In January and February, we talked about getting organized with your expenses and setting some financial goals for yourself. I discussed the importance of keeping track of your expenses and setting up a monthly budget. Hopefully, you are now getting a better idea of where your money is going and are starting to feel more on top of your financial life. Perhaps this has lead you to make some changes in what you are spending your money on and how much is going out each month. If that is the case, good for you, you are on your way! Now that winter is over and you are feeling more energetic and ready to give your house a good cleaning and get out there and clean up your yard to make way for the beautiful spring growth and flowers, you can also do some spring cleaning of your finances. Just as you declutter your house of unwanted extra stuff for a more peaceful environment and clean up all that yard debris for a tidier look, you can also take a look at your finances to clear out those unnecessary expenses that are keeping you from reaching your savings goals and from the peace of mind of living below your means. Once you are organized and are keeping track of your expenses, then you can begin to go over them with a fine tooth comb and start eliminating the financial clutter. Simplify your spending! There are probably at least a few things that you have gotten into the habit of buying that you can do without. And there are probably a few things that you are spending more money on than is necessary. How quickly or gradually you go about this financial downsizing is entirely up to you. Maybe you are the type that likes to get used to things slowly, and form new habits one at a time before making the next change, or maybe you like to see the rapid results of all that “found” money you can have (to pay off debts or start saving money more quickly) when you really pare down your budget all at once. Proceed at your own style and pace. Eliminating a few (or more than a few) daily or weekly expenses can really add up to big savings. Here are a few examples of how small savings can add up: But don’t overlook those big (typically monthly) expenses too. Take a look at your phone plan, your utility usage and company, TV and internet providers, car/homeowners insurance. Shop around to see if you can get a better deal. Sometimes all it takes is the threat of moving on to spur your present company to offer you a sweeter deal. Even think about your mortgage or rent payments. Can you downsize? Refinance? Get a roommate? Once you eliminate a lot of that spending clutter your psyche will feel lighter, and your wallet and bank account will now be able to grow and thrive like those beautiful spring flowers. It’s a good deal all around. Give it a try!
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If you are of a normal weight like I am, people will sometimes say to you “Oh, you are so lucky you don’t have to worry about your weight.” Or even more erroneously, “You are so lucky you can eat whatever you want.” Neither of these statements can be further from the truth. In fact, the only reason I am a normal weight is because I do worry about my weight, every day. And I do watch what I eat, every meal. It is just as much a struggle for me as for them. In fact, probably more so, given the fact that I am only 4’10” making every calorie count!
So what does that have to do with money, you ask? Well, I have also had people say to me, "Oh you are lucky that you were able to stay home with your kids and did not have to go out and work." And once again, luck had very little to do with it. Many of the women who said this to me had husbands who were making more money than mine did. These women also had cable TV, big new SUV’s or minivans, new clothes and shoes, maybe a Coach bag, and (back in the day when I had dial-up) high-speed internet. I would wager a bet that they also thought nothing of going out to lunch, buying coffee and drinks out, getting their nails and hair done, and picking up take-out for dinner. And yes, before you start yelling at me, I know there are single moms or other circumstances when women need to work, but my point is that often what people perceive as luck may actually be a result of the many choices made every day in life. Luck can also be a matter of perception in another way. Let’s say you get in a car accident and break your arm. Are you lucky or unlucky? Well, some might say of course you are unlucky! You got into a car accident and broke your arm for goodness sake! How can that be lucky? But then there is the person who says, “I am so lucky that all I got was a broken arm! I am still alive!!” Same scenario. Completely different perspective. So what is luck then? It is a matter of the results of your actions, and a matter of perception. So, the question is can you create your own “luck”? You absolutely can! Let me create a little story for you to illustrate my point even further: Let’s say Dick and Jane make the exact same amount of money. OK, scratch that, since Dick probably makes more. Let’s say Dixie and Jane make the exact same amount of money and through some cosmic fate have the exact same bills and expenditures every month. Each is able to save up exactly $100 per month after everything is paid, giving them each an extra $1,200 per year. At the end of Year One, Dixie takes that money and goes on a much-deserved vacation. Jane puts it in a one-year CD. At the end of Year Two, Dixie needs some new living room furniture, so she spends her $1,000 on that plus $200 on a hot new outfit. Jane now has $2,424 (her yearly savings of $1,200 plus $1,242 in her CD). She puts $2,200 of it into another CD, and spends $30 on a water filter for her tap, so she can stop buying bottled water, and spends $70 on an indoor antenna for her TV and cancels her $110 per month cable service. With the remaining $124 she has a great time at the thrift shop buying a new wardrobe for the coming year. Year Three: Dixie has her usual $1,200 at the end of the year. She splurges on buying herself the latest iPhone, which is just out, plus a nice case for it. Jane now has $2,244 from her CD, plus $350 saved by not buying bottled water, plus $1,320 saved by not paying for cable every month, plus her usual $1,200 for the year. A total of $5144. She spends $800 buying a washer and dryer so that she can stop going to the laundromat. She decides to invest the remaining $4,344 into a low-cost index mutual fund. At the end of Year Four, Dixie has her usual $1,200. Jane has her usual $1,200 plus $350 saved on water, plus $1320 saved on cable, plus $180 saved on laundry. And her mutual fund did pretty well to earn her 8%, so she now has $4,691 in that for a total of $7,741 … I could go on and on, but I hope you are starting to get the picture. One night Dixie meets Jane at a party. When the topic turns to finances, Jane happens to mention that she currently has about $3,000 in her savings account plus a mutual fund with over $4,500. Dixie is impressed and amazed and comments on how “lucky” Jane is to be so far ahead of her, while she, herself struggles living paycheck to paycheck. Does this sound familiar? Is Jane “lucky”? So how about starting to turn your own “luck” around. And one day in the future maybe you will chuckle inwardly when someone at a party tells you how lucky you are to have such a nice healthy nest-egg for your retirement and a nice bright future to look forward to. Welcome back! I hope you have been working diligently at paying attention and keeping a record