Part Four – The EX Factor

This is Part Four of my five-part, eight-week series on The Beginner’s Guide To Budgeting

Now that you’ve had a week to set up your envelopes we need to look at those, ahem,  other categories that we’ve been gleefully ignoring. You know those FLUFF (fun life expenses under false finances), misc and other ones expenses that you bury your head in the sand about.

PREPARING FOR CONTINGENCIES:

I call these EXpected and UnEXpected EXpense EXceptions ( EUEE’s, or better yet I like to call the EX’ Factor). You kind’a feel the same way about these as you do your EX. You hate it when you accidentally bump into them on a day you haven’t showered yet, decided to run to the store in your pajamas to pick up ice cream and brownies because you are spending the entire day watching a Meg Ryan movie marathon and you want to drown your sorrows about the 15 lbs you just gained….oh, geez, sorry! Yes, you hate it when those expected and unexpected expense exceptions just happen to come around.  Apparently I have issues.

This is also known as the less traumatic anticipatory budgeting (AB), or that well known “rainy day” fund. It’s putting money aside in anticipation and/or planning for those expenses you know (or don’t know) you will have every month/year that hit just like clockwork and no matter how far you put your head into the sand. We all have those little life emergencies that we know are in the foreseeable future (property taxes or Christmas presents) or take us completely unaware (car needs new suspension). Wether we like them or not they will happen. But we can set up budgets for those so they won’t hit us so hard and we can pay cash for it (or most all of it). You may already have some categories for those from Part One especially if you tracked your expenses in the month of December and that is when you buy all of your Christmas presents. Might be a hard number to swallow for some.

For those yearly expenses, either expected or not, if you have a ballpark of what you might need for them you can take that amount and divide by 26 (or however many times you get paid a year) and that is your budget for that expense.

Let’s use Christmas as an example:

Screen Shot 2016-01-08 at 3.19.20 PM

Say you spent a total of $1,735.00 on Christmas this year. And probably the majority of that had to go on a credit card(!). If you create a Christmas envelope based on what you spent last year….Next Christmas will be paid for in cash!

SO LET’S DO IT: $1,735.00 / 26 = $66.73 ROUNDED UP IS $70

$70 per paycheck for an entire year and you will have $1,820 to spend Next Christmas without batting an eye.

This method can work for any EXpected or unEXpected EXpense in your life. The only catch – you have to have enough money in your pay period after paying your FMB (fixed monthly bills), FME (fixed monthly expenses) and funding the other envelopes. Let’s use the example below:

Sample Jan Budget Image

If this is a new envelope for Christmas, as you see, you will need to find somewhere to come up with the extra $70 a paycheck.

  • Maybe you trim back your out to eat for work and start taking leftovers more often. There is $40 right there.
  • Maybe you get your haircut every 10 weeks (easier for us longer haired girls) and you can trim your haircut envelope down another $15.
  • Maybe you pick up the dog sitting job your Mother’s neighbor has been asking you about.

With a little maneuvering and creativity you are on your way to a very Merry Christmas next year without the stress of bills to pay afterwards.

If you have items that really only fall under FLUFF and you just don’t have any wiggle room in your budget (it’s a real budget now!!) and it’s hard to justify, you’re going to have to make some cuts. On the other hand if you have your debt paid off and your savings is built up then by all means, FLUFF away!

The advantages for creating budgets for the EX-Factor are many:

  1. The money builds up in your account/envelope giving you a HUGE amount of comfort.
  2. You don’t have to rob Peter to pay Paul or use a credit card to supplement the expense every time.
  3. Virtually no risk of over drafting your checking account.

The disadvantages? Hmmm, not seeing any, are you?

Envelope budgeting can also be fun. With a little planning, a new expense can be paid for in cash – and let me tell you, that feels good! (i.e. why we have a Braces envelope) or saving up for something special like a vacation!

