Budgeting

OK, I meant it when I said I'd teach you how to budget. It's not hard, but you do need a few tools, and about an hour. Definitely set up the timer, so that you'll know when you can quit. And really, this is a simple one - no huge spreadsheets. 

To start: 

1. Get a blank notebook, with pages of a reasonable size. I like pages that are at least 5 x 8.

2. Grab your checkbook. What you really need are the registers, so that you can go back about 6 months and get a sense of what you spend. 

3. Pens & pencils. 

Step one: Know what your basic "nut" is. That is, how much you must spend on your basic bills. In your notebook, set up three columns. In the first, make a list of the various fixed (or relatively fixed) categories.:

Rent

Land line

Cable TV

Internet

Cell phone 1

Cell phone 2

Electric bill 

Car/home insurance payments

Health insurance

Credit cards (list each one separately)

Most of these amounts tend to be the same every month, except credit cards. Check back over the last six months, and enter the average in the second column. THose are your estimated payments for each month. 

The rest of the list consists of more discretionary items - they may be necessities, but the spending fluctuates more. Here are some of those items:

Daily money (use your monthly cash withdrawals to get a sense of this amount)

Groceries

Dinners out

Medications and vitamins

Miscellaneous

If you're not sure how much you spend on groceries, use your cash card to buy groceries for one month, and add up the expenditures. Same for eating out, and little miscellaneous purchases, like stuff from the drug store. Also, if you're not sure how much cash you spend on this n that, add up how much cash you take out from your account, and use that as a figure. 

In the third column, you'll be entering the actual expenses for each month, as you pay your bills and at the end, when you add up your discretionary expenses.

Draw a line under the three columns. Below that line, make several small columns. At the top of each, write in the name of a discretionary category. I use the five above, but you might want to add a few more, such as vanity or movies. Each time I spend or withdraw money in one of those categories, whether cash or debit card, I enter it in one of those columns, so that I know how much is flowing through those categories from month to month when I add them up.

The idea, really, is to know how much your necessities cost, and how much you tend to spend when you're not conscious of it. I don't recommend recording every single penny spent in a little notebook, as that can get tedious. But be aware that it's really easy to fritter away pocket cash, and not even notice you're doing so. Little things, like candy bars, coffee at Starbucks, newspapers and magazines, can really add up.

My general rule of thumb is that $10 a day of pocket money should hold one. Some days you'll spend less, and some days, more. This money should really be just for little things, like lunch (when you don't take it with you), the occasional bottle of water or snack, or silly magazine to read on the way home from work. If you're spending more than $10 a day on fritter stuff, do what you can to reduce your day to day spending. My way is to take out only what I need for a week. No more.  It's gotta last, Monday to Monday. Monday's also a good day to take out the money, as you don't have the temptation of a wallet full of money on a Friday.

A few other tips:

1. If you haven't checked the latest plan for your land line in more than a year, call your phone company and see if you can lower your bill. Land line companies are always looking for ways to keep their customers, and so have been lowering the cost of their services like crazy. I did this a year ago, and wound up cutting my phone bill by more than half. 

2. The more capability cell phones have, the more they can cost, unless you have the right plan and the right add-ons. If your cell bill is fluctuating a lot, call your cell phone company and complain! They probably have an add-on that will reduce your cell bill back to manageable levels. 

3. Know your per-meal limit on eating-out spending, and stick to it. Don't think "Oh, it's OK if I go over this time." It's human nature to forget, and you'll find you're going over more and more. Example: My husband and I eat out twice a week, and will not eat in places where the bill will come, with tax and tip, to more than $50 per meal. 

4. If you get a coupon for a restaurant, why not use it? Some are pretty good - my hub and I had a nice meal earlier this evening with a $25 coupon, that let us not only stay within budget, but we also were able to take leftovers home! (Side note: Leftovers ... if you've got em, use em. DOn't let them sit in your fridge and become science projects. )

5. There's tons of articles about controlling spending in supermarkets, so I won't bore you with that. However ... watch out for drug stores! They're really set up for impulse purchases. I've lost track of the number of times I've gone into my local Walgreen's to pick up a prescription and have walked out with more than $50 of this and that. Having to wait for a prescription is a sure prescription for overspending, for what are you going to do while you wait? Phone in your renewal, and when you go to the drug store, just pick up your drugs, pay, and go home! 

6. We use credit cards for certain fixed and variable monthly expenses, such as ISP's, transit cards, my membership in a journalism society (deductible from income at tax time), and going to the movies. For most, that's OK. I recently started weaning myself from charging movies on credit cards. 

7. Speaking of movies ... go earlier! Sometimes you can save money. Also, when you go earlier, you're surer of getting a decent seat, and you don't have to order on Fandango, so you save the surcharge. Finally, going early means that by the time you're getting out of the movie, most other folks are just going, so you won't have to wait so long to eat! 

