On personal finance

[chanaleh]

I have (no surprise) been thinking a lot lately about my medium-term goals in life, and had the insight that many of them (buying a house; traveling) are limited, at this point, more by finances than by waiting for a partner I can successfully do them with. (Let's say that parenthood is the glaring exception and leave it at that for now.)

I mean, for years I've been in the mindset of "I'll never be able to afford to buy a house without a partner, so it's just off my radar until then," while still looking wistfully at listings all the time... and then all the time I was with J, the mindset was always "life is so up in the air," and buying a house was just one element of all the things that "we" couldn't commit to just yet. (Until early this summer, when it finally became something we could consider practically, and then I discovered that I couldn't face the process with him after all, but that's another story.) While things are now back "up in the air" for me in a certain very real sense, there are other ways in which my life and choices are actually more under my own control than I've considered, or been willing to own, and that includes financially.

So, between that realization and the fact that the moving (and resettling) process has been wildly expensive, I've started myself back on the discipline of tracking every single penny I spend, so as to better manage my finances on a daily, monthly, and ultimately yearly level. I did this for years on paper (I still have several volumes of "budget books" dating back to my old Prospect St. apartment), but for this round I've built a Google spreadsheet which keeps running totals per category and all that. It's already fairly enlightening.

I expect to spend a couple months just tracking my normal or baseline spending habits (modulo the observer effect in which the very act of writing things down makes you evaluate your choices more consciously, as with a food diary), and then figure out where the biggest changes should be made. -- Yeah, I know, things like "cook dinner at home more" and "bring leftovers for lunch" are no-brainers, but it's a lot more motivating to actually see the bottom line!

Comments

[dphilli1.livejournal.com]

I use quicken for my finances. It makes it very easy to just download everything every week from the bank/credit card to see where all the money goes.

[chanaleh.livejournal.com]

But it's not *just* "where did the money go?" but "where SHOULD it go?" that concerns me. :-) I mean, I'm sure you're right and that Quicken is a tool designed to do most of the same things I'm busily reinventing. But the evolving hands-on process is also helpful for me so far and promotes mindfulness.

[laurens10.livejournal.com]

I use a program called YNAB (You Need a Budget) to track my finances. It's more home-grown than Quicken, basic without frills. But behind it is a budgeting methodology that I find highly useful.

That program has helped me get my finances in order, and it's a wonderful feeling! :D

[chanaleh.livejournal.com]

Yay for the first-time homebuyers :-D

[bookly.livejournal.com]

I started using YNAB about a month ago and really like it. Can't wait for the new version to come out! And as a tech writer, I've been incredibly impressed by all the work they put into documenting the product and supporting their users.

[bex77]

This sounds like a great idea! I've been using a spreadsheet for awhile...very helpful. I still wonder if there are cost-saving measures I am missing...

[chuckro.livejournal.com]

I'm a big spreadsheet fan. (I may, in fact, be a spreadsheet addict, but I digress...) The thing I found most useful for long-term planning was dividing the expenses into regularly-recurring items (rent, phone bill, metrocard), regular discretionary items (dates, other transportation, book/DVD/video game purchases) and unusual discretionary items (travel, gifts, furniture purchases). The first shows you how much is flowing out that isn't really variable but is entirely reliable, the second shows you what you can control on a regular basis, and the third is what you need to plan for.

Longer-term financial planning (for, say, home purchases, retirement or a child) is a completely different bag, mind you.

[brass-rat.livejournal.com]

Sometimes you can control the utilities tho. I once took a notable chunk out of the electric bill by turning off a computer that was no longer in use, and upgrading another one to a much newer and less power hungry model (admittedly that was easy to do since I didn't have to actually purchase the replacement.)

[davidfcooper.livejournal.com]

Minding one's cash flow does sound like a good idea. Shoshana manages our short term cash flow, and does so mainly on paper. I handle long term investments and do that entirely on-line. I've heard good things about mint.com (http://www.mint.com) but have never used it.

[alandd.livejournal.com]

mint.com was recently purchased by Quicken - I don't have a judgement, having never used it, but I'm not thrilled about the thought of all my info being online in one place. But I dunno.

[firstfrost.livejournal.com]

I use mint.com, more for oversight than serious budget planning. I decided not to be paranoid, because I only track my credit card and my not-a-ton-of-money checking account, and I give my credit card number to tons of merchants.

Things I like: semi-automatic sorting into categories for credit card expenses, email reminders to pay the credit card bill, amusing trending ("Normally, you only spend $SMALLNUM on Travel - this month you spent $LARGNUM!" "Well, yes, I bought airline tickets this month..."). The UI is very nice, too.

[thevortex.livejournal.com]

I really like the tools and reports that Quicken has.

I'm really glad you are feeling more control!