SO TAKE THOSE CREDIT CARDS AND FREEZE THEM IN A BLOCK OF ICE IF YOU HAVE TO, BUT DO NOT USE THEM AND DO NOT SPEND ANY MORE MONEY OUTSIDE OF YOUR BUDGETS.

In the next and last part,  Part Four, I will talk about paying off your debt and how to build a savings.

Monthly Roundup Memory Sheets 2016

MonthlyRoundupMemoryQuote

It’s that time of year again that I start a new set of Monthly Roundup Sheets. Looking back through them I am so glad I started writing those little things down. I have dozens and dozens of pictures but it is the story that goes with them that I hope to never forget. Jotting it down helps me keep track of those events and memories that seem to slip through our fingers so fast these days. Now I just need to find the time to get them into an album!

Click image below for your very own 2016 set of Monthly Roundup sheets.

Monthly Roundup Memory Keeping Sheets 2016

Slow Cooker Caramelized Onions

Because I like to grocery shop at warehouse stores to find the best deal on fresh foods I often end up having way too many onions left when I really only needed a few.

onions

One way to use them up before they start sprouting (oops!) is to slice them up and pop ’em in the crockpot overnight and you will have a wonderful crock full of caramelized goodness the next morning.

Onions5

Start by slicing up about 6-8 onions.

Onions2

place 4 tsp butter in bottom of crockpot and load in the onions. You can also add a few more pats of butter on top…I won’t tell anyone.

Onions3

Cover and cook on low for 8 hours. If you want thicker (jammier) onions, crack the lid a tiny bit. This will allow some of the steam to release. Otherwise leave it on tight.

After about an hour the house already started smelling good.

Onions4

Of course the smell gets stronger throughout the night and if you are a worry-wart like myself you will wake up in a panic, smell the onions and immediately think they are burning. But never fear. They are just fine for the entire 8 hours.

Onions6

You can portion up and freeze for use in other dishes and leave some in the fridge. They are perfect to have around to throw in to your soups, stews or maybe even blend up with some Dijon mustard for a heavenly spread.

Part Three – Tell Your Money Where to Go

This is Part Three of my five-part, eight-week series on The Beginner’s Guide To Budgeting

Phew! Are you tired looking at all these numbers yet? Well, I hope not, but I do hope it’s at least making you REALLY aware of where your money is going. I bet you’ve never played with your money like this before?

Now that you’ve got the Big Picture of where all your money is going, it’s time to start budgeting, a.k.a. telling your money where to go. To me that is the essence of budgeting. Tell your money where to go or it’s going to tell you.

BudgetingQuote

With all those categories you’ve broken down into more specific ones these are forever now considered your “budgets”. There’s a grocery budget, an out to eat budget, housing budget, etc. The amounts don’t always stay the same. As life goes, so goes our budgets. Family size grows, kids move away, our incomes rise and fall. You will have new life events that come and go that create a need for a new category/budget over time.

In Part Three we are going to focus on all of our categories except the Fun Life purchases Under False Finances (FLUFF), Misc.,  and other-wise unmentionable categories that you really don’t want to think about right now (i.e. little Fido’s monthly spa treatment). Let’s look at our basic Fixed Monthly Expenses (FME): Groceries, out to eat, toiletries, entertainment, personal grooming and the like. We’ll look at the other ones in Step Four.

CREATING ENVELOPES:

Take a look at all your categories you’ve written down (or put on a spreadsheet). Within each of these ‘budgets’ you now need to decide if they will come out of your checking account or if you will be paying for items by cash. I will tell you from experience it is a whole lot easier to keep track of your budgets if you pay for things with cash. Because trying to reserve $40 in checking for coffee every pay period (and doing the subtraction in your head after purchase) can get messy.

This is where envelopes come into play for our family. We have turned each of those categories or mini budgets into an envelope, except for our monthly bills (mortgage, utilities, student loan, etc. – those are paid  by check or electronically) we use cash for everything else.

