I’ve lost touch with my money

Before I get in to today’s post, I just want to take a minute to say thank you to everyone that volunteered yesterday to help me out and provide an article for PDITF while I am gone participating in wedding shenanigans. I’ll be getting in touch with each of you over the next few days to discuss details. Thanks!

I’ve been a very naughty ninja lately. I’m breaking one of my most important PF rules: Manage your money. For the first time, in probably two years, I don’t have a handle on my financial situation. It’s a very odd/disturbing/uncomfortable feeling. Fortunately after, a few hours checking my bank accounts, doing a little quicken reconciling, and a sexy date with my TI-83, I should be back to normal.

I’m totally obsessed with knowing where my money is going, and when it is going there. This means if I have $5,000 in my checking account and $2,000 in charges on my credit card bill, I would immediately transfer $2,000 to my online savings account so that money can start earning a higher yield than my checking account.  This would leave $3,000 in my checking. I’d eventually send another $2,000 to my credit card, to pay that bill in full when it came due, which then leaves my checking with $1,000 for emergencies.

But instead of initiating bank transfers, I’m just trying to calculate/predict how much cash flow I will have by the end of the month. I know I have a redonkulous balance on my credit card (honeymoon, furniture, wedding stuff) and an even more redonkulous sum of money in my checking account (haven’t transferred money out in over a month). I know that my checking exceeds my credit card statement, but for the first times in recent years, I don’t know by how much. And even worse, I haven’t initiated a transfer of that excess in to my savings accounts.

Right now, I’m the perfect example of WHAT NOT TO DO when it comes to managing your money. Tomorrow, I’m buckling down and figuring all this mess out so I can ease the financial anxiety I’ve been feeling these last couple weeks.

Am I going to PF hell for letting my finances get away from me? Do even you BUDGET NAZIS get a little lazy sometimes? How do you keep your money moving, even when you don’t have the time to sit down and tell it where to go? What software/method do you use? Slap some sense in to me will ya?!

I know many of you will suggest establishing automatic payments, but auto payments are not my thing…they kind of freak me out.

WTF is a budget?

There is one thing that always reigns true in the world of personal finance: Everyone does things differently, especially when it comes to budgeting. I’m convinced, no two budgets are the same. Here are a few of the different budgeting methods I’ve observed…

The anal envelope:

This method is no joke. It’s not for the faint of heart as it requires some serious discipline. Essentially you create a different envelope for all of your various expenses (rent, food, car, etc). After you’ve categorized your expenses, you put in a predetermined amount of cash in to each envelope every pay period. For example, if you allow $50/month for entertainment, you’d put $50 in cash in your entertainment envelope. Pretty straightforward. The hard part is not wanting to spend more than what you put in the envelope. Once you’ve spent the $50, it’s gone. No going to the ATM or using your credit card. Not even if that camera you really want is on sale. There is very little flexibility in the envelope system. Let’s just say it’s not for me.

The guess and check budget:

Ahh, this is my kind of budget. All you have to do is get out a piece of paper (or use excel) and itemize all of your monthly expenses. Instead of putting the budgeted allotments in envelopes each month, I use a guess and check method as I go about my spending. For example, if I feel like I’ve spent a lot more on dining out than I normally would, I cut back for the rest of the month and survive on PB&Js. This method is definitely more flexible than the envelope system, but it also allows for overspending if you aren’t careful. I generally stay within my allotments for each category, but every now and again I’ll get a little crazy and spend some money I probably shouldn’t have. If you don’t have some solid discipline I would not subscribe to this method.

The “WTF is a budget” budget:

Unfortunately, this is probably the most popular budgeting method in our culture. The people who use this method couldn’t spell budget, let alone live on one. They are usually broke, stupid, and stupidly broke…. but hey, at least they have 786 pairs of shoes they never wear. They don’t keep track of their money at all. They often don’t know how much they make and they definitely don’t know how much they spend. This is not a good plan. It’s financial suicide. If you’re a member of the “WTF is a budget” club, you better figure something out quick ’cause a financial disaster is brewing.

What kind of budget are you rockin’? Do you set aside a predetermined amount each month and stick to it religiously? Do you have an idea of what you’d like to spend, but don’t follow it to the “T”? How do you budget for the irregular expenses like car maintenance or haircuts? I’ve never really figured out a good way to set aside money for things that don’t occur on a monthly basis. Any budget tips, tricks, and helpful hints are always appreciated.

I suck at communicating

Apparently I am a pretty crappy communicator. Yesterday’s post left a bunch of you asking “Why is there no entertainment section in your budget?”. Pretty valid question, seeing that I didn’t account for fun, vacations, or household supplies in our budget. Did I forget to include this stuff? Nope. I just do things a little differently.

Since I severely sucked at explaining the budget yesterday, I thought I’d do my best to make it clearer today. Take a look…

Does the infographic help clarify things? It’s important to remember that budgets come in all shapes and sizes, so I’m sure mine looks way different than yours. In fact, J Money has compiled a ton of different budget templates, so you can use the one that best suits you.

