The Queen of Everything Money

Well I started writing my blog today and the first thing it did was make like a magician and disappear.  All that work just gone.  That went well!  I guess it is like getting that first scratch on your new car.  I can just relax now and write because I don’t have to worry about it being perfect anymore.

This blog is about all things family.  As I recently shifted my focus, less toward work and more toward home, I discovered two things.  One is that I seem to know a lot about some areas of the domestic life. The other is that there are areas of the domestic life that I could use some help with, for instance budgeting.  So my goal is to share what I know and ask you to share with me what I don’t know.  I think I will start with what I do not know.

Because my sister is the Queen Of All Things Money my first lifeline went out to her.  This is a woman who raised two children by herself and managed to buy three homes on a modest income.  She can make a penny buy a dollar’s worth of goods and, unlike me, has no fear of shopping on Black Friday. 

Luckily she is willing to take me on as a project and as a matter of fact just gave me my first assignment, writing down every penny I spend.  For a month (I started on the 15th) I will be writing down all expenditures, down to money put in parking meters, and saving the receipts for all purchases.  She says I have to be honest, (that means no fudging on Starbucks or Lotto tickets or those cute little shoes that perfectly match my favorite gray jacket), and that after we review the numbers.  Everyone in the family will be given a set amount of money that fits into the budget for personal spending and they do not have to account to anyone else for how it is spent.  So you really don’t have to give up your decaf mocha latte after all. OK, I guess that helps take the fear of judgement out of it and life will still be worth living.

Please feel free to join me if you have the courage.  I know there is someone else out there that would benefit from a money makeover who also has a great trick or two to share.

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And she said to Dorothy…Are you a good subscription or a bad subscription?

It is just the beginning of this money makeover and already I don’t think I’m in Kansas anymore.  A house has fallen on my happy ignorance and I am seeing that there items that I can easily choose to change without any negative impact on our quality of our family life.

The first things that come to mind are subscriptions.  Now I am not here to say that you will want to cut out all subscriptions, yes life requires some guilty pleasures, and as I have found, some subscriptions cost you money and some actually save you money. 

First, in my case when I began to write out all my monthly payments, many of them auto pay so they are virtually invisible on my spending radar, I saw that there were a couple of business subscriptions that felt like they were first cousins to my gym membership.  Like my gym membership, they were nice to have but I really didn’t use them that much.  A couple of phone calls and I now have $75.00 dollars a month to spend elsewhere in my budget.  And yes, the gym membership… gone.  Not so impressive but multiply that by 12 to get the annual savings and you have $900.00. 

There is no formula for what is best to cut.  In my case the gym membership went, but if going to the gym is the only thing that keeps you from going crazy then I would call that a definite keeper. However, sometimes we already have other resources, that do not cost us additional money, that we can obtain a similar benefit from.  An example of an alternative for a gym membership might be a Wii Fit program, a bike, or a good pair of running shoes. 

Magazine subscriptions are another place where your “habits” can cost you money.  Do you find that many of your magazines lie unread collecting dust and creating clutter?  Here is your chance to clean house and save money too.  In the case that you have several magazines that you actually do read regularly you may consider starting a magazine exchange with friends who share the same interests.  That way you can pass them around (the magazines, not your friends), share the cost of subscriptions and at the same time reduce the piles of magazines that grow like kudzu on your nightstand.

Well, I must say that my sister, the Queen of All Things Money, will be very proud of me.  We have not even reached our one month review of the numbers and I have already started looking at my money with new eyes.  I must say that it feels pretty good so far, no judgement, no sacrifice, and no hairshirt to wear. I feel lighter already. As a matter of fact, I have even found that some of my subscriptions actually save me money but we can talk about that another day.

If anyone had the courage to take up this challenge what were you able to remove from your budget and just not miss?

Eiko and her credit card            Credit Card To The Rescue?

