Plugging the Holes in Your Budget

Posted by The Happy Rock on June 3, 2010

The following is a guest post by a dear friend Ed(@ed_bruner) who is just months away from finally getting out from under $40,000+ in debt.

Use cash to plug up the holes

I assume every family budget has holes in it. Ours did. The holes were mostly unaccounted spending or personal spending…a trip to a retail store, a lunch out, snacks, etc. These “little”spending events can destroy a budget or even derail your debt reduction if they are not kept in check.

The way we handle this issue is by allowing ourselves weekly spending cash. The rest of the income is for bills & savings. All significant purchases are planned and discussed. Once the personal cash is gone, the spending stops. With the change to cash I’ve found that I pay more attention to the cost of things I’m buying. If I want to buy something, then I need to save for it. It really is as simple as it sounds and it works.

I’m sure you are familiar with the statistics regarding credit cards specifically that we are likely to spend up to 15% more when shopping with plastic. Dave Ramsey says that a McDonald’s study showed a 47% increase with plastic. Cash is finite, credit (and debit) have overdrafts and outrageous credit limits, which entice you to be less concerned about price. The minimum payment is only a small fraction of the debt amount.

We do use debit cards but have stopped all spending on credit. When we use debit, it is subtracted from weekly cash allowance.

Its much more enjoyable to manage money, than manage debt.

» Filed Under Cash, Credit Cards, Psychology of Spending

Just Buy It Already! Fighting Indecision On Big Purchases

Posted by The Happy Rock on July 16, 2009

This is a guest post by PF blogger The Weakonomist @ Weakonomics.com. He is a twenty something who works for a major bank and unlike most PF blogger has stayed debt free. For those who aren’t familiar with his blog, click through and say hello.

I’ve never written for Happy Rock before so you probably don’t know much about me. Normally I wouldn’t care to tell you and you wouldn’t care to know, but it adds context to my post. I’m a young buck and getting married this fall. Me and The Sheconomist don’t own much stuff, so we are in the process of acquiring all that married life stuff. We’ve needed a bed, couch, coffee table, dresser, etc…. Since we’re starting from scratch we have a lot to buy and not a lot of money to spend.

When you’re shopping for any items over $100 that you plan to keep for a while it’s easy to get caught up in the shopping experience, and not in a good way. Not only are you trying to find the right design for you, but you’re also trying to maximize the value of your purchase. So you comb the sale ads in the Sunday paper, check for coupon codes on websites, and spend every single Saturday going from store to store looking but not buying.

At some point a line is crossed. You’re actually wasting time. After a month or so of this routine you know the lay of the land and you’ve seen deals come and go. You probably missed out on a couple of really good deals because you just couldn’t pull the trigger. And this happens for one of two reasons: either you’re indecisive or you’re holding out for a better deal.

Now I don’t like to give advice, so I’m not going to try and help you figure out how to actually make the buying decision. Instead I’ll tell you the consequences of not buying. Eventually you do have to make a purchase, and if you wait too long you may have to make the decision in haste. This happens if your furniture breaks, or you car finally gives out, or even if your cell phone stops doing the things phones should do (like ringing). Hasty purchases are filled with emotion and you risk over-paying or not getting the item you really wanted. Buyer’s remorse will then attack like the plague on a 14th century peasant. So make a decision and move on.

You may not find the best deal, but because you’re a smart shopper you know that you will get a GOOD deal. You will waste you life away chasing perfection. Live in a world of “good enough” with your purchases and you’re living in a happy world.

And if there’s one other thing you should know about me it’s that I’m kind of a hypocrite. No not with purchases but because just a minute ago I said I don’t like giving advice, I actually do. I have some parting advice for men and women when it comes to purchasing decisions:

Women: The subtle details mean very little to us. The end-tables with drawers or the ones without are unimportant to us. If you ask us what we think we’ll tell you to get whatever you want. We want you to be happy with your decision because we’re just happy to get back home and watch some TV. If you ask again and we say we don’t care which one you pick, this does not mean we don’t care about you and doesn’t mean we think getting end-tables are stupid. We just don’t care between the options. If you force us to pick one, we will pick the cheaper one and this has nothing to do with the appearance. Don’t take anything we say personally.

Men: Don’t ever say you don’t care!!! The women will see that as a sign it’s unimportant that your home looks nice and so you don’t care about her either. Pick your words perfectly (yes perfection matters here!). I got some great advice from my dad about this the other day. Say that you are less sensitive to the details of the purchase and are only concerned with making sure she is happy. Reinforce her ability to provide the best judgment and under no circumstances allow annoyance to sneak into your tone. You risk her losing interest and then you have to come back next week.

I’m generalizing the sexes of course, you could flip the roles too if you want. If you hate shopping only slightly more than you hate spending money, I feel your pain. We all think it, but under no circumstances should you ever say “Just buy it already!”

Now if you’ll excuse me, I have to go to the bed store… again.

» Filed Under Guest Posts, Psychology of Spending, Spending

We Spend Coins Faster than Bills

Posted by Debt Destroyer on May 18, 2009

Lately I’m becoming an expert on the psychology of spending money, and it’s all thanks to my trusty radio.

Last month I wrote about a story I heard on NPR which said that we can save money by carrying big bills. Earlier this week I heard another story which goes hand-in-hand with the big bill story. According to this story, not only will we hold onto a $100 longer than five $20′s, but we’ll also keep a $1 longer than we will 4 quarters.

