Perfectly Imperfect Family and Finances » The Journey

30′s Personal Finance: A Change of Pace

Mr. Imperfect — Wed, 03 Nov 2010 01:05:09 +0000

We started this blog for several reasons, many of which have changed over the last year or so. First and formost-we are no longer in college. Secondly, through the various methods and techniques outlined in past articles we have lowered our expenses and increased our income drastically. This being the case, we have decided to take a somewhat different approach concerning the type of content we post here. From this point in we want to converse with you about the various ways we have both successfully and unsuccessfully changed our income levels. Also, we want to do our best to motivate you in everyday possible to improve your life, not just financially but physically, mentally, and spiritually as well.

Thanks for all your support, suggestions, criticisms, and questions over the last couple of years. We continue to look forward to hearing your successes as well.

One Step at a Time: A Journey Toward Financial Independence Step 3: The “B” word (Createing a Budget)

Mr. Imperfect — Tue, 27 May 2008 12:33:42 +0000

This post is another step in our journey to eliminate our debt. To view previous post, please click here. If you are new here, consider subscribing to our RSS feed to get post as soon as they are available. Not sure about RSS feeds? For a description, and a brief tutorial, check our RSS Page.

If you are serious about getting out of debt, and changing your life, this is the most crucial step. Since this is such an important step, it is a good idea to take your time and complete this step over several different sittings. Remember, you have to know where you are before you can map out the route to where you want to be.

I will tell you that this is the most difficult step so far that we have experienced. Not difficult to create, but frustrating to keep in check and balanced. If you have not done so, please read our previous posts in this series here and here, they are the first steps to creating a budget. Without further delay, here are the steps we used to create our budget:

Gather those receipts The ones that you are going to have saved for a month (we have read recommendations of anywhere from two to six months, but it was not feasible for us as we needed to get started immediately). Sit down in one location, we prefer the kitchen table, grab a legal pad or notebook, and get ready for step two..
Categorize Everything that you find a receipt for, assign a category. In the beginning do not worry about specifics (those will be worked out as you go!!), just get a general idea of which category your purchases need to be in. We have such categories as: bills (a free table for you to use is here), home, food, personal care, pet supplies, automobile expenses, insurance, taxes, etc. Notice that these are very broad categories. We kept it simple as long as possible, until we had a firm grasp on just where our money was going.
Enter your totals Again, just place items under the main categories for now. That is how we started, and it did not take long to find the biggest leaks in our budget (Dining out, tech toys).
Find your soft spot(s) If you are in good shape and have no improvements to make, we commend you ol’ masterful steward of resources. If you find some changes need to be made, welcome to our club.
Choose your method Once you have the previous step completed, it is decision time. There is actually a poll on our page about this very question, so if you have a moment, please click your answer and vote. Are you going to continue by hand? We wanted to start this way because it made it more personal for us when we had to hand write each figure and total. Will you use a spreadsheet? Money management software(Quicken, MS Money, etc)? A web-based application (YNAB,Mint,Pearbudget,etc.)? What ever your choice, it is imperative that you like the interface and “usability” of your chosen system, or you will not stick with it.

Once you have a handle on where most of your disposable income is going (assuming you have disposable income), start your sub-categories in that area. As stated, our biggest problem was dining out. Under food, we created the sub-categories groceries and dining out. We further investigated (but did not create sub-categories for these) our dining out expenses and narrowed them down by restaurant and day of the week. Surprisingly, our biggest expense was through the week, and not our weekend “date” meals. Once we had that category under control, we divided the next biggest, and so on.

The secret to gaining ground is to find those areas that can be trimmed, and then appying that surplus to your financial plan. We have just finished Dave Ramsey’s The Total Money Makeover: A Proven Plan for Financial Fitness and are going to follow that advice with a few personal tweaks. A post for the near future is one that discusses creating your own financial plan, using the suggestions of authors and combining several ideas, as well as speaking with a personal financial advisor. The latter concerns me somewhat, since no one (other than ourselves) would have my best interest entirely in mind, and most of personal finance advisors earn either a percentage of your total wealth, commission on products sold, or both. It pays to take the time and do the research yourself, make a decision, then put your personal plan to work.

Remember that personal finance is just that-personal. Do what works for you. When you blow your budget to the hot place and back (and you will), recoup, count your losses, adjust accordingly, and move on. Also, the budget is not set in stone at our house. We never make changes without total agreement. If you are not married or in a relationship that requires consent, obviously you are the CEO and can adjust as you see fit. If you are in a relationship, it is not negotiable-you and your spouse must be on the same page. If you are not in harmony with each other, you may as well draw flowers and butterflies on that legal pad. It will not work. If you are not a subscriber, please consider this free service. We are going to do a article on talking about finances with your spouse soon, and you will get it immediately if you are subscribed.

Recently, I have been toying with the free downloadable version of Pearbudget (they just released a web-based subscription service). I like what I have seen so far, and will give a full review in a later post. As always, have a great day!

One Step at a Time: A Journey Toward Financial Independence Step 2

Mr. Imperfect — Fri, 08 Feb 2008 20:02:40 +0000

This is part 2 in this series on getting your financial house in order. To see all of this series click here. To learn why we are on this journey, please read this.

Step 2: Estimate Variable Expenses.

