Budgeting: Why and How

That dreaded word: budgeting. Or if you already do it, that dreaded time of the month when you "reconcile the budget." Or in my case, the one day every 3 months when your husband wants to look at the budget and then gets overwhelmed and says that we're spending too much money. It's not easy.

So then why do it? Here's the top 5 reasons I've discovered as I've budgeted for the last 4 years.

1) Just keeping track of how you spend your money will help you spend less of it.
     Years ago when we had TV, I watched a segment on Oprah where they took a couple of families who felt like they were struggling and had them sit down with a financial expert to help them learn how to manage their finances. I remember there was one family (of four or five) who spent well over $500 a month on eating out/convenience store foods. A MONTH! And the family had no clue. When they realized they were spending that much money in this area, they definitely saw it was a problem.

     So I promise you that just looking at HOW you spend your money will help you spend less of it in areas. You'll be more conscious of where your money is going instead of just whipping out the credit card and not giving it another thought.

2) Knowing how much money you MUST have to live on, as in your most basic needs and bills, is one of the most important things you can do for emergency preparedness.

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      No one plans on losing a job, but for many Americans in the last 5 years, it has happened. If you don't have a financial reserve and don't even know how much money you need a month to keep your home, power, heat, etc., then you're taking away your peace of mind in a situation like that. It would inevitably take some time to find another job and you need to know exactly how much you need to survive on during that time frame.

       The best rule of thumb is to have enough financial reserve (that means savings in the bank) to last you through AT LEAST 4 months of no income. So if you know you need at least $1200 a month to cover your bills, mortgage payment, and groceries, you will need to have $4800 in the bank MINIMUM at all times. Having a food storage could help you decrease this amount since you'd be living off most of that (for my tips on food storage, click here).


3) It isn't always depressing; sometimes it's quite rewarding. It can help you reach your short-term and long-term goals, keeping you from spending your money on things that don't really make you happy.
       In our first few years of marriage, my hubby and I would get flack from family and friends that we were penny pinchers. For instance, we lived with hand-me-down furniture, we didn't travel very much, and we tried to be frugal in all areas. To some people, it looked like we were depriving ourselves. But to us, we knew that our first priority was to be out of debt and then save money to buy a house. We were very blessed that my hubby found a permanent job even before he graduated from college and we lived in our two-bedroom apartment for another two and a half years instead of rushing out to buy a house (when people were encouraging us to buy because interest rates and the housing market were dropping).

       Because of our patience, when we bought a house in June 2009, we not only were able to afford a nicer house than the year before but we also had a good down payment (and we were lucky that interest rates and the market had dropped even more). I cannot tell you how rewarding that has been. Because we had budgeted, scrimped, and saved, we were able to reach our long-term goal. Yes, budgeting can be very rewarding.


4) It can help you get out of debt faster, which only improves your credit score and sense of freedom.

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       I have a sister who can attest to this. For various reasons, they have been in and out of debt (and I'm talking about debt other than your mortgage and car debt) for many years. It wasn't until they created a budget and followed Dave Ramsey's snowball debt plan that they were able to get out of debt.

And those debts can feel like they're looming over you day in and out. Knowing that there are many debts to be paid if you lose your source of income is disconcerting. There is a definite sense of accomplishment and freedom that comes when you get out of unnecessary debt.


5) It is empowering to take charge of your money and change bad habits.
       It is empowering to know exactly how much money you spend and save each month. It is empowering to change bad habits and see your money increase in the areas you want. And it is empowering to reach financial goals. I wouldn't say that budgeting has made me some financial expert or even necessarily good at spending my money. But it gives me a sense of peace and comfort that I know the specifics of our finances. I know where my money is going. I am prepared financially in case of emergency. And I am reaching short-term and long-term financial goals.

 
The How of Budgeting
So now that I've hopefully convinced you why you should have a budget, the question is: how do I create a budget?

The answer to that is how it will work best for you personally. You can make it as easy or as hard as you want it to be. You can make it as detailed or general as you want it. Just know that however you do it, you want to have a way to be accountable to yourself.