of your daily expenses. Have you had any surprises? Were there things that you found yourself spending money on that you never even gave a thought to? It’s all these little dribs and drabs of money sifting through your fingers that add up. It doesn’t seem like a lot when you are buying one little thing at a time, but when you tally it all up at the end of the month and multiply that by 12 for what you are spending on all these frivolities per year .... Yikes! In this day and age, it is often not actual money that we are parting with. Most people today have become even one more step removed from their spending awareness. Just pull a little piece of plastic out of your wallet, plunk it down and, voila, you have whatever you want. It barely seems that you’ve “lost” a thing. It’s just so easy to be unaware of how much is going out. This first step in stemming the constant flow of too much money going out is to become mindful of your daily spending habits and just where your money is going. If you have done your “homework” from my January blog, then you now have a better idea of that. The next step is to write yourself a budget. This is where you can begin to trim some of that fat. Do you really want to keep spending all that money or are there some things you can forgo in the interest of saving money? Once you have a clear picture of where your money is going and how much you no longer want to spend (aka waste), you can allocate a certain amount to each line item of spending every month. Now you will have an accurate outline in black and white of where your money is going (and where you don’t want it to go!) Here is a budget form that I created to help you plug your expenses into as many categories as I could think of. I have also left some spaces for those that you may have that I haven’t come up with. Now I would like to introduce you to an old timey but timeless way to keep your spending in line and on budget each month. It is based on going back to using good old American cash money for your daily expenses. This is what I did throughout most of my years of raising my family. I did not know it at the time, but since the magic of the internet I have learned that other people do this too and they call it quite simply and accurately “The Envelope System.” It is very inexpensive to get started and implement as all you will need is a $1 box of plain white envelopes. Then you simply divide your budget into spending categories and label the envelopes accordingly (e.g. food, gas, clothes, entertainment, health and beauty, household needs, etc.), and place the amount of money that you have allocated for the month into the appropriate envelopes. This gives you a great visualization of how you are doing. You can actually see how much money you have left to last you until the end of the month. When the money is gone it’s gone. No more spending for the month. Can you “cheat” and take money from another envelope if one of them is empty too soon? Sure! But just who are you cheating? Yourself, of course! And, if you want to stay on budget, now you have less to spend in the category of the envelope you “stole” the money from. You will get better at knowing how much to put in each envelope for the month as you become more practiced at it. And hopefully you will also get better at finding ways you can save more money in each category too! As I continue these blogs I will delve more deeply into just how to find those ways of saving more money in each of those categories. You can also attend my monthly meetings at the Red Hook Community Center for more tips and tricks on saving money through the magic of frugal living. (See the Events and Classes page). So until we meet back here next month, I bid you adieu and happy savings! I am so excited to welcome you to my new webpage and get started on a money saving journey with my readers. This blog will be chock full of tips and strategies each month that you can use to set and achieve any and all of your financial goals from the short term to long term to the ultimate of a secure, happy, well-funded retirement and even a legacy to leave to your heirs. The new year is traditionally a time of getting started so this is the perfect time to take a look at where you stand right now with your finances and what goals you would like to achieve this year and beyond. No matter where you are at present the best time to get started on improving your financial status is right now! Before you can begin to set goals it is important to know where you are right now. Set aside some time to take a look at where your money is going. Write out an expense sheet. Include all your expenses big and small, from your fixed expenses (rent/mortgage, insurance, cable, phone, etc.) to your more variable expenses (food, heat, gas, clothing, entertainment, etc.). And don’t forget the occasional expenses (school supplies, Christmas, vacations, car repairs, etc.), as well as all those little expenses that you hardly think about (your morning coffee to-go, vending machine treats, lunches out, beauty products, etc.). If you are not in the habit of noting all your expenses, it may take some time to remember them all. I suggest getting a little notebook to record what you spend money on each day at least for a month. (Even I still do this on a daily basis.) You can use this worksheet I've made to complete this step. In the meantime, take stock of any debt you have. Write down all of your debts including the full amount owed and the interest rates. Add them up to get your total owed.
If you have assets, good for you! Take note of them too. Money in the bank? 401k (403b)?, Any investments? And write down what your income is, including all sources; Your (and your spouse’s) salary, child support, SS payments, rental income, extra side jobs, etc. Now that you have a clear picture of where you stand, you can plan your goals. Let me give you a little hint here. Your first goal should be to pay those debts down! No debts? Great! Is there something you want to save up for to buy this year? Do you have a bigger purchase in mind that might take a few years to save up for? (a new car or down payment on a house?) Do you want to save up for education? (yours or your kids). And then of course there is the ultimate goal, that nice comfortable retirement nest-egg! For the smaller goals it is simply a matter of dividing the total needed by the months you have until you need the money. Then you know the exact amount you need to put away each month to achieve it. For that ultimate big retirement reward, slow and steady wins the race. The earlier you start the better off you will be. This should be an automatic amount taken right off the top, before you even see it. Of course a job 401k will do this for you, but if you don’t have access to one you can set up your own retirement account and have automatic deductions going straight into it from your checking or savings account each month. I know this is a lot to contemplate all at once, but for now just take this month to take stock of your expenses and debts, and think about what goals you might have for your money and I will lead you through the rest of it step by step as the year progresses. When you do it step by step you will see how easy it can actually be to turn your finances around. We will start to talk next month about just how to budget your expenses and find the money to put aside for all those goals. ` Stick with me and you too can have a bright future! |
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