8. Well, all right, I'll mention one supermarket-based moneysaver. Chicken parts. Sometimes you can pick up chicken hindquarters (legs and thighs) for less than $1.00 a pound. When I lived in NYC, I could get a 10 pound bag of chicken quarters for about 39 cents a pound (occasionally the price would go down to 19 cents a pound). I'd take the bag home and process the meat myself: take off the skin, cut the drumsticks off and throw them in plastic bags, and put them in the freezer, cut all the thigh meat off and freeze in 1 lb tubs for stirfries. Then I'd throw the bones, with whatever meat was still on them, into a stockpot with peppercorns, bay leaves, dried dill, carrots, celery, and the like. I'd leave it on the stove on the lowest flame possible all night, and by morning, I'd have chicken stock! Strain out the solids, and discard everything but the meaty bones and the carrots. Pick the meat off the bones, run the stock through a Melitta filter, and pour strained stock into 1 quart plastic containers (save those Chinese restaurant soup containers!). Basically, you can get about 5-6 meals for less than $5.

9. Finally: keep your notebook going! It's healthy to know how much you spend every month, especially when you've got to economize. If you see, especially, the miscellaneous category getting huge, then you know you have to keep on eye on spending you're not aware of. 

Next blog, I'll deal with maximizing your grooming dollar.

Also, please feel free to ask questions!

Have fun, and happy frugaling!

Frugality

Frugality has definitely become cool. You can't turn around without bumping into articles and blogs and video news stories and what have you about how to be more frugal. In the last few days, two friends have let me know they've started blogs based on frugality - one on the food side, and the other on the fashion side. 

I've been a frugality bug for more years than I care to count. My husband calls me "the shopping commando," as I get such a kick out of finding bargains and stretching our consumer dollar. Over the years, I've acquired several books on frugality, including Amy Daczycyn's two volumes of Tightwad Gazettes, Living Lean off the Fat of the Land, and the like. 

With this economy hitting hard, I've been focusing more strongly on stretching dollars for food and miscellany. Here's some of my favorite tips. 

1. If you like to cook, buy spices in bulk. You'll use them, and generally they last longer than the folks who want you to toss them after six months would have you believe. I've been grabbing bay leaves from the same huge bottle for 15 years, and they're still fine & dandy.

2. When you roast a whole chicken, put an apple and/or an onion in the cavity. The drippings and produce flavor one another, and what's in the pan is quite tasty.

3. If you're not a gravy person (I'm not), save the pan drippings in a jar in the fridge when you roast a whole chicken or bake chicken parts. Use them when sauteing vegetable mixes. It adds a lot of flavor, and saves money on buying oil.

4. If you like broccoli, but don't really like the stems, buy broccoli crowns. Stems, however, are a great green veggie. Peel off the tough outer skin with a veggie peeler, cut off the woody bottom, and julienne or dice. Julienned broccoli stems are great steamed with julienned carrots, and the diced stems are wonderful in sautes or stir-fries.

5. Experiment with spices and herbs! They can really spark up the flavor of anything you make.

6. When milk goes sour, don't throw it out. Bake a loaf of bread! Sour milk's tangy flavor can perk up a loaf, and the sourness never shows.

7. Plastic grocery bags make great packing material when you're shipping something. 

8. If you can't join a buying club, do get those savings cards from grocery stores. Sometimes the buys are phenomenal. At one store, I saved a full 25% just by using their card. 

9. Land's End runs some great sales on their overstocks. Know what you need, know your sizes, and keep track of their sales and free shipping specials. 

10. Finally, time is money. Use a timer for chores you hate, instead of procrastinating. I like Flylady.net's idea that you can do anything in 15 minutes. and so keep timers in each bathroom and in the kitchen. I can wash a sinkful of dishes in 10 to 15 minutes. 

11. Use a timer to cook, as well. I do. Makes for better food, and less waste. 

12. The library! Take out books, movies and CD's. Most libraries will even let you reserve the materials online. Also, go to your local branch and read your favorite magazines. Saves on subscriptions.

13. If you live in an apartment building with a book exchange, use it. Get rid of paperbacks cluttering up your house, and bless your neighbors. If you see a book you like, read it and then put it back in the exchange place. 

14. Give reference books to charity. All that stuff's available on line, anyway, and you'll get a nice tax deduction. The only reference book I keep around is a thesaurus, because I like the process of actually looking up the words. It sparks a certain type of creativity that wouldn't emerge if I were using an online thesaurus.

15. Finally, know what you spend, use it to create a budget, and keep an eye on that budget! If you've never done a budget, don't worry - I'll hold your hand and tell you how to do it ... in my next post.