You don't have to start from scratch either. Here are 2 budget templates that you can start from:

Family Budget
Monthly Household Budget

The reasons I like these budgets is because 1) They give you a place to estimate costs (we'll talk about that in a second) and 2) They give you a place to put actual costs and 3) Then they show you the difference. Not all of their categories might apply to you and you can simply delete them from your Excel spreadsheet.

Now how do you come up with those estimate costs the first time around? My advice would be to round up the last 2 months of bills/receipts and then use those to estimate. Granted, if you're not on a set payment plan for things such as power and gas bills, you may need to look over the last year and put varying amounts on each month. When it's a new month, you simply add another page to your spreadsheet with that month and year labeled.

If you've never saved bills/receipts then simply guess. BUT THEN start saving them the next couple of months. You'll need them for not only adding them up and putting them in your spreadsheet, but it will help you know how much to budget for in each area. If you hate saving little receipts, then pull out your credit card bills when they come and enter the amounts into your budget all at once.

My system to recording receipts

Since I am a little OCD, I save every little receipt and bill and faithfully enter it into my budget each month. I like to enter them in throughout the month so that I know if I'm running out of entertainment budget or grocery budget so that I've refrain from either until the next month. It helps keep me on track of where I want to be. The picture above shows my two drawers next to my computer monitor that I use for these receipts. "Need to be recorded" is where I put receipts until I have a chance to enter them into my budget. "Recorded" is where they go after I've entered them in. Then at the end of the month, I rubber band all the receipts and file them away for a couple of months just in case I need them for returns.

Where I put all my bills/other papers until I file them away.

Sometimes it's tricky to separate categories. For instance, I do most of my shopping at Wal-Mart since it's one of the only stores in my city. But the things I buy there could fall under multiple budgeting items (groceries and miscellaneous and gifts all on the same receipt). Again, since I'm a little OCD, I break them up on the receipt and put them under their respective areas. Or you can just limit your categories so you can put that receipt under one area.

Don't get frustrated or hung up on the logistics. The main point is that you're trying and you're keeping track of how much money is coming in and how much is going out.

In my budget, I also have our total savings broken up into different categories. So we might have $5000 in savings, but under the savings section of my budget, I have different categories for long-term goals or non-monthly purchases that don't really fit under my monthly budget. To give you a better idea, these are our categories:

Emergency fund (that we always keep a minimum amount in that we've decided upon),
Auto maintenance
Home improvement (someday we hope to have enough here to finish our basement)
Gardening (my husband is a big gardener)
Vacations (Glad I have this budget or we'd never go on vacations! My hubby isn't a huge traveler)
Clothing
Gifts (Birthday, Christmas, Baby showers, etc.)
Insurance
Preparedness
Service
Miscellaneous (AKA anything that doesn't fit in the monthly budget or the above listed categories)

So when we want to do home improvements, we look at our home improvement savings and see if we can afford what we want to do. I have our budget set up so that it will take our income, minus all our monthly expenses and then split the remaining amount (the money we put in our savings that month) into the different categories (you can do this either by percentage or set amount). Then I put in what we spent that month under these areas and carry each end-of-the-month total into the next month's budget of my spreadsheet.

The reason I do all of this is so we don't just blow all our savings at once, without thinking what we may need it for in the future. I want to make sure that when it comes time to pay insurance twice a year, we have enough for it. But I also want to make sure that I'm saving money to spend on my short-term and long-term goals as well.

Oh boy, I hope I haven't lost you all by now. If you're mind is swirling and you just want a copy of my spreadsheet (with all of our amounts deleted of course), just let me know. You can e-mail me at sweepsalot@gmail.com (for all those who know my personal e-mail address, you can send it there too).

I hope that these tips help you create your own budget and take control of your finances if you haven't already done so. I promise it's worth it!

One of my Favorite Things

So when we moved into our home, there was no place next to the sink to put a towel. No bar or hook, nothing. And since my husband refused to put any holes in our beautiful cabinets, I had to come up with a different solution.

