Monday, August 11, 2008

A deeper look at personal finance

Tonight I am setting aside time to address the questions I brainstormed this afternoon.

1.) Stoping the creation of debt.

In other words, no more credit card purchases. But it goes even deeper than that, like addressing #3 - finding ways to spend less. But in order to avoid stopping the creation of debt, I think the one basic element that needs to happen is to take out the credit card and take out the scissors and just do it.

Yes, I'm that serious, and no, I didn't plan that.

2.) Paying down debt.

Establishing a set minimum amount to pay to the credit card (yes, I only have one) instead of just whatever is left over. Making that a priority instead of an afterthought.

Let me explain why I only have one credit card and yet why I'm so anxious to address this spending issue. I've been in debt a number of times and I always get out of debt by refinancing the mortgage. Then a few months later, I slide back into debt. I don't want to continue that cycle. First of all, I'm essentially paying for it every time I make a mortgage payment for the next 30 years, and secondly - I'll never learn to budget if I just rely on the credit card, then get a quick/easy fix down the road. What will that teach any children I might have? Third, for everything that I don't pay for up front, I'm essentially going to be paying WAY more than sticker price for.

3.) Finding ways to spend less.
I'm really excited about brainstorming ideas for this. I've already implemented quite a few ideas here and there.

I'm making my own laundry detergent and saving an average of 10 cents per load. Actually, it's more dramatic if you understand that I used to pay 14 cents per load and now I pay 4 cents per load!

I've also set up a clothes line using materials I already had. Unfortunately, it's been raining for weeks on end, so I haven't had the opportunity to use it yet! I am, however, hanging things in my basement/laundry area on a folding rack when I have the opportunity to do so.

A tip I found a few weeks back was to fill empty liter bottles with water and put them in your toilet tank. This will essentially allow you to use less water when you flush. I was a little concerned that less water would be less effective and sometimes require two flushes, but so far that hasn't happened. I actually fit two 1-liter bottles in my tank so I'm able to save that much more on each flush.

I've taken the Wardrobe Refashion Pledge which is basically to not purchase any newly manufactured clothing. You can buy new fabric, and shop for clothes at thrift stores, or make your own clothing.

I've taken this a step further and decided not to purchase any new fabric.

In addition, I declared August as Stash Month for me with a $20 budget for things like thread. Essentials. Strictly Essentials. So far I haven't used any of it.

I also took the Buy Nothing Challenge because I found I was spending money on things I really didn't need at thrift stores. Great, it's a thrift store, but please. Let's be sensible about it! Another reason for this is that I have limited space and I'm quickly running out of it!

Other areas I can really improve on are with food.

I've started menu planning. That will help a lot, I think.

Also, sticking to the list and not making impulse buys.

I also started a price book much like Jenn's.

We're also switching to Basic Cable.

I would like to find a lower cost alternative high-speed internet (lower than $60 a month.)

I'd also like to find an inexpensive motorcycle so that I can save on gas on my daily commute.

I've begun watching the way I drive, staying at the speed limit and implementing some hypermiling techniques to help save on gas as well.

I also took the "Buy Handmade" pledge, which is to purchase only handmade gifts this holiday season. Except I intend to actually "do the making" myself!

I've stopped buying paper napkins and paper towels. I cut up two old t-shirts of my hubby's which keep us well stocked in kitchen rags instead of paper towels and I pulled out the cloth napkins that have been stored in the linen drawer for the last 8 years and put them to use. I also stopped buying kleenex which I use quite a bit since I have year-round allergies. I made up a bunch of hankerchiefs and am really happy with them.

I also stopped buying household cleaners and instead use some more cost-effective alternatives like equal parts water and vinegar for glass cleaner.

I need to stop buying coffee in the morning, as well as the breakfast sandwich or donut that goes along with it.

I also need to stop buying lunch out. Even if it is on the dollar menu! This is going to require making lunches and prepping breakfast and coffee the night bfore.

Actually, just eating healthier will save money. I cut out ice cream last month and I KNOW that's resulted in a savings of about $20 per week! Yeah, I bought Ben & Jerry's at $4+/pint EVERY workday. Plus Edy's for the house. That's not as expensive, but it adds up too. That's $80/month of food budget! (As if there was a budget!) Since unhealthy often is also unnecessary, what other unhealthy foods do I eat that I can cut out? Chips, soda,

We're also not eating out. That's such a waste of money! (Except for lunches. Oi.)

I'm trimming my own hair and my hubby's using the razor during the summer.

I'd like to look into making my own skin care products. I have pretty sensitive skin, so it may be a lot of trial and error, but I'd like to try it anyway.

Decorate and rearrange with found objects.

Turn off the TV when it's just background noise.

4.) Identifying things I spend money on that are not essentials.
any crafting materials
specialty coffees
fast food
air conditioning
seltzer water

5.) Identifying times that I am emotionaly-spending. (Like emotional eating.)
This is going to require just becoming more aware and realizing that it's happening before it's too late (before I get to the checkout!)

6.) Brainstorming ideas for combating emotional spending.
I think this happens most often on my lunch breaks. I have a hour long break and work on what I call "Retail Row." It's four miles of retail and fast food. So convenient! Not.
A better use of this time could be journaling the cause of my emotionalism and working on my reading list!

7.) Explore "paying down debt vs. establishing savings."
There's the balance between building up emergency savings and putting everything you can into paying down debt. Where do you find that balance? (I simply don't have the answer here.)

8.) Establish timeline/plan with clear dates for paying down debt and establishing savings.
I'd like to have three months worth of my salary in my emergency savings within two years. Is this realistic? I don't know. Am I going to try it? Heck yeah.

9.) What am I saving for? (Goals to keep me focused and motivated, reminding me what I'm working towards.)
Emergency Savings
Travel Fund (So I can meet my niece or nephew in November!)

10.) Do I have a false sense of security? (Am I using my credit card as a safety net?)
Absolutely. But not anymore.

11.) What is a realistic emergency savings goal? (How much per month?)
I'll start out with what I established above, but monitor it as I go along.

12.) What is a realistic monthly budget? (considering maintenance costs for vehicles, house, etc. that don't come up every month and usually take us by surprise.)
I'm going to have to start using the Quicken product I purchased a year ago to track expense with an eye on maintenance and surprise costs.

13.) Identifying budget busters. When/why do I have expenses that take me by surprise and how can I avoid this element of surprise in the future (and make room in the budget for them.)
food for parties

So to recap:
-I need a good financial planner including taking into account special events.
-I need to stop impulse buys
-I need to find a lower cost alternative to high-speed internet
-I need to save for an older model motorcycle
-I need to continue watching the way I drive
-I need to prep coffee, breakfast and lunch the night before
-I need to find recipes for skin care products
-I need to turn off the Air Conditioner during the day when we're not home
-I need to continue the wardrobe refashion, stash month and buy nothing new challenges after August is over
-I need to be aware of emotional spending and stay away from temptation when I'm prone to do so, such as reading or journaling at lunchtime instead.
-I need to remember that I'm saving for our emergency fund, a motorcycle, and the opportunity to travel down south to meet the newest addition to our family once he or she arrives!!
-I need to consistently update quicken and monitor maintenance costs on both the vehicle and the house.
-I need to remember to anticipate costs such as for parties and family gatherings.

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