Thursday, January 15, 2009

Maintain Your Monthly Plan

There's a couple really simple things I do to stay on top of our monthly spending plan (see "Make a Monthly Spending Plan" below). Here's a few easy tips to stay organized and on track.

1. Put All Your Bills in One Place

As soon as we get a bill, I open it and write the amount due and the due date on the outside of the envelope. Then I immediately put it on my desk so all the bills stay together in one place.

2. Pay Your Bills on Time

It's crucial to pay the bills on time to avoid late fees, which can really add up. So as soon as we get paid, I pay the bills first--before we buy or do anything else. If cash flow is an issue, make yourself a little calendar so that you know when your paychecks come in and when each bill needs to go out--you can note this on the envelopes as well.

3. Use Weekly Cash Envelopes for Daily Expenses

This is probably the single best thing we've done to get a handle on our spending. I use the month's spending plan to figure out what we need for groceries and any other categories we can pay for in cash (gas, entertainment, laundry, lunch, etc). Then I put the cash for each week in an envelope.

Not only is this simple, but it keeps us to our plan. It's far too easy to walk into the grocery store with a debit card and over-spend for the week--especially if you're hungry when you shop. But if you only have $65 when you walk into the store with a store list, you're only going to spend $65--trust me.

Let me know if you've found any tips or tricks that help you handle your spending each month. I look forward to hearing from you!

Wednesday, January 14, 2009

Principle #4: Make a Monthly Spending Plan

So I kept track of my spending for thirty days.

Broken Piggy Bank by Veronika Nagy.

At the end of the month, I tallied up my numbers into categories. I used the following list (which I've only slightly revised 13 years later) from the non-profit credit counseling service I went to, and found it helpful and pretty thorough. Feel free to delete categories you don't need or add categories that aren't already on the list.

Two points: (1) This is a monthly expenses worksheet. So if you spend about $250 on holiday gifts in December, divide $250 by 12 months and enter $21 for holiday gifts in the appropriate place. Do the same for any annual/semi-annual expense, such as car license/registration or eye exam/teeth cleaning. (2) At the time, I used another worksheet to calculate my debt repayment from a list of all my debts. However, I've included a line entry for minimum credit card payment because that may be one of your basic monthly expenses if, like most of us, you have some credit card debt.

Okay, so here's the list:

Basic Living Expenses


1. Rent/Mortgage
2. Oil
3. Gas/Electric
4. Water/Sewer
5. Garbage pick-up
6. Basic Telephone
7. Basic Cable
8. Property Taxes
9. Property/Renters Insurance
10. Maintenance


11. Groceries (incl. cleaning supplies and paper goods)
12. Lunches (work and school)
13. Pet food and litter

Dependent/Child Care

14. Alimony & Child Support
15. Babysitter/Day care


16. Car payment(s)
17. Gasoline
18. Car maintenance/repairs
19. License/registration
20. Car insurance
21. Parking
22. Commuting costs


23. Insurance Premium/Deductible
24. Doctor/Therapist/Optometrist
25. Dentist
26. Prescriptions/Medications


27. Life/(whole/term)


28. Family Clothes
29. Uniforms (work/school)
30. Laundry/Dry Cleaning


31. Educational Debt


32. IRS or other
33. Fines, tickets, etc.
34. Credit card minimum monthly payment(s)
35. Any other

Subtotal of Basic Living Expenses: _____________

Non-Basic Expenses

A. Tuition
B. Hair Care/Cosmetics/Toiletries
C. Cell phone
D. Books/Newspapers/Magazines/Subscriptions
E. Tobacco
F. Liquor/Beer/Wine/Soda
G. Movies/Concerts/Plays/Videos/DVDs
H. Dinners Out
I. Dues/Memberships
J. Donations (religious/charity)
K. Gifts (birthdays/holidays)
L. Children’s allowance
M. Pet care/veterinary
N. Lottery
O. Hobbies/Lessons
P. Vacations
Q. Other (in my case, I had bank fees and had used an accountant to help me with my taxes in this particular year)

Subtotal of Non-Basic Expenses: __________

Total Monthly Expenses (Basic + Non-Basic): ____________

Total Monthly Income: _______________
Total Monthly Expenses: _______________
Monthly Excess/Deficit (Monthly Income minus Monthly Expenses): _______________

Be sure that your monthly income is based on what actually comes in -- not on what you think you might make. Be honest--both about what you spend and about what you earn. Once you are totally honest with yourself, everything else begins to fall into place.

At the O'Kitten household, we've been using the same basic format for about six years now. This month, our plan looks like this:

1/14 - 2/10/09 [I put in the dates so that we know exactly the period the plan covers]

Rent/Utilities (total 954.86):

Rent: 722.11
Electric: 65.00
Gas: 15.00
Phone/cable/internet bundle: 135.00
Renter's insurance: 17.75

Medical (total 290.00):

Medication: 140.00
Therapist/Doctor Co-pays: 150.00

Grocery (total 280.00):

4 weeks at $65/wk: 260.00
Cat food and litter: 20.00

Other (total 282.00):

Transportation/Metro Card: 20.00
Debt repayment: 262.00

Total expenses: 1806.86

Total income: 1814.00
Total expenses: 1806.86
Monthly income minus monthly expenses = 7.14

And remember--it's just money. A lot of days I have had to repeat to myself: "For today, I have everything I need." Try not to fret over the past or worry about the future, but stay in today.

Drawing by Jim Doran.

Monday, January 12, 2009

Keep Track for 30 Days

Happy New Year and welcome back to the Money Shot! Here's a great way to start off the year, plus two resources full of helpful info to start 2009 off right.

Principle #3: Keep Track of What You Spend for 30 Days

Get a pocket-sized notebook and carry it with you everywhere you go for 30 days. Keep meticulous track (yep, to the penny) of everything you spend each day for thirty days. Whether you pay cash, charge, or buy online, write the amount down in your notebook the moment you spend it. (If you don't do it immediately, you may forget.)

For now, don't worry about what you're going to do with this information--just make the list each day. Soon it will be clear how useful it is.

First, it will give you an idea of exactly how and where you spend your money. Secondly, you will be able to see your spending categories and the amount you spend in each category. Finally, you will understand where your money goes in a month.

Mrspao mentioned she had done this and found it helpful. When I did it, it gave me a real sense of empowerment as I'd always lived check to check and had never been able to answer that monthly and perpetual question, "Where does the money go?"

This one-month exercise gave me the tools--and the precise information--I needed to regain control of my finances. In this case, knowing was more than half the battle, and in just a few seconds a day, I had a very powerful instument with which to tackle my seemingly overwheming financial fears: the instrument of knowledge.

A Good Book

The 30-day spending record as described above comes from a book I used when I was first addressing my debt and spending issues. Titled How to Get Out of Debt, Stay Out of Debt, and Live Prosperously, I highly recommend it to anyone who has debt, spending challenges, or is interested in viewing their finances in a more positive light. Available in paperback new or used on Amazon for virutally free.

A Free Book

Suze Orman's 2009 Action Plan is available for free download through 11:59 p.m. CT on Thursday, January 15, 2009. It has really helpful, straight-forward, step-by-step information for tackling your credit-card debt, starting a savings program, and basically just dealing with finances in our 2009 economy. Also available in your local bookstore (or on Amazon), but if you hit the link before January 15 you can get it for free--it's 200+ pages of info.