Thursday, August 28, 2008

WOW! PoW Retro

PoW Retro (that is Picture of Wealth, not prisoner of war) is a look back at some of my favorite posts over the past year and a half. I hope you enjoy these!

Oh, the lies we tell ourselves!! I was telling myself a whopper. We are actually a little worse off now having just purchased another vehicle, but it lowered our monthly bills, we had to have another vehicle, and now we are no longer living paycheck to paycheck. Yea! Check out this post and see how truthful YOU are!!

Tuesday, August 26, 2008

Back to Basics Post 5 Before the Snowball Rolls

If you are just finding the Back to Basics series you can find all of the posts in the series by clicking on “Back to Basics” in the sidebar. So far we have discussed tracking our money, finding money in our budgets and saving for an emergency fund.

Today’s topic is what to do before you begin the debt snowball. Now that you have $1000 in an emergency fund you are ready to begin paying off your debt. But, how good is your budget?

If you are like me, I was changing my budget daily when I first started…. “oh yeah, we have $20 in prescriptions each month”, or “Oh, I forgot that we buy dog food every other month.” So, you probably know that there are some things you have forgotten about. Another thing that was lacking in my budget was a plan for yearly expenses. For us, those expenses are car license plates and our real estate taxes. The grand total for all of this is around $2400 annually. So for us this means we need to save $200 per month to be able to afford these expenses when the time comes without wrecking our budget. I also decided that for things like hair cuts, oil changes, stamps, clothing, etc. I would budget another $65 a month. If we don’t use this money one month we will save it to use the next month. If it runs out then we just have to wait until we have enough to cover the expense.

Now, it is one thing to save all this money up, but how do you keep track? If you don’t keep track you will inevitably spend money that is meant for a specific purpose. Well, I created a Money file in MS Money that handles this for me. I got the idea from Trent at the Simple Dollar. He set up an ING account and created “sub-accounts” for this type of saving. You don’t have to use ING to do this. All you really need is a plain old savings account and a spreadsheet. First, decide what you want to sub-account for. In my case I have one called “irregular expenses”, another called “lump sum” (our $2400 above) , “hospital savings” (money left over from our hospital bills from the baby), “lease money” (we are holding on to a large sum of money owed for paying out our car lease and can’t get anyone to tell us who to pay!!) and “holding for bill pay”.

Each month we get three separate pay checks between my husband and me. I use the “holding for bill pay” to save extra money. This way I know it will not accidentally get spend, AND I have a specific place to put it and track it. So those are my sub-accounts. You will choose your own. If you don’t have any lump sum payments each year great, more cash to go toward your debt. But, I am sure we can all use some money for “irregular expenses”.

A side note. At this time do NOT save for things like vacations or a new TV (unless your old one is really about to die) we are only saving for necessities. All of our extra money we want going toward paying down debt. Got it?

Next week we will finally discuss the debt snowball!!

Thursday, August 21, 2008

WOW! PoW Retro

PoW Retro (that is Picture of Wealth, not prisoner of war) is a look back at some of my favorite posts over the past year and a half. I hope you enjoy these!

Ahh, my first milestone. I won’t say what this refers too, because I want you to read the post…. But I am happy to say I can now boast the same thing except instead of a month it has been a year and a month!

Tuesday, August 19, 2008

Back to Basics Post 4 What to do with Found Money

If you have been following along with this series you should have a good idea of where you money is going each week. Last week, we also talked about some ways to “find” money to help get you out of debt. Today we will talk about what to do with that money.

First, if you have not already done so you must pledge to STOP CREATING NEW DEBT. Until you have done this, you can go no further. You cannot fix your finances if you continue to add to your debt. End of story. Taking the plunge can be hard and it really is a mind set. However, once you do this things will only begin to get better.

Now, the first thing we are going to do with this “found” money is begin an emergency fund. You should aim to save $1000 because that will cover most things that can go wrong. Some examples might be an unexpected trip to the emergency room, a car problem, or needing to have an appliance repaired.

All extra money each month should go to this purpose and this purpose only. Here is why. Once you have an emergency fund you will no longer be forced to use credit in an emergency. The problem I always had was that I would pay off my $2000 credit card balance, then my car would need repairs and I would immediately add $1000 right back to it. So, for the time being, pay only the minimums on all debt and save up to $1000.

The next logical step for anyone who has heard of Dave Ramsey is to begin a Debt Snowball, but that is NOT what we will discuss next week. I think there is one more thing to do first…. To be continued!

Saturday, August 16, 2008

I did something really stupid...

Well, not all that stupid. I won't LOSE any money over it. But, I decided to sell our old Blackberries. We recently traded up/down (depending on how you look at it) to some different phones to save money. We ended up saving about $100 a month doing this so it was well worth it. Anyway, I sent them to I was going to get about $16 for the pair. This was the highest amount I found online, but I didn't spend enough time on the site.

Going back I found many misspellings on the site and in their email to me. This sent up a red flag. Usually people who can set up a business can at least run their things through a spell check and make sure their site uses proper grammar.

I still have a few days before they say I should know something. They keep telling me it takes exactly a month for them to check the phones because of the number they receive. We will see, but I think this one is going to be a loss.

Oh, by the way, I have found a great site that gives you gift cards for points. It is actually pretty easy to get points and you could get a $50 Visa gift card in 33 days of getting points. (because of a daily point cap) You can earn a $25 Target or Best buy in 17 days (but we don't have those stores here.) If you are interested please email me so I can refer you. I am doing the referral contest for even more points.

Thursday, August 14, 2008

WOW! PoW Retro

PoW Retro (that is Picture of Wealth, not prisoner of war) is a look back at some of my favorite posts over the past year and a half. I hope you enjoy these!

I still think this is hands down, the best thing I have ever written about finances. If you and your significant other don’t agree on money, THIS is the post for you!

Tuesday, August 12, 2008

Back to Basics Post 3 Finding Money

We started out our Back to Basics series talking about what your goals were for your money. Last week we set up a budget so we could begin tracking expenses. If you have these two steps down you are actually doing pretty good.

Chances are when you made up your budget last week you subtracted expenses from your income and came up with a positive figure. It may have been in the hundreds of dollars… you were probably thinking, “I should have X amount of dollars still in the bank each month!” Since it has only been a week since you started tracking, here is the secret…. You are spending that money each month too, you just haven’t caught yourself yet.

When I first made up my budget, I was coming up with an extra $300 a month. I knew it was going somewhere but I didn’t know where. Tracking helped me with that and it also helped me “find” some money.

So, how do you “find” money? Well, how much you can find depends on how upset you are about your finances. I was really upset. The first thing I did was to look at my monthly bills and see what could go. Early on (before even beginning budgeting) I cut out the premium cable channels. Later, I bundled our cable, internet and phone service and saved us about $80 a month. Next came our cell phones. If you are paying for internet at home and you very likely have access at work too WHY do you have it on your cell? That saved me $30 a month. (My husband doesn’t know it yet, but he is about to start saving the same $30 a month)

We are very dedicated to getting our finances under control. Currently we do not eat out, rent videos, go to the movies, or take vacations. And, YES, our lives are tolerable. We have video games at home and a few DVD sets that we watch quite often.

DO THIS: Now that you have started a list of your expenses, go back through and find some things that are not really necessary. Cut them out or cut back and you will have some of that money back in the budget for more important things.

Next week we will renew our promise to STOP CREATING NEW DEBT and talk about how to use that newly found money.

Thursday, August 7, 2008

WOW! PoW Retro!

PoW Retro (that is Picture of Wealth, not prisoner of war) is a look back at some of my favorite posts over the past year and a half. I hope you enjoy these!

I made a few changes early on to start lowering our bills. Eventually I cut off our phone service and had it added in with our cable services which ended up saving us almost $75 a month. This post I added because it just shows how when you start thinking you can find a lot of ways to free up money.

Tuesday, August 5, 2008

Back to Basics Post 2 Tracking Your Cash

Last week we talked about what was upsetting you about your finances and what you wanted to get out of getting your money under control.

Now that you have some roughly defined goals, lets move on to step two. If you had a ton of money left over each month you wouldn’t be reading this. You wouldn’t need to. So, most of us are here because we are living paycheck to paycheck or perhaps worse… credit card statement to credit card statement.

The first thing you need to do is look at where your money is going. You may not be able to do this yet. If you have an online banking account where you can see exactly who got each of your hard earned dollars you may be able to look back and get an idea. If you don’t have this luxury you need to begin tracking your expenses. I am not going to tell you that you can’t go any further until you do this, but it will be hard to get a solid plan until you have done this for a few months.

DO THIS: Come up with a list of everything you “think” you spend in a month. Write each item down with the amount you spend on it. At the top write down your income too. Then add up everything you “think” you spend money on and subtract it from your income. Right now it does not matter if this number is positive, negative, or zero… we will get to that later. Guess what? You just created a budget!!!

The word budget is like the word diet. It has gotten a negative connotation. A diet is truly just what you eat. It doesn’t mean you are cutting calories. A budget is the same thing. It is just what you spend. It doesn’t have to mean you are cutting out all the fun stuff in life. But, you NEED to know where your money is going presently, so you can MAKE it go where you want it to go in the future.

This is not going to be set in stone… hope you didn’t use a pen. Keep this list around for the next few months. I promise you will be adding things to it that you didn’t realize you were spending on. The first month I had to buy dog food after I started my budget I freaked out because I had to take $30 out of the grocery budget for the pet food!! (We don’t have this expense every month.) This month my husband started a new medication that is $20 a month, so that had to be added. Next month when school starts again we will have to shell out $35 a month for school lunches. So, you will be adding to your list. That is okay, don’t freak out every time you do this. We will get your “budget” to a manageable point soon. Just keep tracking that cash flow!!

Next week we will talk about adding more money to the budget. It can be done!!

How are you doing so far? If you have any questions just ask. If you want me to try to help you with your budget please email me.