Amazingly, I stayed on budget for these two sales days. It wasn’t easy with all the marketing and flashing lights I was inundated with.

The good news is I finished my Christmas shopping, so that is one less thing to worry about. The great news is I didn’t buy anything for myself and wasn’t sucked into the feeding frenzy.

How did I stay on budget?

This was the easier part. I made a list of what I was going to buy for each person that I still needed to buy gifts for ahead of time and stuck to it. The hard part of this equation was avoiding being sucked in by “you may also like.”

Since I am rigid about my budget, I wasn’t tempted to buy extra things for Christmas gifts. I have one aunt who has this problem. She has a basement full of things that she buys during Christmas sales that she pulls from every year and gives them to people. She also keeps shopping the same way every Christmas, so her hoard continues to grow.

For me, I was more tempted to substitute a new gift for my original purchase idea. I used the strategy of sleeping on the decision. I took a nap (I don’t really need reason to take a nap, but it is always good to have a reason ready.)

I decided to stick with my list and not even look at the suggestions offered up by the infallible internet. I did this because I had already researched the products and knew the people I was buying them for would like them. Problem solved.

How did I avoid the impulse buy for myself?

This was a much more difficult task. I can be overcome by flashing lights as well as any other lower mammal. My first stab at stopping the impulse buys was the tried and true “Do I want this or do I need it?”

The want need approach works for me most of time, but we all can get mesmerized by the right product or the mass hysteria of thinking something is a deal. What to do?

I thought about all of my stuff in boxes in the basement. You know, the things that once you’re married, are no longer fit to be on display? (This seems to happen to men’s belongings as opposed to women’s…strange) Anyway, I starting thinking of all the things I could sell.

This made me realize that I still have too much stuff and don’t really need to buy more stuff. Therefore, I may have missed out on a few “deals”, but at the end of sales frenzy, I feel good about missing the sale of the year.

How did you fare on Black Friday and Cyber Monday? Get some great deals? End over or under budget? 

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At the end of the day, if your finances are in bad shape then you have one of two problems. You are spending too much money or you are not earning enough money. It is that simple.

I know what you are going to say. What if I have a bunch of unexpected expenses or one large unexpected expense? It could be argued that in this case you are not earning enough money. If you were earning enough money, then you would have the necessary insurance and funds available to cover these types of expenses, in theory.

Spending Too Much

I notice this sort of problem with a lot of my friends and coworkers. It is very easy to identify a spending problem when you are around someone on a consistent basis. I consistently hear my coworkers complain about how they do not make enough money.

Lunchtime rolls around, they go out and buy their lunch for around $7, on average, a meal. Well, over the course of a two-week pay period that is $70 or roughly $140 a month. That is $1,680 a year. I bring my lunch to work and it cost me $10 a week or $40 a month, I now have $100 more than my coworkers per month or $1,200 per year.

I stopped spending as much when I began categorizing my purchases into the simple want or need categories. I have done this so long that I do not really consider buying anything that I want any more. I can prove this by people asking me what I want for Christmas, and my response is always cash. If I am forced to think of something, I normally reply “I need a new electric razor or a half-dozen socks”

Not Earning Enough money

I can make a lot of people mad in this section because it is very difficult to not make enough money. I read many personal finance blogs where people are living happily on as little as $1500 a month and in some cases much less than that.

That is around $18,000 a year after taxes. Therefore, having a job that pays $30,000 a year should put you in good shape. I understand that is will depend on where you live as this amount in New York City would be equal to having almost no money, but you get the point.

At the end of the day, you probably have a spending problem if you are in financial trouble. You house is too big, your car to expense, you spent too much on your education, you eat out too much etc.

Start cutting cost and paying off debt and once your debts are paid off, start saving your money, do not fall back into the trap of spending too much.

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My budget was dinged with a subscription fee that I had forgotten about and this one has put me over the edge. Granted it was only a $30 charge, but it was the straw that broke the camel’s back.

I have a decent sized list of yearly charges that are a constant source of  annoyance to me because I can never remember exactly when I will be billed. I have a general though of “It seems like it is about time to pay for my basketball season tickets.” Of course, this thought last for 1-3 months before the bill actually arrives. Here is a list of my once a year bills. (If I can remember them all.)

• Magazine Subscriptions $30
• Consumer Reports Subscription $30
• College Athletics Donation $155
• College Basketball Season Tickets $255
• Car Tag $1xx
• Termite Warranty for house $160
• Veterinary Appointments $50-130
• Flea, tick, heartworm treatment (every six months) $250

Right now, I can think of  those infrequent bills, I am sure I missed some of them. So, as I said before I have had with being “surprised” (forgetting) about these bills. I know it is completely my fault due to poor planing. What am I going to do about it?