The Vortex

[navrins]

I really liked the tools and reports that Quicken 98 or so had. Every successive "upgrade" has made it less useful to me. Next time I have to "upgrade" to continue using it to pay bills, I'm jumping off the roller coaster.

[palmwiz.livejournal.com]

I totally agree. Which is why I'm still running Quicken 98.

[chanaleh.livejournal.com]

Honey, most people would have sent an email, instead of putting it out there for any fool with access to a rot-13 utility to see. ;-)

[xiphias.livejournal.com]

. . .er, yeah.

Comment deleted for embarrasment.

[seventorches.livejournal.com]

Gbb yngr. Ohg vg qvq znxr zl qnl. V'yy or orggvat ba lbh va gur rafhvat Pynj-Cybpx zryrr, SJVJ.

[xiphias.livejournal.com]

Uzcu. Jryy, gunaxf.

Nf ybat nf V'z orvat uhzvyvngrq, V'yy yrg lbh xabj gung lbh'er nyfb ba gur yvfg bs Crbcyr Jub V'q Or Jvyyvat Gb Perngr Arj Uhznaf Jvgu.

Vg'f n dhnyvgl guvat, l'xabj?

[yehoshua.livejournal.com]

Wait... there are rot13 utilities?

Why would anyone need that? Everyone can read rot13 by sight, right? Right?

[kimberlogic.livejournal.com]

mint.com seems to work well, if you're interested

[vettecat.livejournal.com]

Sounds like a great habit to get into.

[happyfunpaul.livejournal.com]

I've been keeping track of all my finances for the past few years, using a home-brew Excel spreadsheet. Good luck!

[mercurysparkle.livejournal.com]

I also use a self-created spreadsheet for budgeting/tracking. With J, I may need to modify it a bit so it's more understandable for him, rather than my half accountant/half compulsive organization. For home based budgeting, Quicken or Quickbooks is great if you think like an accountant, in my opinion. I prefer the "organic" (if one can call it that) spreadsheet way - it doesn't always produce the pretty pictures but works just as well. If you want help or just to bounce ideas, let me know.

[seventorches.livejournal.com]

We use envelopes for basic household stuff, and the car has its own debit card. Basically, add up the costs associated with $maintenance-item for a year and divide by 52. This gives you your weekly budget. (It's handy to do this by pay periods, also, so that you have X amount until next payday, but my employment and income is so irregular that I have to redesign the schedule all the time if I do that).

[chanaleh.livejournal.com]

Wow, envelopes. That's... so... cash-based. :-}

[seventorches.livejournal.com]

Well, no. Actually we pay all our bills online straight from the checking account, and as I said, the car has its own account (which is basically like an envelope but with a debit card attached). The cash amounts are pretty much specifically designed to avoid nickel-and-diming the check register--We allow $100/week for groceries, so we withdraw that using the card. We also each have our own checking accounts for personal allowances (also a weekly amount) and use debit transactions for those funds.

[http://users.livejournal.com/urban_faerie_/]

Would you please put up a post telling exactly how you budget your money cent by cent? I've tried but I keep fucking it up. I signed up for mint.com but I just can't stand all the smug little emails that say, "You have exceeded your monthly budget on shopping!"

But I *need* to learn how to budget and save more. I could have so much more money now if I stuck to a budget.

[chuckro.livejournal.com]

Is your problem one of recording/awareness (you can't keep track of what you spend / you lose track of how much you've spent) or one of overspending (you buy things despite knowing they'll put you overbudget / you never have enough money to buy everything you need)?

[chanaleh.livejournal.com]

Conversely, awareness is an important precursor to controlling overspending. :-} IOW, they're closely related, though it's a good question as to where one's personal sticking point really is.

On a tangential note, I also find that there's a huge difference in mindset between the frugality of "ALL UNNECESSARY EXPENSES ARE FRIVOLOUS YOU UNDISCIPLINED SLOB" and of "choosing to conserve resources in one area in order to invest them in another that's more meaningful". I am, naturally, prone to resist the former :-} but the latter is actually fairly freeing.

[chuckro.livejournal.com]

"choosing to conserve resources in one area in order to invest them in another that's more meaningful"

Well, yes, which is the very concept of budgeting. And economics, for that matter. Hoarding resources isn't useful unless there's a greater purpose for that hoard later on.

I learned very long ago that if I didn't spend my allowance on an action figure this week, I'd be able to combine it with next week's allowance and buy an Atari game.

[seventorches.livejournal.com]

And in fact, we often borrow from one category if we're underbudget in another. (The cat buys us the occasional pizza, and the car provides kitty litter once in a while.) But we live strictly within our means; no use of credit.

[navrins]

My current theory is: Do the things you want to do. Spend what is necessary to do them, but not more. Do not spend money on things you do not actually want.