Thankfully my sister introduced me to Command Hooks. If you  haven't heard of them before, they are hooks that you can attach to almost anything that goes on with a sticky strip. You can buy them in varying size/color/weight capability. And they're easy to put up and take down, without damaging the surface you put it on!

Problem solved!

 And they can sustain a lot of weight. My next use for these handy hooks was on another side of my cabinets. I put my magnet board on it with my calendar and appt cards or invitations. This has been up for over a year and hasn't fallen once. They're pretty darn strong.

 Let me give you a quick tutorial so you can see how easy they are:

 When you buy them, they come with the command strips, a backing for the hook, and then the hook itself. The strip is sticky on both sides. You peel off the red side and stick it to the back of the backing (haha) for the hook (making sure to have the tab of the strip on the same end as the ledge that the hook sits on.

Then when you've decided where to put your hook, peel off the wall side and stick to the wall, holding it in place for at least 10 seconds to adhere.

Then you slide your hook down onto the ledge. It's as easy as that. Then if you ever get sick of it or want to move the hook all you do is take the hook off and then pull down on the tab slowly like so:

And then it comes off! You can buy replacement strips to re-hang the hooks at Wal-Mart or Target or wherever you bought your hook. They're relatively inexpensive in my opinion.

And like I said they have them in all sizes! I bought these little ones for my Christmas stockings. We don't have a mantel or anything and up until now I'd been using little pins to hang them up on the wall (which makes my husband cringe). So to hang them on the wall, I used my handy dandy little Command hooks!

Then after Christmas, I just take the hooks down and use them again next year.

And the last place I've used them: in my entryway closet. I got sick of my little boy throwing his coat on the floor in the closet because he couldn't reach to hang it up. So I put up one of the hooks at his height so he can hang it up and get it himself! It's been perfect!

So go check them out! I love them and will continue to use them in places where I don't want to drill into the wall or if I don't want the hook there permanently. It's a great solution!

Keeping Your Cabinets Nice and Shiny

Are your cabinets looking a little sad? Do they look dull and have crusted food on them from those little hands in your household? Or from just plain cooking? One of my sister-in-laws passed this tip onto me and now I'm passing it to you on how to make your cabinets look nice and shiny again (and any wood for that matter):

The first thing you're going to need is Howard Feed-N-Wax Wood Polish and Conditioner. You can get it right now at Amazon for $8.82 for a 16-oz bottle which should last for at least 2 applications (it all depends on how many cabinets you have in your house). This is basically beeswax and orange oil mixed together which makes for a strong, but pleasant smell while you're cleaning your cabinets.

Before you begin using this, you need to wipe down all your cabinets with a wet rag, trying to get off as much of that food and other grime as possible.

Then taking a rag, pour some of the Feed-N-Wax on the rag and wipe down the cabinet. Continue to all the cabinets. Your rag is going to get really really wet and greasy by the time you're done. After wiping down all the cabinets, let it sit for 20 minutes.

Then go back over the cabinets with a dry rag, wiping off the excess Feed-N-Wax.


And you're done! The result is shiny cabinets like this:

Granted, my cabinets are less than 5 years old, but I've seen this done on older cabinets and the difference is amazing! I can't tell you how many people compliment me on my cabinets after we do this. We do this once a year, but since the Feed-N-Wax uses natural ingredients, you could do it more often and it definitely wouldn't hurt.

What's even best for me is that my wonderful husband is the one who does it every year. So not only have I shared a tip that wasn't mine in the first place, but I've also admitted that I'm not even the one who applies this stuff! Either way, it works and you should try it out!

7 Food Storage Tips

I'd better first start by saying that I'm no expert on food storage by any means. A lot of what I know I've learned from great websites and family. However, over the last 6 years, I have learned a lot about storing food long-term in an apartment first and then a home.


Tip #1: Only buy what you will really eat for your food storage. If you're living in a small space, don't start collecting massive amounts of food that you would never eat. Things can be crowded enough without bags of dry black beans that just take up space for no reason. Make a list of the things that you eat the most (corn, green beans, canned black beans, peanut butter, pasta, etc.) and make sure you have those things in your food storage first.