Google Calendar to Keep Track of Yearly Bills

I am going to use Google Calendar to remind me of my irregular bills because it is free and I already have a Google email account. It is just a matter of adding all of my information to Google Calendar.

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Getting all your goals written down

When you are setting your goals to get out of debt, the list of debts that need to be paid off can become long. The list gets even longer when you add in your savings and retirement goals. It is with long list that we can run into trouble (more on that later). When you first start you get out debt plan, you need to list all the debts you want to pay off and all the savings goals you wish to reach. Here is my list from when I first started.

• Credit Card #1
• Credit Card #2
• Credit Card #3
• Car Loan
• Emergency Fund to 3 months
• Student Loan
• Early Retirement (4 separate goals within this one)
•             401k
•             Roth IRA
•             Equity Account
•             Real Estate

Not the longest list of things in the world, but still 7 things to keep track of or 10 if you count all the retirement goals.

Prioritize your Goals

Generally, you will want to pay off your highest interest rate debt first. The list I provided above is how I decided to prioritize my debt and savings goals. Your priorities may be different from mine.

For example, some people would disagree with me about paying off my car loan before establishing an emergency fund. However, if you knew I lived in a place where I must have transportation to get to any job, then you may agree that it is better to own a vehicle so that I can have transportation to a new job should something go wrong at my current job.

Cut your list down to around three goals

Chop off the top of your list and focus on only the highest priority goals. I was left with these goals.

• Credit Card #1
• Credit Card #2
• Credit Card #3

Which list is more manageable or looks more attainable to you? This list right? As soon as Credit Card #1 is paid in full, add Car Loan to the bottom of the list. Alternatively, you could wait until all three credit cards are paid off and then move onto the next three financial goals on your list. You can read about how I paid of my credit card debt. When you limit the number of goals you are trying to meet, you are artificially blocking yourself from changing around your priorities.

This causes you to pay off your debt instead of saying well; I need to contribute this much to my IRA, save this much for the emergency fund, ect, ect. With this limited list, you stop weighing priorities and instead take action.

Conclusion

The most effective way to get out of debt is to start paying off that debt. Paying off debt one item at a time will keep you motivated and keep you from becoming overwhelmed. Keeping track of your long-term goals is also nice because you can always look back if you are feeling down and see how far you have come. Manage your finances; do not let them manage you.

How many of you have a long-term goals list? Do you often look back to see what you have accomplished?

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Budget Flexibility

Having the proper amount of budget flexibility will make your life less stressful. I have a bad habit of not doing this and it just makes things annoying for me. If you read my post on how many checking accounts should a married couple have, then you know that my wife and I have 3 checking accounts; Mine, hers, and ours. The budget that always seems to bite me is the “ours” account.

For some reason (I promise I will tell you the reason), I have a mental block about adding in flexibility to this budget. There is plenty of flexibility in our personal checking accounts and even a built-in buffer for each account. Joint account, nope, none of that. I could make excuses here and say there have just been more unexpected expenses happening the last few months, which is true, but is not the root cause of the problem.

Cause of Inflexibility

Every year it is the same few months that give me a headache: June, July, and August. It is normally just those three months that are an issue. That was until this year. This year our joint account budget started running into trouble around April. What changed this year? A heat wave that caused unusually high temperatures starting in March.

The electric bill fluctuates enough to throw everything off and cause a loss of flexibility in the budget. Why do I never fix this problem? Because it always goes away. The power bill at my house is sometimes triple what it was in the winter, but it always goes back down. I did base the monthly budget on the highest electric bill of the year, so that wasn’t the problem. Another reason: I am too lazy to adjust the money transfers for three months out of the year.

Solution to making this budget flexible

The way I am going to fix this problem is just add $150 to our joint budget. All the money left over at the end of the month (during the Fall, Winter, and Spring) will be transferred to a joint savings account and probably put towards a vacation. The other option would be to allow a “buffer” to build up in the account during winter to cover the increases in the summer.

It is win-win. I don’t have to adjust our contributions to the joint account during the summer months and we will already have some money saved up for a vacation.

If you need a budget spreadsheet. I recommend visiting Budgets are Sexy’s free budget templates.