There are a lot of underlying assumptions here that are pretty particular to me-right-now... life changes mean I need to simultaneously reinforce "it's okay to spend money on things I want" while being without foreseeable income, which is not a thing one ordinarily ought to try. But the principle is pretty much sound. (Perhaps it requires an addition of "don't spend more than you have on anything that won't help you pay it back," but unless I'm stupid, that's not going to be a worry for me for a while. The trick is to hold down unjustified spending *before* I run out of money to spend.)

But paying attention to how much you're spending is still a prerequisite.

[firstfrost.livejournal.com]

I just can't stand all the smug little emails that say, "You have exceeded your monthly budget on shopping!"

They bugged me too, so I deleted all my pre-assigned budgets. :) So I can look at things by category, but it doesn't nag me.

[chanaleh.livejournal.com]

For now, I can definitely tell you what my categories are, and what starting amounts I calculated in the initial budget. I had a working version I started off with when I was looking for a new apartment, for reckoning how much I "could afford" to spend on rent. -- I put that in quotes because, y'know, [returning to] living alone is an indulgence and every dollar I spend on that is a dollar I'm not putting in the travel fund or whatever, but anyway. At least my basic habits are sustainable, in the sense of "not spending more in a month than I earn", even if I am not putting enough into savings at the moment. But anyway.

What I could do at the end of this month is put up a retrospective of what I allocated in each category, where I went over, and how I will re-jigger the amounts (which is also to say, prioritize my planning in order to reduce certain glaring overages) for next month. :-}

[seventorches.livejournal.com]

Don't budget cent by cent. Go dollar by dollar. The only time cents really matter is if you are bouncing checks because you're short. Cash is an excellent savings tool; take out your grocery money in cash, and you won't need an email telling you you're over budget. Your empty pocket will let you know.

Also, getting into a budget is a habit that will take some time and tweaking to get into. In early days, "stein money" (we put our house money into a beer stein) was only $50/week and a lot of incidental expenses came out of credit cards. As we became aware of what we needed money for (which are not necessarily bare-bones necessities, but just where what our lives looked like, such as weekly tango dates or monthly trips to the aquarium or annual science fiction conventions) we added categories for those items and simply sequestered funds for those purposes. We're still tweaking the envelopes, and we've been at this for over 6 years now :)

[skreeky]

Two things changed my personal ability to save money.

1. Get a job that earns more than the cost of living, and I don't mean living + fun. I mean eating and rent.

2. The invention of direct deposit and the automatic electronic check, which can be sent to my money market or investment accounts every single payday without me ever seeing it.

Remarkable.

[enochs-fable.livejournal.com]

We're also big fans or direct deposit. It enables us to save without thinking about. By the cnt sounds like more effort than utility, but anything that allows you to figure out your base expenses and construct that safety cushion is a good start. Your Money or Your Life is a good (if sometimes preachy) philosophy of money read, and the blog Get Rich Slowly is more on the concrete end.

[awfief.livejournal.com]

I've found that budgets are not what works for me. I decide how much I'm going to save and treat that as a bill that needs to be paid. (after all, it is a bill that's going to come later)

Just as you can't call the phone company to refund some of your last bill, I don't take from savings. If the car blows up and needs $500 for a repair, I think really hard about what other things I can "fudge" for that.

It helps to have a "zero line" that's not zero. Not only is there no worry about overdraft, but things like a $500 repair are absorbed more easily without going to savings. This is the way it works: I get paid every other week. Thus every other week after I'm paid, I do bills. This ensures that I don't miss deadlines, and that bills (including savings!) get paid first. (Tony is currently out of work but even when he was working, my salary is the lion's share of the income, so it was easier to just do bills when I got paid). I used a Google spreadsheet too.

After all the bills are paid, we look at the difference between the "amount in the bank after all bills are paid" and the zero line. That's what we have "left over" -- so it doesn't cover things like "grocery store bills" but it does give us a budget for what we can spend. If there's a lot left over, I'll put some extra into savings.

This basically forces you to save. Unfortunately it has the side effect of feeling like I'm still living paycheck to paycheck, because all of my money still goes somewhere, and the house savings is Not To Touch even though it was growing nicely when Tony had a job. However, it does mean that Tony being out of work for 9 months has only made us dip into savings for $2k. Which is pretty amazing (imagine being able to support one person for 9 months, and have it only cost $2k!). Obviously we "lost" a lot more because we stopped saving....but it's pretty good to know that we can, in fact, live as a 1-income household.

(for us, our "zero line" is $5k -- basically it was the amount of a tax return one year. It's a lot more than some people might do, but it makes us feel comfortable, so....).

[awfief.livejournal.com]

BTW, if you find that you constantly come up short of money to the point that you're stressed a lot, save less. If you find that you comfortably are able to buy books and go out to dinner, you might want to consider saving more. That's a whole lot better than "I spent more on groceries than I should"....