And even if you have a lot of space, in an emergency situation, your family is going to have a really hard time eating things they have never eaten before. So definitely make sure everything you have in your food storage is something your family will eat. Besides, then you'll be able to rotate your food storage by eating it and not throwing it away.


Tip #2: Start small. If you haven't started your food storage, don't get overwhelmed by the massive list of food that you should have stored. Start with a month at a time. There is a ton of websites that give you good ideas of what to buy each month to slow stock up on your food storage so that it's not a financial burden. I just recently came across a list that shows how you can start stocking up for only $5 a week; you can find it here.
 

Tip #3: If you don't have a lot of room for food storage, maximize space. When we lived in an apartment, this was huge for us. We had the floor of two closets and the top of our kitchen cabinets to store food storage. We lived on the top floor which apparently gave people a perfect view through the window to the boxes and boxes and boxes of cereal that we stored above the kitchen cabinets. Man we got a lot of gruff for that one. But there was no way I was letting that space go to waste. So even though it may look tacky, you may have to display your food storage in a public place in order to be practical.

Rubbermaid shelf, $3.86 at Home Depot

Another thing I did was stack our cans of food storage under our shoes in the closet. If you look at almost anybody's closet, you see clothes and then a huge gap of space and then shoes on the floor. I didn't want that space to go to waste either. Look in other closets as well and see if there's some wasted space there. You could put food under stacks of towels or sheets. If there's enough space, you could also install another shelf in the closet and put food there (you can find some relatively inexpensive ones from Lowes or Home Depot like the one to the right). Just remember to make sure it's not going to get too hot wherever it is.


Tip #4: Rotate Your Food Storage. It's no good to store something for years only to find that it's bad/moldy/old when you need it. When you add stuff to your food storage, add it to the back and make sure you're using the older stuff first. Then, pay attention to expiration dates so you'll use them in that amount of time. To be honest, I usually still use stuff if it's within a year of its expiration date.

There are also some things that don't store very long like mayonnaise, salad dressings, certain nuts, etc. So make sure you don't buy too many of these things at once so that you will be able to rotate through them without them spoiling.


Tip #5: Always keep track of what you have in your food storage and where it is. Especially if you're doing all of these creative methods of storing things, you're going to forget where you put what and then the food will just go to waste. Also, if you have an inventory of what you have, that will help you to not buy things that you don't actually need for your food storage. I'm blessed now to have my food storage all in one place, but it's still impossible to keep track of how much I have of each thing. So I stole my sister-in-law's idea and made a Food Storage Inventory sheet.

At the top of the page, I have the month and year it was updated. Then I have listed what is in my food storage under some general categories (in italics). Then the first column is what we have, the second is what we need to have to fulfill a year food storage goal, and then what the difference is. You could easily add another column that says where it is stored.


Tip #6: Reuse plastic bottles for water storage. I don't really know if this saves space per se, but it definitely saves money. Wash out your used plastic bottles and caps well and then fill with water for your water storage. Check the lids after a few months because some caps go moldy if you don't wash them out well enough. If that happens, just throw away (or RECYCLE) the bottles.


Tip #7: Learn how to cook with your long-term food storage. This has been one tip that I'm still working on learning. When we bought powdered milk for instance, I told my husband, "Ummm, how am I going to use this?" Then I found out that you any recipe that calls for milk can be substituted with powdered milk (I wouldn't suggest drinking it as milk though unless you really are in an emergency situation). I also found a great blog on how to EASILY cook dry beans in a crock pot (which is really good since I have 25 lbs of dry black beans in my food storage room). That blog post can be found here. There is so much information on the internet that if you're not sure what to do with a long-term food storage item, you can easily find ideas of what to do with it.


Well that's pretty much it for me today. Some day I hope you can have your husband (and father-in-law in my case) build you amazing shelves in a food storage room so you can get the same satisfaction I get from seeing this: