas Budget and Start Saving

 

The next step is to figure out a savings plan to fund the Christmas budget. For many people, putting money away each month throughout the year is going to be the best way to save for Christmas. Saving $100 per month between June and December will yield you $700. Saving $50 per month will yield you $350. How much you decide to save depends on how much you plan to spend. Remember, this all depends on how much you plan to travel and how much you plan to spend on gifts. If you are a smaller gift type and all of your family lives in the same town, you won’t need to spend as much as someone who needs to travel 500 miles and wants to buy larger gifts.

Furthermore, you need not put every dime you plan to spend in December in a savings account. You just need to put away as much as you think will exceed whatever you’re able to provide out of your monthly budget. In 2013, I was able to fund my Thanksgiving and Christmas travel out of my normal monthly budgets, but after that, I did not have much left over for gifts. So, this year, I plan to save enough throughout the year to cover gift purchases.

 

Get Started!

 

So, whether you are planning for Christmas or planning for the many other things that happen throughout the year, it is important that you take account of those events before they arrive so that you don’t derail your goals. Hopefully, you will be able to take care of many of those items with your regular monthly budgets. However, bigger upcoming events may require you to put money away in a savings account each month. Planning is one of the best things we can all do to keep ourselves on track, so let’s get at it!

 

Question: Does Christmas (or birthdays, a quarterly or semiannual bill, anniversary, etc.) always seem to  creep up on you? What are you going to do to make sure that doesn’t happen this year?

We all love the idea of getting a raise. Oh the things we could do with more money! Whether you are an hourly employee, salaried, or working on full commission, you will hopefully experience a raise many times throughout your career . It could be a raise in your current pay within the same job, a promotion to another position, moving to another company that pays more money, or money made from starting your own business. It is a wonderful feeling to make more money, because it serves as a reward for our constant improvement.

 

However, there is a huge mistake many people make when they get a raise. Because of this, they really don’t see much of an improvement in their financial situation in the long-term. What is this mistake?

Too many people get a raise and react by increasing their spending by virtually the same amount.

Here are some ways many people react to getting a raise:

• Trade in their car for a more expensive one, even if their current vehicle is paid for or almost paid in full. “I’m making an extra $500 per month now. I can afford that $300 payment.”
• Rent a bigger apartment or spend more money on non-essential home improvement.
• Buy that TV, set of clothes, or whatever hobby or luxury item they’ve been eyeing for a while.
• Increase their dining out expenses.

What happens as a result of this? We make more money because we are working hard in the marketplace, but we remain in debt, still rent our home or pay the minimum on the mortgage, have no savings or retirement, etc. because we made the mistake of increasing our lifestyle by the same amount as our increasing income. Are the constant lifestyle upgrades worth it in the end?

Since we want to have results that are not common, we must react to increases in income in uncommon ways.

It’s okay to celebrate a raise with some lifestyle changes, but they should never increase by the same amount as your raise or you will remain in the same financial state you are in right now.

So, go out and celebrate that raise or promotion within reason. But make sure you come back to the table and format a plan on how you will use your newfound money to reach your goals.

Question: What would you do with the extra income from a raise or bonus?

 

The topic of discount stores vs traditional grocers often spark a lot of debate. Which type of store offers the better value for the money on groceries? Discount stores like Walmart and Target, or traditional grocery stores like Publix, Kroger, Meijer, etc.?

Based on my experience, I believe that traditional grocery stores will provide you with the maximum amount of savings on grocery items. Here are three reasons why.

1. Traditional Store Sales Oftentimes Beats Everyday Low Prices

Stores like Walmart, Target, Aldi, etc. market themselves on having low everyday prices. Though they have sales themselves, they offer the convenience of you being able to buy things at low prices without having to chase sales at other stores. That is great if you do not want to deal with sale ads from traditional stores and coupons. However, I believe that sales at traditional grocers oftentimes beat those prices. And this site is all about maximizing your budget, right? For example, the everyday price of Gevalia Coffee may be $8.99 at Publix and $6.45 at Walmart, but when it goes on Buy One Get One Free at Publix, that coffee is now $4.50 each.

2. Combining Coupons with Store Sales Seals the Deal

The key to saving at traditional grocery stores is combining store sales with coupons and other incentive programs they offer. While Walmart does have a good coupon policy, the store does not offer store coupons like many of the traditional grocers. Target does offer store coupons, but you’re better off using those coupons under Publix’s competitor store coupon policy. Traditional grocery stores also may have other incentives that will help you maximize your budget such as doubling coupons (in certain areas), gas savings programs, and rewards programs that the discount stores do not offer. So, while the everyday low price stores provide more convenience, following the sales and learning some of the traditional store incentive programs will give you more bang for your buck. Let’s go back to that bag of Gevalia coffee. I estimated that it could be $8.99 at Publix and $6.49 at Walmart. If it is Buy One Get One Free at Publix, you will pay $4.50 per bag. Add the typical $1.00 coupon to both of those packages of coffee, and you end up paying $3.50 per bag at Publix. The Walmart price with a coupon would be $5.45 per bag.

3. Traditional Stores Offer a Better Shopping Experience

This reason doesn’t have a lot do to with saving money, but the shopping experience matters to me.

• Having items in stock matter.
• Having fresh produce matters.
• Having a variety of products matter.

Before I started using coupons, I used to go out of my way to shop regularly at Walmart. However, I always found myself swinging by Publix or Winn-Dixie on the way home to pick up all of the items either Walmart didn’t sell, didn’t have in stock, or wasn’t great in quality. Time spent in line is also an issue at the discounters. Since a large portion of the population believes they are the cheapest, the stores are oftentimes crowded. Though the stores have plenty of registers, they are oftentimes underutilized.

So, while stores like Walmart and Target may be truthful in offering everyday prices that are lower than what other stores typically provide, I believe that traditional stores’ sale prices can beat those prices, coupons maximize the store sales, and they offer a more pleasant and efficient shopping experience.

Question: What store do you prefer for groceries? Why?

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Now that we have a clear understanding why creating a budget is important, it is now time to start creating our first budget. It is not as complicated as it seems, but it will play a monumental role in bettering your financial situation.

So, what goes in the budget?

Everything. Literally everything you plan to spend during that month goes into the budget. A budget simply involves you listing how much money you expect to have during a particular period and then predicting how much money you will need to spend during that time to live.

I tend to divide my budget into two major categories and then I create a bunch of sub categories below that.

Fixed Expenses

This category is reserved for my bills. Fixed expenses includes those items whose prices usually don’t change much from month to month. This would include things such as:

• Rent/Mortgage
• Insurance (Auto, Home, Life, etc.)
• Utilities
• Cable
• Phone
• Giving
• Gym Membership
• Recurring Internet Services (i.e. Evernote)

Variable Expenses

This category includes items whose costs are likely to change from month to month. The amount of groceries you buy may be different one month because you’re going to be out of town for a week. You may have a car maintenance/repair that is due one month and not the other. You may purchase your Christmas travel plane ticket in October. And the beat goes on…

Here are some of the items I include in my variable expenses category:

• Groceries
• Personal Care Items
• Household Items (Cleaners, Furniture, Home Improvement, etc.)
• Auto Maintenance/Repair
• Restaurant/Entertainment
• Books/Music/DVDs
• Toll Road Fees
• Medical (co-pays, deductibles, prescriptions)
• Other items that could vary from month to month such as gifts, membership dues for organizations, additional giving, etc.

So, how do I get started?

In order to make this as simple as possible, I am going to suggest that you start doing this on paper first. If you’re comfortable with technology, you can go ahead and create a spreadsheet or use any of the financial software or web tools that I will discuss at a later time.

Here are some simple steps to get started:

1. On the left side of your paper, list all of the income you expect to receive in the next month.
2. On the right side of the paper, list all of your anticipated expenses by category. If you are unaware of how much you spend on certain items such as groceries, gas, etc., you will need to make your best estimate.
3. Subtract your expenses from your income.
   1. If the answer is a positive number (greater than zero), you have a budget surplus. That money can be used to make extra debt payments or to beef up your savings.
   2. If the answer is a negative number (less than zero), you have budget deficit. You will need to adjust some of your expenses to make it 0 or a positive number.

Like I mentioned earlier, we are keeping things simple for now so that you have no barriers to getting started. In the future, I will show you other techniques that you can use to create a budget and even provide sample forms that you can print each month or edit on your computer.

Question: Was creating a budget this way simple or difficult? Why?

In this short series, I have been sharing five reasons why creating a budget is important and a key factor in achieving your financial goals. Here are the other articles in the series if you need to catch up.