It sounded so easy.  When the Queen of Everything Money explained the envelope budget method I thought, no problem.  Who knew that a bunch of envelopes could create such a swirl  of emotions.  

I guess the purpose of this  method is to make the concept of money more concrete.  In our credit card, debit card world it is easy to forget that funds are not limitless.   There really is something about actually handing over cold hard cash for all your purchases that changes the way you think of money.  There is also something about seeing on a piece of paper exactly what your money bought you that changes the way you view your stewardship of your resources.  What is more amazing is the number of emotions this little accounting exercise reveals.  Now I understand why money, or more accurately how money is spent, is often at the root of marital problems that can lead to divorce.

 The fact is, even if you have plenty of money and do not have an immediate need to find a way to make your money go farther,  this exercise can help you to refocus your spending in a way that will improve your life.

However, after seeing that cash is the way to go, it seems that there is a place for credit cards if used in the proper way. This next technique that the Queen of Everything shared is definitely not for everyone.  It involves the use of credit cards to save money so if you do not have the funds or the discipline to pay off the entire balance every month, on time, this strategy is not for you.

There are a few credit cards that offer cash back on all purchases, for example 1% cash back on everything you purchase. There are also credit cards that offer cash back on a specific type of purchase, for example 5% cash back on all gas purchases.  Discover card comes to mind, but there are several cards now offering cash back, so do your homework.

When you go to the grocery store to buy groceries you use your credit card that offers cash back to pay for your groceries.  When you buy gas, you use the credit card with the highest cash back offer to pay.  Even when you pay your utilities bills, you use a credit card with a cash back offer to pay .  At the end of the month you pay the entire balance on all your credit cards.  You have just reduced the bulk your monthly costs by more than 1%.

Of course if you are not able to pay the entire balance each month then you have in effect increased your costs by an average of probably 12% or more. And if you continue to carry a balance on those purchases then it becomes more difficult to know exactly how much more you will pay for those goods because of the nature of compound interest.    This is how many people find themselves in trouble, so please, use this with caution.

Picture taken by Fu

More About The Budget        the envelope system: day one

Hopefully, you have all written down every purchase you made last month and are ready to take a look at where your money actually went.  You can place them into categories such as groceries, gas, utilities, insurance, household items, entertainment, personal and other.  This is just an example, as these can be broken down further if that is important to you.  You may want to break down entertainment into dining out, movies, gym, fishing, whatever.  The way you create your categories will allow you to see different things about how you spend your money as well as ways to make small changes that could produce big savings results for your budget.

After you have identified where your money is going you have the ability to see if your spending reflects your priorities.  For instance, I have started taking my lunch to work everyday and my boss recently noticed this.  It must have looked better than his burger because he started calculating out-loud how much money he was spending eating lunch out.  I do not think he really thought about it before, but perhaps he was thinking that spending $150.00 a month on heart stopping fast food was not higher on his priority list than, say, a fishing trip.

Here is where the expertise of my sister, the Queen of Everything Money, comes in.   This beginning technique is called the envelope method.  After looking over your monthly spending you decide what level of spending you are comfortable with in each category of your budget.  You then get one envelope for each category, write the category name on each envelope, one for groceries, one for entertainment, etc.  Go to the bank and get cash for the total amount of spending that you have budgeted for the month and place the amount allotted for each category in to the corresponding envelope. Make all purchases with cash.  When an envelope is empty you are done spending money in that category for the month.  Of course you may find that you have extra money in other envelopes that you may choose to redistribute to another category and that reflects your actual priorities.  In order for this to be effective you cannot use credit cards for any purpose, only cash. The next month you can adjust the amounts so that they better reflect your real spending priorities. 

So if you find yourself asking yourself why you can’t save any money for a vacation, a new car, or retirement you now have the answer.  It is not high enough on your priority list.

 Of course, the Queen of Everything tells me that she has many techniques to share and the magic is in understanding which ones are the best tools for your particular situation.

Photo by J. McPherskesen

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