budgeting · Managing Money · money challenge

August Money Challenge

Oops, I did it again. I spent waaaay too much money on groceries last month ($291.11 to be exact) and my food hoarding stash is getting out of control again. I decided it’s time for another pantry challenge.

You may recall my April Pantry Challenge that I tried out earlier this year. I didn’t exactly pass the challenge, but I didn’t do too badly either. With a few little tweaks and some newfound motivation, I’m sure I can achieve my goal this month. This time around, I will not be including cat-related items or wine in my budget. Hey, I don’t need to starve myself for my cats’ sake. As for the wine, we’ll make that another challenge for another month, but summertime is not the time nor the place to skimp on a nice, cold pinot grigio.

My goal this month is to spend only $50 on groceries. I have plenty of the staples in my pantry, a plethora of frozen fish and shrimp in my freezer, plus my herb garden has been growing like crazy this year. Realistically, I should only need to spend on produce and protein.

We’re currently 4 days into August, and I did go grocery shopping today. I spent $16.91, which leaves me with $33.09 for the rest of the month. Let’s just hope the ice cream and fish taco stuff I bought today lasts me a while!

budgeting · Clarity Money Articles · Managing Money

4 Budgets You Can Actually Use

This article first appeared on May 26, 2017 on the Clarity Money Blog

 

Let’s take a minute to talk about the “B” word. No, not that B-word. I’m talking of course about a “budget.”

For most people, living on a budget is synonymous with sitting at home alone on a Friday night and eating Top Ramen—while your friends hit up the hot new sushi spot in town.

In actuality, a budget is a sound financial tool to carry you from where you are to where you want to be.

When you’re in control of a budget, you’re telling your money where to go, instead of wondering where the heck it all went.

But before you attempt to go it alone, here are four different types of budgets you can try on for size before sticking to one. Here are the four budgeting methods to try:

Zero-Based Budget

In a zero-based budget, the goal is to take the money you earn during a specific time period, say a month, and then subtract your expenses until you end up at zero.

Start by subtracting all of your fixed monthly expenses such as your rent or mortgage, car insurance, Internet service, minimum payments on credit cards, and any other fixed payment monthly bills.

Then, subtract all of your variable expenses that change each month, such as your phone bill, groceries, and gas.

Anything left over should go toward debt repayment or savings.

Cash Envelope Budget

cash envelope budget describes the physical management of allocating cash spendings across labeled envelopes. For this type of budgeting system, you would only use your debit card or automatic withdrawal for fixed monthly expenses, such as your rent or mortgage, utilities, or your car payment.

For everything else, create separate envelopes for expenses such as groceries, gas, and eating out, and place your monthly budget for each in the corresponding envelopes (in cash, of course).

If you exceed your budget in one category, you’re out of luck,  or you’ll have to take the money out of another envelope’s budget for that month. Any cash left across your envelopes at the end of the month means you’ll have a little extra to really treat yourself the next month, pay toward debt, or give your savings a boost.

While this method may require more manual, hands-on involvement, the tangible act of spending only what you physically have may help prevent you from going overboard with buying on plastic.

50-30-20 Budget

The 50-30-20 budgeting system is as straightforward as it sounds. For this method, you would allocate 50% of your earned income on needs, 30% on wants, and 20% on savings or repaying debt.

This method is fairly cut-and-dry, but can give you a baseline for prioritizing actual needs versus wants, while also helping to boost savings.

A tip on establishing needs versus wants: Imagine you need a pair of sensible nude pumps. You may want the designer label, but you exert control by acknowledging the difference between what you need versus want, and you end up buying a great quality shoe from a more affordable designer.

If you find it difficult to categorize between needs versus wants, the 50-30-20 budget can be especially helpful to remove the emotions associated with choosing.

Once you’ve identified your wants, challenge yourself to spend half of what you would normally spend, or if you’re feeling super motivated, spend even less. Nailing this strategy can not only boost your savings or your debt repayment potential, but also provide a practical approach to budgeting.

The Savings Snowball Method

Personal finance expert Dave Ramsey coined the debt snowball method as a debt payoff strategy, where you would pay the minimum due on all of your debts while throwing anything extra at the debt with the lowest balance until paid off. Then, move on to  the next lowest debt balance, pay it off, and repeat.

