Super Easy Pseudo-Budget

I can’t do regular budgets to save my life.  I’m horrible at tracking my spending and end up with mounds and mounds of unreadable receipts that I just throw away after a few months without looking at.  I can’t track cash at ALL partly because they’re usually for tiny amounts and partly because of my insanely horrible memory.  But, I really needed to know what I spent on and I really needed a way to save money for various short-term, middle-term, and long-term goals.

After years of trial-and-error, I have developed a system that works very well for me.

I made a list of all my financial accounts and a list of all my major goals with the shortest-term goal being about a year away.  I opened ING Direct subaccounts for all my savings goals and I reclassified some of my old accounts for an emergency fund and certain major long-term savings goals like a “Home-building fund”.

Next, I set-up an excel spreadsheet with a list of my financial accounts and major bills and charitable donations in the first column.  Then I split up the next columns into each paycheck as well as a column for any extra funds.  Then, at the beginning of each month, I divvy up my expected income for the month as well as any other extra income that I expect.  I also make sure to round down to the nearest whole number so I’ll have a few cents cushion each month.  I split up my money by the major bills and all my savings goals, playing around with the numbers until it satisfies me.  All the money that hasn’t been split up into the various goals and accounts, goes straight into “Fun for my credit card”.

Throughout the month, I have a general notion of how much money I can spend for daily and fun things and every so often, I’ll go check my credit card account online to make sure I’m not going over the limit I set for myself.  I don’t limit myself in any number of categories.  I just spend as I want and as things come up just as long as it’s within the boundaries.

At the end of the month, I take an hour and move all my money from my main bank account to all the other various accounts according to the spreadsheet.  Then, I pay off my credit card in full with the money that I had already set aside for it.  Lastly, I go on Bank of America’s “My portfolio” link and download a list of all the transactions/interest/dividends that occurred over the last month in my various accounts. I take that list and just spend an evening inputting everything into BudgetPulse while watching some TV.

So, now, this is why it works for me:

-I have finally been able to track my income and expenses easily

-I have a great credit score since my credit card is always paid off in full

-I am on track with my saving goals and am rapidly accumulating net worth each month

-I can spend happily without worrying too much about what it is that I’m spending my money on

-I never have to worry about over-draft charges or credit cards being declined or any extra bank or credit card fees because I always know how much money I can spend.

-There is a little bit of start-up time and work needed.  But, after that, it is really quick and easy for me to integrate this routine in my normal super-busy life.

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Do we benefit off the foolishness of other?

I just came upon a sudden realization:

The only reason we can buy low and sell high is that someone else out there is selling low and buying high.

Unless a company is actively putting more shares out there, there is a static number of shares to buy and sell from.  This means that in order to buy, there must be someone selling at the same price and in order to sell, there must be someone willing to buy it at the same price.

So, if we’re doing well in our investments, perhaps it’s because someone else isn’t doing quite as well and when we’re buying and selling at the wrong times based on emotions or bad information, then someone else is relishing their good luck.

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My FBP Account, and how I learned to have splurging as a goal

One of the biggest problems I had with saving was that I wanted lots of things.  I tried telling myself that “things” don’t matter when I have bigger future goals.  But, the problem with that was that to an early-20-something-year-old closet tech geek and wannabe artist is that the future just doesn’t seem quite real when compared to a new wacom tablet or gadgets for my Holga camera or a really cool usb microscope.

However, my relatively low income, my lofty savings goals, and an aversion to carrying a balance on my credit card instead left me with no way to feasibly buy anything just for fun and left me with the uneasy feeling like I was somehow missing out on my youth to focus on a very hazy future.  “What if I die tomorrow? or in 5 years and I really don’t need any of my retirement money!” is a popular refrain in my mind.

And whenever I did break down and splurge on something, the next month I would have to cut back even more savagely on my normal day-to-day spending just to make sure I paid off my credit card balance at the end of the month leaving me feeling even more deprived and upset.

I tried to focus on only free activities and told myself I didn’t really NEED that <insert really cool gadget> and it would just be cluttering up my limited space at home.  I tried not to watch TV or read magazines so I wouldn’t see advertisements.  But I would catch myself looking longingly at my friend’s spiffy mp3 player that they could strap onto their arm as we went to exercise together while I fiddled with my ancient CD player that skipped every time someone breathed too hard on it.  And then I contemplated how many functioning security video cameras they actually had at Circuit City and whether I could get away with filching something.

Obviously, this system was definitely not working.  I needed to be able to save for my goals but also I needed to have some fun once in a while and get to buy myself something just for the sake of its coolness.

So, I opened an ING sub-account three months ago and named it “my FBP account”.  FBP stands for Fun Big Purchase.  Every month I stick a little money in it.  Whenever I save up $300 or so, I plan to withdraw the money and splurge on something Fun and Big (meaning expensive).  While I’m waiting for the balance to reach that number, I like to plan out exactly what I want to purchase and this makes me excited since I know that eventually I will get it and I’ll actually have the money to buy it without cutting back on anything.

In fact, I have 5 different sets of things I want to purchase with that money and I really have a great time trying to prioritize them or trying to find the best prices for them.  And a great benefit of this plan is that since it takes me quite a few months to save up that amount in that account, it lets me really think about exactly what I want as opposed to short-term gadget lust so whatever I’ll end up getting is something that I’ll really treasure and want.

And…just maybe I’ll get that fancy new mp3 player eventually.  But for now, I just listen to the radio.

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How to save money: Stop driving like an idiot

As I drove to work in the morning, I saw a car shaking a little erratically as it suffered behind a car a bit too slow.  It switched into the other lane of a two lane road but again it was stymied by another slow car so impatient, it switched back almost clipping another car in the process.  Over and over again, the car switched  lanes back and forth and in the end, had ended up back where it had originally started.  Now, I’m all for switching lanes once or twice if I’m really stuck behind an incredibly slow vehicle but this was just getting ridiculous.  I wanted to pull that guy over myself and sit him down and tell him to just “Stop!”.  Besides, he could save a lot of money if he just had a little patience.  How?

Save on Gas

All this rapid acceleration and decceleration was just wasting a lot of gas which with it being $4.50 or more per gallon around here was a LOT of money.

Save on Auto Service

I’m not an automobile expert here but I’m sure that all this swerving back and forth has got to be tough on the tires.  Not to mention this guy may have been lucky not to get hit by another car this time but things are unpredictable and I’m sure he’s gotten or will get into a few accidents that could have been wholly preventable.  This means getting his car fixed over and over again when he didn’t have to.

Save on Auto Insurance

Speaking of accidents, even minor accidents when happening multiple times will make an insurance company take pause.  The insurance companies still want to make sure they have a profit in the end and if they’re always paying claims since most of the time, it’s this guy at fault, then they’re definitely going to raise his premiums.

Save on Medical Bills

Ok, if this guy gets in a car accident, he has a likely chance of getting hurt or at the minimum: whiplash.  Also, this guy’s rather impatient and even his car seemed a bit stressed.  Stress, whether it be from daily life or simply the fact that he has to pay more on gas or auto service or auto insurance, is definitely not good for one’s health in the long run (heart disease or high blood pressure to name a few).

This guy could potentially be paying hundreds of dollars more and all he gets in the end is that he arrived at work 5 minutes earlier than he could have.  Is it worth it?  That’s for him to decide.

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Burial Fundraising on the Streets

As I was driving back from work, I saw a middle-aged woman standing on the side of the road holding up a Fed-Ex box with a picture of a little baby girl on it and a sign that said “Burial Funds”.  I realized that she was trying to raise money from cars driving by to bury this little girl.  It was heartbreaking that she had been reduced to asking for money from complete strangers and sadder still that no one paid much attention to her.  Not even me, I’m guilty to say. 

Two things came to mind as I drove onto the freeway onramp after passing her. 

That there are people out there who don’t have the funds to bury little baby girls and that they had no one to turn to.  It speaks of poverty even in the middle of a bustling metropolitan city and the isolation we have from each other. 

That I needed to make sure I had adequate life insurance so that in case of the unlikely case that I die suddenly, that my family can pay for any last expenses for me without taking it out of their own hard-earned money.  It’s the least I can do for my family.  People grieving over loved ones should not have the additional financial burden that comes with a death. 

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A Company’s Efforts and Dave Ramsey

During the monthly staff meeting this week, one of my coworkers had offered to show a Dave Ramsey video because he had taken one of Dave Ramsey’s programs.  In the video, Dave Ramsey goes through all the major components of a benefits package from both the perspective of the employer and employee such as various insurance plans especially health insurance and retirement plans.  He also quickly went over his baby steps and  what a debt snowball was.  I’ve never read or heard anything of Dave Ramsey’s even though his name evokes instant recognition in anyone who follows financial blogs on a daily basis.  He was funny and most importantly, he talks in such a way as to engage the attention of his listeners who were mostly apathetic or unknowledgable about their finances.  His video engaged my coworkers, made them laugh, and made them think about their own situation.

Afterwards, as I walked back to my office, I overheard a small cluster of employees asking each other “how much do you have in your retirement account?” “how much do you put in?”  My coworkers were discussing  how saving just $100 or even $10 a month by cutting back on different things could make a huge difference.

Sure Dave Ramsey had some hyperbole and he automatically assumed 13% return which in light of the recession may not be as realistic.  However, his ability to start conversations among people who usually don’t care about finances is quite an amazing thing.

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I love being an alumni

As soon as I graduated from college, I splurged on a lifetime membership to my college’s alumni association.  It was quite a chunk of change, about $500 of money I didn’t really have, and I remember getting the letter in the mail welcoming to the association and sitting there think, “why the heck did I spend the money on this when I have so much other stuff I’d rather buy?!”

But, now, I’m actually quite happy I spent the money that I did.  The main reason?  I’m saving so much money because of it!

I haven’t had a chance to use most of the discounts, or gone to any alumni events, or any college sports games but the one thing I have used my membership for is 10% off continuing education classes.  I’m currently enrolled in a continuing education certificate program through the college and if I complete the program with the bare minimum requirements, I will have saved a total of $550 which is more than I actually paid for the memberships.

Not to mention that after completing the program, I will have the chance to embark on a career that I love and will get paid to do it!

Maybe I’ll go to a sports game sometimes.  Can’t beat free entertainment.

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I’m driving in my car and that’s that!

Ok.  I’m going to take an unpopular stance here. I refuse to take public transportation to work even though gas prices are soaring.

Here are my reasons:

1. It’s uncomfortable for me. There are some public transportation around my workplace but none really nearby.  The closest metro station is a 20-min FAST walk which would be difficult for me to do since I insist on wearing heels everyday to work.  Yes, I could wear tennis shoes and then switch them out when I got to work but I just don’t want to lug tennis shoes around (they don’t fit in a purse) and show up all sweaty to work.

2. It’s inconvenient for me. I don’t want to wake up earlier than I already wake up (5:30am) just to catch a bus to make it to work on time (and if I miss the bus then I’ll be stuck waiting for the next one).  I often take classes after work but I don’t want to lug books with me and switch multiple buses and walk just to make it to class on time also (and yes, buses do get stuck in traffic to, though the metro doesn’t).  I also like the flexibility of having a car so I can leave work early if I need to or stay at work late if I need to rush on a project. Plus, I like to catch some snoozes in my car during lunchtime (can’t really sleep on my desk without it being a bit awkward)

3.  It’s safer for me. I work in a not-so-nice area in the middle of Los Angeles.  In the winter, it’s often dark when I get in to work and dark again by the time I get out of work.  As a single young woman, that’s just darn creepy walking outside.  With my car, it’s parked in an enclosed parking lot so I can quickly walk to my car and go straight home.

4. It actually saves me money. This is the kicker for me.  I generally pay about $45 a week for gas (yes, it still makes me cry a little when I fill up once a week).  Taking public transportation, I would have to probably take an extra hour or more waiting and taking public transportation everyday.  Even if I value my time at my entry-level salary from when I started my job (thank goodness it’s a bit higher now) which is $14.50/hour, for that extra 5 hours a week I would be doing basically nothing super productive , that’s wasting about $72.50 worth of my time well over the $45/week I pay for gas. Yes, I could be reading a book but I’m the type that tends to get nauseous if I read a book in a moving vehicle.  Plus I’d have to pay bus fare on top of it all.

So, by taking my car instead of public transportation, I save money, save my time, and I save my sanity.

Could I be doing more to save the environment and going green?  There are plenty of other things in my life that are “green”.  Could I commute?  Probably if any of my coworkers lived near me.  We’d end up driving quite a bit out of the way just to pick the other person up.

But, before you come down on me with the green and frugal wrath, in a few years down the road, my boyfriend and I are planning to get married and since we both don’t have the funds for another car at this point in time, we’re probably going to be driving around LA to both our jobs in my old clunker of a car.  Unless I can somehow convince him to take public transportation!

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Invisible Money

It seems to me that money is so invisible now. When I get paid, I see it as a number online. When I pay someone else, it’s a swipe of the credit card and numbers get deducted. Very rarely do I pay with cash. When I fund my online accounts, I click my mouse and tap the keys on my keyboard and the number in one bank account goes down while the number in another bank account goes up. In my investments, my portfolio worth is just numbers fluctuating depending on what price people are buying and selling at.

When I do pay in cash, it disappears from my wallet into a cash register into a bank account where the paper is converted to 1s and 0s in some computer somewhere. It’s almost as if my cash disappears and sometimes I wonder where it goes and if it’s ever going to appear again, holding my breath like an audience of one watching a magic trick that hasn’t quite finished yet.

Wouldn’t it be strange if we just woke up one day and found that all the money had disappeared and instead all we had were numbers. I pay you a certain number and you sell me something for a certain number and my value is a certain number but there was absolutely no physical object to back it up with. Then, if all the data got erased (a la Fight Club), what would we really be worth? Would we all start back to zero? Would everything be a blank slate again?

Yes, I know that’s a bit dramatic but it’s the what-ifs rather than reality itself that can really show what the underpinnings of reality is really made of.

[edit: this article was included in the Carnival of Personal Finance 3rd Anniversary edition!  To check out more good reading, go here.]

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Investing Experiment

I’ve always had a fascination with riskier investments. Up ’til now I’ve kept most of my money in index funds of various sorts but I’d like to get investing in stocks on a more frequent basis just for fun. So, I’m developing an investment strategy that I’ll let you guys in on as soon as it’s settled and I’ll keep you guys updated periodically of my progress. Then, we’ll see what happens!

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