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With the state of the economy over the past few years, it has become harder to get by financially. Many people are doing just what they can just to pay the bills, but even more people are not prepared to handle an event that can cause financial disaster. These distastes come in many forms; a job loss, sudden illness, or a major car repair can wreak havoc on a your personal finances if you are not prepared. The good news it is not hard to prepare for the unexpected.  All it takes is planning.

Here are a few easy steps to take prepare yourself for a financial emergency.

Start an emergency fund – The amount to save is a hotly debated topic that ranges from 3 months of financial expenses to 12 months of financial expense. I know it is not easy and it can’t be done overnight, but you must start somewhere. Try to put whatever you can into a savings account every month. You can also try the dollar savings plan if you use cash.

Use direct deposit – With direct deposit, you will know that your paycheck will be in your bank account and you will not need to worry about getting to you bank before it closes.  This will help you if you cannot go out due to illness or in the event of natural disaster that causes your bank to close temporarily.

Use online bill paying – You do not have to use this service every month, but it can come in handy if you have all your accounts set up. Let’s say you forget to pay you cell phone bill before you go on vacation and it is due.  No problem,  sign on the internet and pay it.

Get an ATM/Debit card – I prefer an ATM card to a “fake visa” that you bank issues as  a debit card. You may not regularly use cash or have a need for a debit card, but there are some circumstances where it may be necessary.  If you don’t use one regularly, get one anyway and keep it in a safe place.

Set up a home equity line of credit – This option is not available to most people given the current economy, but if you can get one, you can use it until you have your emergency fund built up. Unlike a home equity loan, which provides you with a lump sum of cash right away, a home equity line of credit provides you with cash that you can use a little at a time and only when you need it.  If you don’t actually take any money out, you don’t have monthly payments.  However, if an emergency strikes, you’ll have cash available.  This can be particularly helpful if you find yourself out of work for a short period of time.  Your bank won’t lend you money when you are out of work, so plan ahead of time and the money will be ready when you are.

Plan for financial disaster now and experience the comfort of knowing you are prepared if an emergency strikes. A little bit of planning can go a long way to helping your through a financial emergency.

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Budget Goals fall into two categories: Paying off debt or saving for something. They generally look like this.

Paying Off Debt

The need to pay off debt is the reason that most people make a budget.  Overall, you want to pay off your highest interest rate debts first, but there are always exceptions. The most important thing is that you make your own goals the way you know you can accomplish them.

Credit Cards

I would suggest you start with credit card debt if you have any. Your minimum payments for your credit cards should be in your budget. I am going to talk about where to put the extra money you are throwing at your credit cards to pay them off. There are two methods to paying off your credit card debt.

Economical Method

This method is simple. You pay off your highest interest rate credit cards first.   This will save you the most money over time. In a perfect world, everyone should use this method, but I did not use this method.

Psychological Method

Pay off your smallest debts first. The theory behind this one is you will be more likely to follow through with your debt pay off plan if you see balances on your credit cards reaching zero. This one is more about keeping your spirits high as you can more easily see that you are making progress and decreasing the number of bills you must deal with the fastest. This is how I paid off my credit cards.

Other Debts

For all of your other debts, it is more about personal preference and interest rates because the loan amount is generally fixed. For example, your car payment will always be what your car payment was when you bought the car. I would pay the rest of your debts off in the order of highest interest rate to lowest. I am currently paying off my car as it has the highest interest rate. On a side note, one thing that I am going to do once I pay of my car is deposit an amount equal to my old car payment into my emergency fund. The idea behind this is to build up savings to pay for the next used car I buy and have no payments ever again.

Savings Goals

I will tell you how I am doing things because there is no exact right way to do this. The most important thing is that you save as much as possible as often as possible. When I was in a position to start saving money, I first split it between emergency fund, 401k and ROTH IRA. My goal was $50 in emergency fund and ROTH a month each, with the rest going into my 401k until I reached the employer maximum matching contribution. My thinking behind contributing a little bit to the ROTH IRA is to go ahead and get into the habit of contributing to the ROTH IRA.

As I said above, I am currently paying off my car loan and have stopped all contributions to my ROTH and emergency fund. I only do this because if I pool all that money together I will have the car paid off by April, and can catch up the skipped savings in the next couple of months.

Finally, if possible try to start saving for a vacation as soon as you can. The same is true for saving for you or your children to go to school/college.

If you are having trouble saving money, try out the dollar savings plan.

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What kills your budget? Most people will tell you credit cards and they are half-right. What kills your budget is payments. I am not talking about home related bills (electric, water, garbage, etc.). I am not talking about your mortgage or your auto loan.