How you choose to manage these budgets is up to you. But the one item that we don’t pay cash for is gas. I don’t want to have to run into the store (leave my kids in the car) and pre-pay for my gas at the pump so we leave that “budgeted” amount in our checking and that is used for gas. We know that we spend approximately $40/week on gas so after each payday there is an extra $80 in checking to cover that.

1. Take out a box of envelopes (or buy one – it’s a good investment), tuck the flap inside and on the outside write the category.

One envelope for every category. See, nothing fancy. You can get cuter with your envelopes but for now let’s just focus on your money.

2. Write down the amount that will come out of each paycheck under the name.

This will be what you spent last month (or less!) and becomes your budgeted amount for that category for a time period (between paychecks).

Grocery Envelope

Figuring out the envelope amounts:

All those categories you’ve been tallying and adding up become your monthly, weekly or bi-weekly budgets (depending on when you get paid). Those categories hold the dollar amount that you spent on that category for a period of time.

Say you have calculated that you spent $950 last month on groceries and you know that is way more than you should be spending because your spending was well over what you earned. You need to trim that down but you’re not sure by how much or what is even an average amount. It all depends on how much you need to feed your family. There are some guidelines of what you should spend out there but we have budgeted $150/week to feed our family of 5. Some weeks we go over. But in comparison to those guidelines that is well below the thrifty weekly plan for a family of 5.

You can start with that to give you a ballpark of where you should be in food spending. The beauty of this is it can always be adjusted next paycheck if necessary. Again this is always a work in progress. Budgeting is not a destination it’s a journey. But set an amount and see if you can stick to it for a pay period.

So back to our grocery envelope, if you determine that you will need $200/week for your family grocery budget and you get paid once every two weeks you would write down $400 on the envelope. Come next payday you will take out that amount of cash and put it in this envelope.

Take this envelope with you, or take a certain amount out, every time you grocery shop and when the money is gone, it’s gone. No borrowing from other envelopes. This really makes you think twice about impulse items and is a great motivator to create meal plans and figure out other ways to stretch your grocery budget.

In the name of full transparency, here is our current envelopes:

Our Monthly Envelopes

You can see I have them split into Household and Food. These are our fixed monthly expenses (FME). This is off to the side of a spreadsheet I use to track all our fixed monthly bills (FMB) every month that come out of our checking so I know I have enough left to cover the total envelope amount. There is two columns because each one is a payday in the month of January.

The grayed out rows are ones that we aren’t allocating any cash to currently. This changes depending on the circumstances.

You will do this for every category that you spent money on during Part One, that will not be coming out of your checking for bills.

If any of those budgets are pushing you over your actual income then that is when you have to start getting creative. You will need to find ways in each budget to trim out the fat, or FLUFF items if they are in your basic FME categories. or move them to their own category to deal with in Part Four. Maybe brown bag your lunch 3 days a week or start doing your own nails.

Especially if your monthly income is LESS than the total amount of expenses you will need to decide what you want to cut from each category until those numbers match – your income is at least MORE than your total expenses. Or figure out ways to make more money.

3. Take the cash out of the bank on payday and put it into the designated envelopes

This is you telling your money where to go! You go, you.

Envelopes

(you can see these are well loved)

You will get to know your bank teller and will eventually get over the weirdness of taking large sums of money out every other week.

So do not spend any more money outside of your budgets and take those credit cards and freeze them in a block of ice if you have to, but DO NOT USE THEM 

Come back next week for Part Four – The EX Factor. We’ll talk about those “fluffy” little life expected and unexpected things that seem to pop up constantly.

Part Two – The Big Picture

This is Part Two – of my five-part, eight-week series The Beginner’s Guide To Budgeting.

Now that you have all those entries, receipts and statements that contain your entire expenses for one full month, what exactly do you do with them?

1. List out the categories you think you spend your money on along the top of a sheet of paper

First we are going to list out all the categories to give us a bigger picture. What categories, or labels did you spend your money on? This exercise is to get them onto paper if you didn’t already and if you have them on paper already it will help categorize even further.