Alright, on to the question “Why don’t I account for tampons sponges, clothes, and movies?” The answer is simple. I don’t want to. Hah! How’s that for straightforward? Everything I included in our “expenses” category has little month-to-month variation and is a necessity. Our income MUST ALWAYS exceed these expenses, ’cause if it doesn’t, we are going to have serious financial issues.

The very bottom section of the budget is titled “Left over”. This money then becomes our discretionary income. We can do with it what we want. Referencing the example above, we should have about $2,000 after all of our bills are paid. This money will be broken down to pay for things like haircuts, sunglasses, weekend trips, gifts as well as to save for things like a home, a car, and new furniture.

I personally HATE the idea of having a line item in my budget for “household supplies”, “entertainment”, or “vacations”. These costs are not fixed and can vary greatly from month to month. Instead of making guesses for each variable expense, I much prefer putting all $2,000 of discretionary income in to my savings account and then take when needed.

I realize many of you probably HATE that I don’t budget for all the same categories you do, but this is how I’ve always done things (Girl Ninja is on board with this plan as well) and I don’t think anyone would say I’m a reckless spender. We are both natural savers and understand every dollar we spend, means one less dollar we have in the bank. Our frugality allows us to live outside of a spreadsheet. Maybe this makes me a budget hypocrite, but I don’t really care. In my defense, however, I religiously check Quicken to make sure I’m spending reasonable amounts in each variable category (ie electronics, gifts, toiletries, etc). Did you really think I would not keep a watchful eye on our money?

A few other things to note from yesterday’s post.

Many of you recommended Girl Ninja seek out part time employment, in the evenings, to help stabilize her income a little bit. This is probably because I said we would  “scrape by” if she only subbed 2 days out of the month. What I failed to make clear, was the odds of that happening are virtually zero. Over the last 45 school days, she has been able to work all 45 of them. Basically I was being a big drama queen yesterday, and probably made it sound like Girl Ninja will be unemployed, when that really isn’t the case. My apologies for any confusion. Plus, if she picked up part-time night work, that means I would be home alone at night, which is NOT COOL in my book. How the heck would Operation Make-Baby-Ninjas ever come in to the picture if our schedules were opposite?

Another common theme across yesterday’s comments, was the recommendation to decrease tithing until we get a better handle on our financial situation. Again, solid advice, but not really our style. We both share the belief that tithing needs to be something that we do every month. And for us that means 10% of our income. This means before we do ANYTHING with our money (including contribute to retirement or pay rent) we commit 10% to our church. I know many of you will think that’s crazy, or possibly even that we are weird Jesus freaks, but it’s a personal decision we BOTH made and are excited about. (Remember, it’s called personal finance for a reason).

It seems that I totally blew it yesterday and failed to bring my main concern to light. My primary motivation for yesterday’s post was to ask “How do you budget with a variable income?”. I received a bunch of great suggestions on how to increase our income (GN part time work) or decrease expenses (find a cheaper apartment or tithe less), but what I really want to know is How do those with a variable budget navigate life? What’s the secret?

If I confused the crap out of you (figuratively and literally) again today, let’s just pretend these last two posts didn’t happen and we can start with a clean slate for tomorrow’s post… deal?

2010. Year of the “Non-budget” budget

I pinky promise I wont turn PDITF in to a wedding/marriage/love blog, but you are gonna have to bear with me, for a bit longer as this engagement thing is uncharted territories for me. Getting married is going to completely change the way I have been managing my money. Apparently wives don’t just cook and clean (dear feminists, that was a joke), but they also do things like make money and spend money.

In years past, I have made my budget on January 1st and made assumptions of what the next 12 months is going to look like. It has been pretty easy for me to do, seeing that all I had to account for was myself. I knew what my income would be, I knew how much food I bought each month, and I knew how frequently I was putting gas in my car. It was really easy to make a budget once every 12 months, because few things in my life varied.

Well Girl Ninja, I hate to break it to ya, but you’re throwin’ a little wrench in my tires. I think I’m going to be forced in to budgeting twice this year. One for now through wedding day, and again wedding day through the rest of the year. That means I have to do twice as much work, ugh.

Even more unfortunate… I have no idea how to budget for our life post wedding. I have no clue how much women cost. To further complicate things, Girl Ninja is a substitute teacher so her income can range from $200-$2,000 monthly (depending on how many days she works). My guess is our wedding will take place in August, which leaves me with four months of assumptions (Aug through Dec).

It really seems pointless to make a budget for the last half of the year at this point, since I really have no clue what things will be looking like. We could be spending $900 to $1,500 on rent, $300-$500 on grocery/dining, $100-$400 on gas, blah, blah, blah. Nearly every category has a couple hundred dollar variance. It kind of defeats the purpose of budgeting, when you have no clue what you will be spending on virtually all aspects of your life.

Right now my game plan is to establish my budget from January to August and call it good. Once married life begins, I will closely monitor our spending habits and be totally prepared to make my 2011 budget on January 1st next year. I guess it’s not a huge deal though, because I treat my budget like a spending guideline. Do any of you all recall how much your overall expenses increased post marriage? Do you make a budget each month, once a quarter, or like me, once a year?

p.s. a few of you bloggers (mostly women) have mentioned you would like to hear a little more about my thoughts on weddings/marriage/love, so I plan to begin touching on those topics at least once a month. consider me your official Love Ninja 🙂

The dreaded third pay check

For those of us that get paid every two weeks, we face an epic battle, that others do not. For us, managing a budget is no easy task. Ten months of the year, things are just fine, but when March and October come around, my whole world turns upside down…I get an extra paycheck.

Although it is definitely a good problem to have, it does make things more difficult than other payment plans. We are really left with two options…

We can break up the two extra paychecks, by twelve, and calculate that in to our online budget app. Say for example you get $2K every two weeks. That means 10 months of the year your income will be $4K, but for two months it will be $6K. You can take the extra $4K (from the two extra paychecks) and divide that by twelve, this gives you $333. For budgeting purposes, you can average your monthly pay to be $4,333. In my opnion this method sucks. It’s a lot of work, a lot of planning, and a waste of time.

I subscribe to the “Booya, extra money” budgeting plan. Instead of breaking up my extra two paychecks over the entire calender year, I simply pretend they don’t exist. If I get $2K every two weeks, then I budget my cash flow around a $4K monthly income. When the time comes for the extra paycheck, I get to do with it what I want. Why? Because I have established spending habits around a $4K income.

If you haven’t noticed…it’s October, which means I’ll have an extra $1,500 coming my way. Perhaps I will buy 1,500 McChickens, maybe I’ll give it away to one of my lucky readers, but most likely I will contribute to my Roth IRA or pay down my student loan. Ah, the life of being a frugal ninja 🙂 I know there are others that get paid every two weeks. What method do you use? Is there a third option I haven’t thought of?

I’m a hypocrite

Yes it’s true. Full disclosure, I’m a big freakin’ hypocrite. I preach the wonders of living on a budget, when in reality, I pretty much don’t. Maybe this makes me a terrible person to go to for financial insight, but I think it just makes me normal. Let’s face it, we all compromise a little bit on financially sound principles every now and then. Even the Dave Ramsey “rice and beans” fanatics dine out occasionally, when that money could have been put towards paying down debt. See, I’m not so bad after all.

Just because I don’t live by a budget, doesn’t mean that I am a reckless spender. Actually it’s quite the opposite, I’m a frugal mother lover. I think my frugality fills in as my quasi-budget. If you have been tracking my expenses, you know that I have a dining out/grocery goal of being under $250 each month. If you really pay attention you will notice I’m almost always under that amount.

My budget may say that I have allocated $250 in spending this month, but I rarely restrict myself from doing something I want because “It’s not in my budget.” I guess what I’m trying to communicate is: A budget (to me) is a lifestyle and not necessarily a set of defined parameters. If I live in a way that reflects my ultimate goal of being debt free and owning a home, I don’t have to count pennies. All I have to do is make as many smart spending choices as possible and do my best to minimize any stupid ones.

So now I’m curious. To those who have a budget: Does it determine all of your decisions? How often do you track your spending to make sure you are within your limits? Am I a crappy financial blogger for saying that I don’t really use my budget that often? I guess this is just another area where I resist the financial norm, and make things personal.

This is the way I live…

So if you are poking around this page that means you’re like me and you like knowing other people’s financial situations. I guess I really have no problem letting people ask questions about my money. Call me crazy, but if you are looking at this article than you have at least SOME interest also.

So here is how this little gem work…

  • INCOME pretty self explanatory. This is my monthly pay from my current job. If you have read my other posts, than you know I also tutor to make some spare change. I decided I didn’t want to include this in the income section of my budget as that income fluctuates each month and I did not want to build my spending habits around inconsistent income. I include the tutoring income at the bottom of the spreadsheet and I underestimate it for each month. I’ve been averaging $1,000 a month, but I still don’t want to change it’s current $500 value…I know that makes my budget less accurate, but less accurate in a good way right 🙂

  • INVESTMENTS, TAXES, and EXPENSES. Again, pretty straightforward so no real need to elaborate. I will mention, however, that I DO have health insurance, but since I am 23 I was able to stay on my parents plan (you know I’m gonna ride that out till I’m 25 and get kicked off their policy). I included a 5% increase section on my expenses because sometimes ‘ish happens (consider it like a mini-monthly emergency fund).

  • GOALS, BILLS, and PRIORITIES. The top right section is where I set out my financial goals on January 1 of each year. It starts with what I had in my accounts on 12/31/08 and I make assumptions as to what my accounts will look like come 12/31/09. The section below this is where I keep a list of my fixed monthly expenses…otherwise I’d be forgetting to pay that darn cable bill. And lastly, below that is where I list of the priority of all of my expenses. I did this so if I’m ever in a situation where a ninja stole all my money and I was fired from my job, I would know exactly how to spend each precious dollar that I had. Basically I put the most important bills at the top.

So that’s my life in a spreadsheet form. Hopefully it makes sense to you all, but if it doesn’t feel free to shoot an email or comment and I’ll let you know how it works.

Enjoy,