A phrase that can kill your budget before you know it is “no interest the first 6 months.”

I know these phrases are very enticing and logically they make sense (the no interest part). I have been a victim of this type of marketing myself.  After all, 50 bucks a month can’t be that bad right.

Wrong.  This type of new monthly payment is often forgotten, and not added to your budget expenses.  Therefore, what happens is you think you have $200 of free spending money and then you are nailed by the $50 charge you forgot about. That doesn’t sound so bad, but what if you buy something else using this method again?

Now you are up to two different items that you may or may not have added to your budget expenses. Now you are locked into having much less spending money for half a year or longer. At this point all it takes is one emergency to tip you over the edge. It doesn’t even have to be an emergency. Your car tags could be due four months down the road. Hopefully you followed my advice in the “How to make a budget post,” and have a savings account to pay items such as auto tag renewal.  Any unexpected or forgotten expense will quickly blow your budget up when it is weighed down with monthly payments.

The safer and smarter thing to do is save enough money to buy whatever item you want outright in one transaction. Don’t try to be sneaky and tell me that buying something on a credit card is one transaction.

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The budget is the keystone to taking control of your finances and ruling your wallet.

1.       Record Income – This one is easy if you are not self-employed or have a commission-based job. Simply record your take home pay for each month. If you are paid monthly, record what is on your pay stub. If you are paid every two weeks use two paychecks as your monthly. (I know this excludes two paychecks, put those two in a savings account or use it to pay off debt.)

2.      Record monthly budget expenses – This is the tricky part. Compile a list of every bill you pay monthly (Utilities, mortgage/rent, auto payments, credit cards, etc). Now, many people recommend using the 6 or 12-month average of you power bill, and other bills that fluctuate, for your budget. I don’t do this. I use my highest bill. For example, I live in Georgia, our power bill in the winter is about $135, but in the summer it can get as high as $250. The way I see it is if I used an average then four months out of the year I would have an extra $50 or so to pay to the power company that was not in my budget. $50 is a lot of money. Use this method for every bill you pay that is not a set amount.

You may be saying, “But if I do what you say I will have too much money in my expenses.” That is exactly right. This extra amount will be a buffer in the months when your expenses are at their highest. What do you do with that money? Personally, I have a joint savings account that I transfer the left over money to at the end of the month. This will allow you to build up a buffer for your joint checking account that expenses are paid out off. The great thing about this is once you get a high enough balance you can use the money over your set buffer amount for other things like paying for a vacation or buying Christmas presents.

3.      Record variable budget expenses –Groceries, eating out at restaurants, gasoline, etc. These budget expenses can take a few months to get right, so don’t be discouraged if you don’t get this number exactly right the first time, I know I didn’t.

4.      Consider annual and semi-annual bills – Here we are talking about paying your car tag, auto insurance, and property taxes. For these types of expenses, I recommend taking the average amount over the period between payments (Example car tag is $140 / 12 months ). Once you have your average, have that amount auto transferred to a savings account on the day you get paid, so you have the money available when the bill comes due.

Now subtract all your expenses. If you have money left over, that is great! If you do not have money left over, don’t get discouraged, start making budget cuts. The first place to look for savings is your variable budget expenses; generally, the eating out category is the first one I look at.

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I believe that making a budget is the first step to controlling your finances as opposed to them controlling you. Before you can set goals you must know where you money is going. You cannot make priorities if you are spending more money every month than you are taking in because then your priority must be to spend less than you make. Once you have a positive cash flow (money leftover each month), you can set goals and priorities.

Ways to make a budget:

• Do it by hand and put your information in a spreadsheet
• Use computer software
• Use a free online service

To make a budget by hand you need to keep a spending journal for a minimum of 30 days and track every penny that you spend. You need to categorize you spending into things like, groceries, credit card payments, each monthly bill, etc. You could also go back through you previous months spending by looking at your account statements if you do not use cash.

I have made a simple spreadsheet for you to create a basic budget here.

You can also download your transactions into software like Quicken or use one of the free alternatives. Follow the software’s instructions to create your budget.

You can also use free online budgeting software. I suggest Mint.com. The best part about using mint is that you do not have to wait 30 days while you track you spending because it pulls all available transactions from your accounts, generally 90 days worth. This allows you to set your budget instantly once all of your transactions are categorized.

You can never make a budget too soon if you do not have one. This not something to put on your to-do list. Sit down today a start making your budget, or use a program and have it completed today.

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