What are some of the basic major categories that you spend your money on? Housing, utilities, food, car maintenance, toiletries, personal (grooming, clothes)…etc. Those are some of the basics that you can start with. As you come across purchases/expenses you don’t have accounted for add a new category for those as you go (and if you used my Monthly Bills & Expenses Worksheet from Part One you are already ahead of the game).

2. Enter your dollar amounts under the applicable column

3. If you can open a spreadsheet and let that do the work for you (I ♥ spreadsheets)

Here’s an abridged version of what it might look like:

Screen Shot 2015-01-09 at 2.29.33 PM

4. Don’t forget to make a Misc. column for those items that are hard to categorize (Like little Johnny’s piano lessons or your furry kid’s monthly spa treatment) we’ll figure those out later. We want every amount under a category

Once you’ve placed all your expenses under a categories take a moment and pat yourself on the back. You completed the second step in becoming more aware of your money. Now take a look at the columns. See any common themes? Is one column a little longer (heavier) than another? Is there a lot of items in your Misc column that you didn’t know exactly where to put? Do you see 45 <insert coffee shop name here> entries under your Food category or do you have a Caffeine category all it’s own? You are starting to see how you get a bigger picture overall on where your money is going.

5. Add up the totals for each category and then add up the total of the totals

Now comes the scary part, let’s add up the total of each of your categories and then the total for all the categories for the whole month. That amount, while it might be hard to swallow, is a real tell-tale sign of whether or not you are living within your means.

So from the example above:

Total Monthly Expenses

This is your total month’s worth of expenses. Pretty scary, huh? Probably a lot more than you think you would spend in one month and there are probably some exceptions in that total – car registration was due this month, Christmas snuck up on you or you suddenly needed brakes for the  car and if you weren’t prepared it probably went on a credit card. If you have any of these “life happens” amounts I would move them to their own category for now (don’t include it in your total) and in Part Three I’ll show you how to plan for those Expected and Unexpected Expense Exceptions (EUEE, or better yet, what I like to call the ‘Ex’ factor).

Screen Shot 2015-02-28 at 3.41.00 PM

6. Compare that total to your monthly income

Next to that total amount write down your monthly income (usually two paychecks if paid every other week). Now is your income total greater than your total expenses or vise versa?

If your income is larger than your expenses there is hope. If your expenses are larger than your income we can get you help.

And by help, I mean more spreadsheets 🙂 because I ♥ spreadsheets, remember.

This will allow you to find out where this money miscommunication is coming from and determine exactly how to correct it!

7. Break it down

So let’s take it a step further and categorize, or shall we say, fine tune the categories a little more.

For example break down:

  • the Food category into Groceries, Out To Eat Evening, Out To Eat Lunches, Coffee, Work Treats, School Lunches.
  • Auto could be broken down into Car Payment, Car Maintenance, Gas…you get the point.

So your homework this next week is to take each of the basic categories that you started with and break them down even further. I have provided the printable spreadsheets below, of course, to help you do just that. Or use your own spreadsheets on your computer. Whatever route you choose this will allow you to differentiate between your financial ‘wants’ and ‘needs’ and help you determine how bad you really want something.

You will have your ‘needs‘ – those Fixed Monthly Bills (FMB) that are due every month and your Fixed Monthly Expenses (FME) those things you need to purchase every month, you know, like food to eat and Kleenex to blow your nose with, that stuff. And then you will have your ‘wants‘ the things that I like to call FLUFF or better know as: Fun Life purchases Under False Finances – those impulse items, those things you don’t-really-need-because-you-really-can’t-afford-butreally-REALLY-want-so-it’s-going-on-the-credit-card, yeah, those things. they are FLUFF. And now you will also have the ‘Ex Factor’ items for those unexpected life events that seem to pop up randomly out of the blue or on schedule every year.

BGB Worksheet PackSo see you in a week, happy spreadsheet-ing!