You can use this same theory for budgeting. Create your list of monthly fixed and variable expenses, paying those first, then throw anything left over toward a savings goal, for say, an emergency fund of three months of your monthly rent or mortgage.

Once you’ve met this savings goal, move toward a second aspirational goal, such as a dream vacation for the family, or a down payment toward a new home. The savings snowball is highly effective reverse method on the debt snowball, and an excellent way to gain momentum as you see your savings increase.

Tips to Get Started

Before you attempt to establish a budget, get a sense of your current spending habits.

Budgeting apps are much easier than tracking everything in a spreadsheet. You can link all of your accounts and track your spending in real time.

Following a good budget practice doesn’t have to be frustrating, nor should you have to suffer and neglect yourself from having any fun. Rather, it’s a learning opportunity to prioritize areas of your life so that you have more resources to experience or have the things you love most. If you resolve to give it a shot and stick with it, you won’t look back in regret. And who knows, you may even have a little fun in your newfound financial empowerment.

 

This article first appeared on May 26, 2017 on the Clarity Money Blog

Managing Money

Giving Your Graduation Advice an F

As I recently drove myself to a high school graduation party, I came to a startling realization. I’ve now been out of school just as long as I was in school. It’s pretty miraculous how quick the time has flown by, especially considering how the years in a classroom felt like they dragged on for several lifetimes.

I can still remember what an exciting time high school graduation was. A whirlwind of emotions, hopes, fears, and plenty of unsolicited advice from those who had tossed their caps in jubilation before me. Most people were, of course, trying to be helpful and prepare me for my impeding adulthood, and some of the advice was actually pretty sound. Some tidbits, however, were probably best left unsaid. Especially when it came to some of the financial advice I received.

Student Loans are Good Debt

This is an utter and complete fallacy, in my humble, broke-ass opinion. Don’t get me wrong, having an education is undoubtedly one of the greatest gifts you can give yourself. But you’re kidding yourself if you think dragging around five or six figures of debt for the next ten to thirty years is a good problem to have.

I was fortunate enough to pay for my time at a community college out of pocket (but unlucky enough for it to be funded by a drunk driver that almost took my life). I took out student loans to pay for my remaining two years of college, but didn’t really understand them or how they would continue to impact my daily life several years later. Despite paying hundreds of dollars toward them each month for the past three years, I now owe more on them than when I started paying!

Repeat after me… no debt is good debt!!!

Always Carry a Balance on Your Credit Card

Remember a second ago when I made you repeat that mantra? Let’s say it again… No debt is good debt! Carrying a balance on your credit card is debt, plain and simple. Carrying a balance on your credit card is not better for your credit score. Paying your credit cards on time each month (and in full, so you don’t end up paying any interest) is better for your credit score.

There are several components to a credit score. I won’t go over all of them today, but for the sake of my argument there’s two that you need to understand.

35% of your credit score is based upon payment history. In other words, making all of your payments on time on all of your credit accounts (such as credit cards, car payments, and mortgage payments).

30% of your credit score is based on your credit utilization. In other words, out of all available lines of credit you have, how much are you using? For example, let’s say you have two credit cards: one with an available credit limit of $4,000 and the other with an available credit limit of $6,000, for a total of $10,000 available to you. Card A carries a balance of $2,000 while card B carries a balance of $1,000. Because you currently have $3,000 out of $10,000 borrowed, your credit utilization is 30%. 30% and below is considered good, although the lower your credit utilization, the higher your credit score.

If You Can Afford the Payments, You Can Afford It

This commonly-gifted bad advice is a great way to get yourself under the dark, burdensome cloud of debt. Sure you make enough money now to pay your monthly payments, but what if you lost or job or suddenly found yourself unable to work? It’s better to save the money and buy whatever it is you want (a car, TV, Christian Louboutin pumps) outright. You won’t have to worry about defaulting on a loan if you find yourself lacking in the income department. Plus you’ll have extra money every month to put toward saving for a rainy day or other items you like.

You’re Young. You Don’t Need Insurance.

Anything can happen to anyone at any time. I mentioned earlier that I was hit by a drunk driver in a head-on collision, which is how I had the money to pay for my first two years of college. What I didn’t mention is that I was only nineteen years old and suddenly found myself unable to work, with medical bills stacking up for eleven months.

Thankfully I worked for a coffee company with excellent benefits, including short-term disability. For the duration of my medical leave, I was paid 66% of my income, which was enough to pay for my car insurance, car payment, and phone bill. Luckily I lived with my parents and didn’t have to worry about keeping a roof over my head at the time. I now have both short-term and long-term disability policies through an insurance company instead of my employer so that I don’t have to worry about lapses in coverage if I switch jobs or work for a company that doesn’t offer plans.

 

As you walk across that stage and head straight toward your adult life, keep in mind that with your newfound freedom comes plenty of advice on what to do with your new life (and with that huge wad of cash to be found in your cards of congratulations). Just remember that while your relatives and friends mean well, not all advice is good advice.

 

Managing Money

Mayday Mayday: My Spending Habits Need Saving

Ahh, the first of May. A day to celebrate the impending arrival of spring. A day filled with top ramen haired memes of Justin Timberlake. A day of chaos and anarchy in most large U.S. cites. And for me, a day to reflect on my spending habits during the month of April.

I use an app called Personal Capital to track my spending, and I have a love-hate relationship with it. I love it because it serves a great purpose in showing me how much money I spent in various categories. And I hate it because it shows me how much money I spent in various categories.

I mentioned earlier in the month that I was participating in a Pantry Challenge and was planning on limiting myself to $100 for groceries this month. Drumroll please…. I went $127.51 OVER budget, for a grand total of $227.51. If I break it down, I actually only went about $35 over budget. I spent about $40 in cat food and kitty litter, which I now realize should be in its own separate category. I also spent $53 on liquor and mixers to bring to a party, which I could put into the entertainment category. But regardless of what lame excuse I try to come up with, I still failed at this challenge. I also spent $113 on eating out this month, which I consider to be a high number for me.

Overall, I did have around $400 in unexpected medical and car expenses for the month, which did make my spending higher than anticipated. Even so, I still spent $367 less in April than I did in March! Definitely not something to sneeze at, if I do say so myself.

Based on all of the numbers, I’m going to give myself two challenges for the month of May:

  1. Only spend $75 on restaurants (I’m going out of town for two days, so I’m making that a little higher than I normally would).
  2. $125 grocery budget for the month

If you have any savings challenges for the month of May, I’d love to hear about them, so let me know! Happy saving!

Managing Money · money challenge

April Money Challenge: Pantry Challenge

I’ve got a bad habit. Well, to be real I have several. But for the purpose of this story, we’ll just go with the one. I have a bad habit of going grocery shopping, buying stuff on sale that I would likely only eat during a national crisis when grocery shopping isn’t an option, then hoarding it all in my pantry and freezer. My freezer is filled with tilapia and frozen vegetables that probably haven’t seen the light of day in at least 4 years. And who even knows what strange nonperishables I have stacked up in my pantry. Probably the worst thing about this strange, awful habit of mine is that I will open the doors to the freezer, spin the lazy susan in the cupboards around, then decide I have no food in my house and go buy more groceries.

I’m always looking for ways to cut corners when it comes to my monthly budget. So when I looked through my spending for last month and saw that I spent a whopping $358.36 on groceries (keep in mind, I’m ONE PERSON), I decided to challenge myself to spend less this month.

I recently listened to a podcast that had to do with money challenges, and one person shared their experience with a pantry challenge. First of all, what a breath of fresh air to find out I’m not the only food hoarder out there. Second, I realized a pantry challenge was just what I needed this month.

The woman on the podcast had a goal to not spend anything on groceries, but that just didn’t sound feasible to me. I recently joined Weight Watchers, so produce is pretty essential to me right now. Plus, I don’t think my two cats would appreciate eating nothing but stale spaghetti noodles and 8 cans of garbanzo beans for the next month. I modified the rules to fit my lifestyle, and I decided that I can only spend $100 on groceries this month. Plus, I’m challenging myself to create recipes that are still reflective of my Weight Watchers goals.

We’re now a third of the way through the month of April, and I’ve only spent a third of my budget ($29.58 to be exact)! I’m not the greatest cook, but just yesterday I meal prepped for the week and made cilantro lime chicken with cilantro lime rice and beans (I only spent $1.50 for the cilantro and lime!) and Thai peanut butter chicken with rice, and I have to admit that I gave myself a nice pat on the back after. The Mexican stuffed shells I made last week weren’t the greatest, but at least they were edible. Oh, and just in case you were curious, I’m still holding up the Weight Watchers end of the bargain and lost 2 pounds in the last 2 weeks!

Managing Money

4 Common Money Mistakes Made By Women

Let’s face it, we all make mistakes. Overly plucked eyebrows. Cringe-worthy haircuts from years past. Blurry, tequila-fueled hook ups with men that haven’t quite figured out they’re gay yet. There’s always something we, as women, can look back on with regret. Thankfully, the pain of these awkward memories usually fade, just as sperm-shaped eyebrows always grow back. But sometimes women make terrible mistakes that stick around for decades (just like that shamrock-shaped tattoo you got in a tent outside of a bar on St. Patrick’s Day — yes, that really did happen). Money mistakes can take many shapes (fortunately, most aren’t in the shape of a lucky plant). Here are 4 of the most common mistakes I see women make with their money.

Trying to keep up with Ms. Jones

Your favorite celeb posts an Instagram picture wearing her new waist trainer, so now you have to have one too. You can’t make your car payment this month, but you definitely can’t miss your bestie’s bachelorette weekend in Vegas either. You can’t be caught dead in a car that doesn’t have heated seats and built-in GPS. Whether or not we like to admit it, women care about how other people perceive them. We want to be the prettiest, the smartest, the most talented, or the wealthiest, just so we can impress other people that probably don’t even care about those things to begin with. Unfortunately, this usually comes with a price tag (both literally and figuratively). We buy things to make us appear more like the person we want to be. It’s fine to buy things that make us feel good about ourselves, take ourselves on a relaxing vacation, or even reward ourselves for a job well done. It’s not OK, though, to buy ridiculously expensive designer sunglasses then not have enough left over to pay the rent or buy your baby’s formula. It’s all about balance. Make sure you pay for the essentials first (including putting something into savings), then by all means spring for those hot new shoes if you have extra cash leftover.

Assuming he’ll take care of you forever

“My husband has a retirement account, plus a pension from the military, so I don’t need to save for retirement.” But what happens if you get divorced? “That will NEVER happen.” What if he dies young? “He’s perfectly healthy.”

This was a conversation that I had several times with a friend, and it absolutely kills me to think about all of the what ifs. No one ever plans to get divorced or expects their seemingly healthy husband to pass before you’re both old and gray, but guess what? It happens! It happens ALL THE FREAKING TIME! My dad was 71 when he passed away, which is still relatively young. My 63 year old mom suddenly found herself solely responsible for the mortgage and day-to-day expenses, despite my dad’s pension and social security income being slashed in half upon his death. Thankfully, my parents were always very smart with their money. Plus they had ample time to get the finances in order prior to his death. Unfortunately, I’ve seen too many widows lose their homes, have to live with their children, or just simply not even know how much money they have or where to access it.

Long story short, never rely solely on your significant other to manage your finances and your financial future.

Rushing into things

Along those same lines, I’ve seen women totally screwed when they moved too fast in a relationship. One friend purchased a home with her fiancé, only to divorce him less than a year after marrying him. She kicked him out, he didn’t have a job, so he quit paying his portion of the mortgage. I don’t know the specifics on how much of a struggle it was for her, but I know she moved in a few roommates and a new boyfriend soon after, which I assume helped her make the payments.

Similarly, I have a cousin that signed an apartment lease with a guy she’d only been dating a few weeks. Sure enough, her crazy started showing through and he bailed. She tried to sue him for his portion of the rent that he’d promised to pay when they signed the lease. That failed miserably when she saw him across the courtroom and fell for him all over again. Oddly enough, he bailed once again, just as soon as she dropped the lawsuit. Go figure.

Not asking for more money

It’s no secret that men make more money than women. Just last week people were posting all over Instagram in support of Equal Pay Day, which highlights the wage gap between men and women in the United States. Part of this is a broken system. But part of it is that most women are afraid to negotiate their pay. I have hired a few employees in my day, all of them women, and not a single one has ever tried negotiating with me for higher pay. I’ve also spoken to several friends who tell me they’ve never tried negotiating their pay either upon hire or after a performance review, out of fear of rejection or fear of coming across as greedy. I don’t know how greedy I’ve come across, but in all of my negotiations, I’ve never had anyone flat out refuse. Maybe they didn’t give me as much as I’ve asked for, but they’ve always increased the offered amount. In my opinion, it’s better to ask and be turned down than to risk not asking and losing out. If you don’t ask, you won’t receive.