In this article we would like to talk about the rest of the money that goes out of the house on top of bills. Later we will look for ways to reduce the total for some of these expenses as well as reducing some of the monthly bills, but for now we just want to get the estimate. This will give us another opportunity to face reality and change our situation. It is amazing at how many purchases we made that were unnecessary. Most of our purchase are completed with a debit card, so we had an accurate count of amounts spent for most categories. Here are some other ways to get these figures:

Make a list of your expenses and “guesstimate” the amount. Although this is not the best way to get a total it is a start. If you are going this route, I recommend writing down the amount you believe to be close to accurate, then add 15% to that total. We have a tendency to underestimate the cost of our expenditures, and overestimate our frugality.
Carry a small notebook with you to record your purchases. This is a great way to get an exact amount of your expenses. I have read of several different ways to do this, but my favorite is to save the receipt in a pocket that you have designated for this purpose. Then when you get to your desk, car, or where ever you have to opportunity, write an itemized statement of what you bought along with the total. One reason for waiting till later is that you do not want to hold up the line while you write this information down; but, do not wait too long, for if the receipt is not itemized you may not remember what you purchased. I know that this can be a pain, but it will give you an honest account of your situation. I also recommend doing this for at least a couple of week, or even a month if you can. We all have those items that may only be bought once or twice a month.
Use bank records to get your figures. This is the way that we came up with our totals. It is the most accurate, and we had several months of figures to deal with so we could come up with a more accurate amount. If you use online banking, and your institution offers the service, you can download your totals per transaction in Excel format.

When we sat down and actually completed this exercise, we were honestly shocked at the amount of money that we had spent frivolously. There are also a lot of purchases that we made that would have not been accounted for had we not made an all inclusive list. If you do not have a solid list to go by, here are some of the categories and items that we have that you may use as a starting point:

Automobiles. This, next to our next category, is our largest expense each month. Included are: GAS (by far the biggest), and maintenance (oil changes, tire rotation, wiper blades, washer fluid, brake fluid, transmission fluid, and even cleaning are listed here.) Some car care businesses will top off all your fluids whenever you have a service completed there. It pays to check with several different providers to get the best deals. Be sure to look at the cost of the “extras”, such as what was listed above, when calculating the best deal.
Groceries. This is our second biggest expense next to our vehicles. It is something that we are looking to reduce the cost of in the near future.
Household items. This was kind of a catch all for items we purchase frequently for the house. Paper towels, toiletries, laundry items (powder/liquid, fabric softener, dryer sheets, stain remover), as well as cleaning supplies such as Windex, furniture polish, carpet cleaner, mopping solution, etc.
Personal hygiene/care. This includes all personal care items that you use to groom yourself. Also in this category we listed our daily regimine of vitamins and other over-the-counter medicines that we use regularly. Hair cuts, unless you do them at home, are in this category as well.
Eating out. In the past this has been a major pitfall for us. There have been times when we have spent the equivalent of a house payment eating out. Thankfully it is something we have gotten under control lately (out of necessity, though).
Convenience items. Here we have all the unnecessary items such as beverages and candy purchased at the gas station, snack items purchased from the vending machines at work/school, and my weakness, gourmet coffee from various coffee houses.

This is a great place to start, coupled with the information derived from the first post in this series, the next item on the agenda will be creating a budget.

What did you find to be your greatest expense? What other items did you find while completing your list?

One Step at a Time: A Journey Toward Financial Independence

Mr. Imperfect — Wed, 06 Feb 2008 18:54:37 +0000

This is part 1 in this series on getting your financial house in order. To see all of the post in this series click here.

Step 1: Find out where you stand.

Welcome to the journey toward financial independence! In this series we are going to evaluate and share actions that we are taking in order to gain control over our finances. We do not know how long this series will be, but we are going to try to post at least once a week on this topic, maybe more often as we accomplish new goals.

Get it together-Monthly Bills. Write down a list of all the bills you pay out each month. No need for specifics just yet, we just want a general idea of how many bills are being paid each month. We are also only going to focus on the payment amount for the time being, in a later post we will create a list with the outstanding balances for loans. This list should include everything that you pay out each month. Mortgage/rent, phone, cable, utilities, auto loans, personal loans, gym membership, etc. You can use the list that we created here.

Non-monthly bills. One of the things that always hit us was the occasional bills that only roll in one a year, or once a quarter. We knew they would come, but we always just figured we would pay them with what we had when they came due and play catch-up with everything else. For our list we simplified everything down to a monthly cost. For us this includes home/auto insurance, property taxes, vehicle tags, and memberships to various professional organizations.

Once all these items have been recorded, it is a good idea to dedicate part of your dwelling to the storage and paying of bills. It takes only a small area, and the amount of psychological relief of having everything in it’s appointed place is well worth it. We use half of a 2′x4′ foldout table. It provides ample space for check writing as well as a location for a three drawer organizer to hold the bills, envelopes, stamps, etc. Having everything in one location will save us at least a hour a month that was previously spent looking for misplaced items necessary for bill payment. It will also help avoid mistakes.

We have a long list that is almost terrifying to look at. It can be discouraging to see things in this new light, but it will be worth it in the long run. Keep in mind that this is a journey. There is not a quick fix when it comes to getting out of debt. Our situation did not appear overnight, nor will it disappear in that fashion. It will take time, and sacrifice, in order to achieve the worthy goal of being free from the bondage of debt. Imagine what you would do if there were no bills to pay. That is what must be focused upon in order to stay on the right path. Proverbs 22:7 “…the borrower is servant to the lender.” How true that is. We may not be slaves to the actual lender, but debt does keep a lot of us tied to jobs that we despise just to pay the bills.

Did your list look like you thought it would? Do you have more or less than expected going out each month?