Reason #1: Budgeting Confronts Bad Habits

Reason #2: Budgeting Makes You Responsible

Reason #3: Budgeting Puts You in Control

Reason #4: Budgeting Releases the Power of Writing Things Down

Reason #5: Budgeting Gives You an Immediate Raise

Believe it or not, creating a budget may leave you with the feeling that you just got a raise. Now that you’ve confronted your bad spending habits and hopefully vowed to eliminate them, you all of a sudden have a lot more money to work with to reach your real goals.

How do you “get a raise” if you aren’t literally making more money?

1. You know how much you are bringing home and you’ve already planned your “necessities” spending. You’d be surprised at the number of people who couldn’t tell you without hesitation how much money they make each year or even each month. On top of that, many people don’t even know exactly how much their total priority expenses (housing, utilities, gas, insurance, food/grocery, etc.) are each month. Once you subtract the priority items from how much you bring home, you’ll have what is called “discretionary” or “disposable” income left to do as you please. Simply being aware of your situation provides you with some insight to make it better.
2. You have cut the fat from your budget. Remember the list of bad habits you listed in Part 1? Still getting that latte everyday? Still paying for that gym membership you don’t use? When is the last time you’ve shopped auto insurance policies? Still eating out too much? Hopefully you have taken a look at your goals and put that against what you’re actually doing in order to see if those habits are hindering your progress.
3. You will find ways to save money on this items you purchase everyday. Once you start to taste a small bit of success, you will become very excited about continuing your progress and accelerating your progress. One way to do that is to find ways to spend less on the items and services you use everyday. For example, you may initially plan to budget $100 per week for groceries, but now you seek out ways to reduce that to $80 a week, saving you $80 each month. You may discover that your job has a corporate wellness program through the gym you use, which could provide a better monthly rate than want you are paying now. These kind of reductions in spending will only increase the amount of money that you need to save in order to get out of debt, save for a house, save for retirement, etc.

So, I hope that this introductory series on Budget Maxer has motivated you to take action to reach your financial goals. My motivation will always be to teach you ways to spend your money wisely and to teach you have to save money on the purchases you make everyday. Thank you for visiting my blog, and I hope that you stick around for all of the wonderful tips you will receive in the future.

Question: Did you feel like you had a “raise” when you started to become aware of your income and expenses?

In this short series, I have been discussing five reasons why creating a budget is important and a key factor in achieving your financial goals. Here are the other articles in the series if you need to catch up.

Reason #1: Budgeting Confronts Bad Habits

Reason #2: Budgeting Makes You Responsible

Reason #3: Budgeting Puts You in Control

Reason #4: Creating a Budget Releases the Power Gained By Writing Things Down

Many people understand the extreme power of words. Well, there is something even more powerful than that. The most powerful words are those that are in writing. When there is some sort of legal dispute, anything on paper is infinitely more powerful evidence than something that someone said. Regardless of which goal-setting system you use, they all agree on the importance of writing them down. In my own life, physically writing a daily to-do list increases the likelihood of me actually completing my goals for the day. When we use the power of writing to craft a budget, we release things that increase the likelihood of our success.

1. It Clears Up Our Desires: I don’t know if it is just me, but my mind can be a rollercoaster when coming up with ideas. Writing things down forces me to slow down and to state my intentions or desires in a succinct manner. I definitely don’t want to write a dissertation about everything that comes in my head, but I pretty much do that when I keep it all in my head. That results in a lot of important ideas getting lost in the clutter. Writing a monthly budget will help you clarify your financial goals.
2. Writing things down strengthens our memory: It’s one thing to think that you will spend $130 in an area and actually knowing that you will do so. Knowing that you will spend that much in an area such as groceries or gifts will help you remember your goals throughout the month, thus increasing the chances of you actually achieving that goal.
3. Writing Makes You Accountable: A written budget can act as a sort of contract with yourself or your spouse if you are married. You can even make a game out of it, seeing if you can spend less in areas than you planned.
4. Writing Helps You Journal Your Progress and Check Trends in Spending: A written budget can act as a journal, allowing you to see how far you have come, see how your spending patterns have changed, and to remind you of certain expenses that only occur during certain times of the year as a reminder to plan for those things in the future. Christmas is in December. Mothers Day is in May.  Three close family member’s birthdays are in October. Yearly membership dues for an organization are due in February. The insurance bill you pay once or three times a year is due in certain months. You get the picture.

Writing things down helps create the discipline needed to follow through on the goals that you set for yourself. If you put this power to use with your money by creating a budget, you’ll be one step closer to attaining your financial goals.

Question: In what ways has writing down a goal (in any area) helped you achieve it? 

In this short series, I have been discussing five reasons why creating a budget is important and a key factor in achieving your financial goals. The first reason was about confronting bad habits. The second reason was about creating responsibility.

Reason #3 Creating a Budget Puts You in Control of Your Finances

How many times to we wake up to realize that something in our life is out of control? It could be our health and weight. It could be our job performance. It could be our relationships with those in our family. Many times, it is an issue with our finances.

We grow up. We go to the college of our choice. We have a good time. We graduate and get our first “real job.” We buy a car (with a payment). We rent our first post-college apartment (that we hope is a serious upgrade from what we had in college). We outfit that apartment with furniture and electronics. We buy new clothes. The list goes on. Then all of a sudden, we realize that everything that we’ve built was built with false money! That money is called “credit.”

Student Loans

Car Payments

Credit Cards

Store Financing (furniture, electronics, appliances, etc.)

This wonderful life that we began to build during our twenties turns out to have been built on a false foundation (financially speaking) that has finally come due. Whether it’s through a pay cut, a layoff, or even maxing out all available credit lines, we realize that our finances are totally out of control. Some throw their hands up and act as if their situation is the fault of someone else (that someone being the “economy”). Responsible people will look in the mirror and realize that the person staring back at them is a huge part of the problem.

That “Man in the Mirror” moment is the point in which change will start to occur if you have the wherewithal to do the necessary work. Sitting down and actually creating and following a budget will put you in control of your finances.

Here’s how you will gain more control over your finances by using a budget:

1. Face your reality – Are you satisfied with your income? Do you actually have something to show for what you make? If you are satisfied with your income, then make it work for you. If you are making what others consider to be “a lot,” isn’t it kind of frustrating to be struggling to get by?
2. Sets Boundaries – Are you making decisions that are best for you (and your family if you are married) or are you doing what others are expecting of you?
3. Sets Expectations Early – If you know that you only have a certain amount of money to spend in a certain category (restaurant, entertainment, books, etc.), then you’ll be less likely to make those impulse purchases that get so many people in trouble.

Creating that budget will give you a since of control over your money that you did not have beforehand. Instead of waiting for life to happen to you, you go out and make life happen. You make a plan, you do your absolute best to follow it, and then you reap the rewards later.

Question: What does personal control of your finances look like to you?

 Tristan Martin via Compfight

In this short series, I have been discussing five reasons why creating a budget is important and a key factor in achieving your financial goals. The first reason for budgeting involved confronting bad habits.

Reason #2: Creating a Budget Makes You Face Your Reality and Makes You Responsible for Your Future

Many people live their lives with no purpose or direction. Even if they do not do that in every aspect of their lives, for some reason, people tend to live that way with their finances. It does not matter if it is someone going from minimum wage job to slightly above minimum wage job or someone with several graduate degrees and a lucrative income. Oftentimes, we are simply ignorant or unaware of the things we already have, which oftentimes ends up keeping us from winning. Sometimes, our unwillingness to face our own reality prevents us from having to make the necessary changes to improve our lives.

Creating a budget will force you to take a big picture look at your finances. For some people, it will be like taking an inventory of their entire lives. In addition to documenting the expenses you need to reduce or eliminate, creating a budget will force you to look at what you have and reach one of two conclusions:

1. I am not making enough to meet my goals. What am I going to do about that?
2. I am making a lot more money than I realize. Why am I in such a financial mess?

 

I believe that there are more people in the second camp than many are willing to admit. We make a reasonable amount of money, but our choices prevent us from  making the most of what we earn.

So, what ways can we become less financially “ignorant?”

1. Take your 2012 W-2 forms and know exactly how much you made in the previous year. If you are in a new job or you have irregular income, make the best estimate on how much you plan to make in 2013. (If you are married, both of you should know each other’s information.)
2. Ask yourself this question: Do I need to make more money this instant in order to improve my financial situation, or do I need to make better spending decisions? (Aspiring to make more money isn’t bad, but it won’t solve your problems if you have bad spending habits.)
3. Compare your expense list you created in post 1 and compare it to your income. Do you have money left over or are you spending more than you take in?

Knowing what you actually make is a key ingredient to writing a good budget. Once you are aware of what you already have, you can use it to your advantage or realize that you have to make whatever changes are needed to improve it.

Question: Do you know how much you make? What realizations did you have when you compared your income to your typical expenses?