I did some head scratching while listening to it.

They talked about a couple of studies which show that people will spend coins faster than bills. The studies were interesting, and they got me thinking back to my days at an office job. Back then, if I had change in my pocket, I’d probably pay a visit to the vending machine. But I’d hardly break a $1 for the same snacky goodness.

The lady went on to say that if the Obama Administration wanted to stimulate the economy they should increase circulation of $1 coins and introduce a $2 coin.

That comment reminded me a story I heard the previous day on NPR, on how the opposite is actually happening.

The US Mint is producing 70% fewer coins this year compared to last year.

They said that a key factor in the reduction was the economic slowdown.

“The Mint’s mission is primarily to make coins to fulfill the demands of commerce,” says Ed Moy, director of the Mint. “The demands of commerce haven’t been doing too well the past six months.

They also mentioned that more people have been saving coins and turning them back into the bank.

“So in addition to low economic activity, there’s an increased number of coins coming back into the banking system, which means that the banks need less coins from the Mint,” says Moy.

So while the penny is not being retired, there will be less of them floating around. In fact collectors are grabbing up. According to the story a 50-cent roll of Lincoln Bicentennial pennies is selling on eBay for up to $10.

Yet another head scratching moment.

So how do you handle coins? Do you spend them as soon as you get them, do you roll them up and put them in the bank, or do you scour ebay and look for coins to add to you collection?

Until next time,

-DD

PS The piece of info I found most interesting in these stories was the fact that the U.S. Mint funds its own operations through sales of collectible and bullion coins. Last year it made a $750 million profit for the U.S. Treasury.

» Filed Under Cash, Psychology of Spending, Spending

Does Carrying Big Bills Save You Money?

Posted by Debt Destroyer on April 7, 2009

On more than one occasion I’ve mentioned my love of public radio, so it should come as no surprise that a piece I heard this past Sunday made my wheels turn.

All Things Considered ran a story about a study which found that people will spend less money if they carry around big bills rather than smaller ones.

The idea was that it is psychological more painful to spend a $100 bill than it is to spend five $20′s.

Does this sound familiar?

It should, because this is the same logic behind the idea that using cash will save you money over using credit.

I instantly found myself in agreement with this idea. I know it used to be true for me. If Ben Franklin somehow found his way into my wallet, he was going to be there for awhile.

I had a hard time spending a $100 bill. I don’t know why, I just did.

Maybe it was because I remember seeing clerks turn down customers who tried to use $100′s. Or maybe it was because I very rarely would come into contact with one myself, so I was in no rush to get rid of it.

But notice I said I “had” a hard time. I’m using the past tense because I have overcome my inhibitions of parting with big bills. And I owe it all to the envelope system.

Just yesterday me and my four year old daughter hit the grocery store and racked up a $97 bill. I just pulled a $100 out of my pocket and let my little girl pay. The clerk got a kick out of it. I guess you had to be there.

Basically, I agree with the report that people will spend less if they only carry big bills, but I think that effect will lesson as time goes on. After a few months I think people will get use to the idea of dropping $100′s and their spending will return to normal.

What do you think?

Is there anything to this idea or was NPR just trying to fill up a few minutes of airtime with nonsense?

Until next time,

-DD

» Filed Under Cash, Psychology of Spending

I still want a Snowblower and I Know When To Buy One

Posted by Debt Destroyer on April 7, 2009

This year March went out as a Lion in my neck of the woods.

This meant, yet another blizzard. So as I spent a couple of hours digging out my driveway and sidewalks, my thoughts turned once again to breaking down and buying a snowblower.

My friends & neighbors were also asking me when I was going to get one. They couldn’t believe that I lived on a corner lot and didn’t have a snowblower. But then after a few minutes of conversation (yes, around here, conversations about snow removal can take that long) it seems most people delay the purchase until a really nasty winter sets in.

This year qualifies.

As luck would have it we here at The Happy Rock received an email from Chris who happens to run snowblowers.net. And according to an article he forwarded (when is the best time to buy a snowblower) the summer is an overlooked time for people to shop for snowblowers.

I have to say that buying a snowblower is nowhere near the top of the list of things I’m thinking about during the summer. By that time I’m much more worried about not getting eaten by mosquitoes (why do I live here?).

So this summer, in-between Deet applications, I’ll keep my eyes peeled for a deal. I’m hoping people will replace their 10 year old model (winter of 1997 was very nasty) for a new one, which means a flooded market for used snowblowers.

Until next time,

-DD

» Filed Under Psychology of Spending

DD’s Monthly Expenses – February 2009

Posted by Debt Destroyer on March 9, 2009

It’s a good thing that February is a short month, because we here at the DD household went WILD!!!

Here is the latest breakdown of my family’s monthly expenses:

$1032.00 – Investing
$830.00 – Mortgage
$664.10 – Health Insurance
$639.00 – Daycare
$520.36 – Vehicle Maintenance
$475.50 – Groceries
$468.23 – Electricity
$210.83 – Phone & Internet
$175.92 – Short Film Project
$175.00 – Student Loan
$169.16 – Medical Expenses
$161.41 – Household Misc
$150.00 – Obama Picture
$58.45 – Dinning Out
$53.00 – Movies
$52.11 – Utilities (Water, Sewer, Garbage) no longer billed quarterly I guess.
$48.30 – Gas
$22.00 – Donations

Grand Total – $5905.37

I’m Speechless.

Biggest Budget Busters!

$1032.00 – Investing – I tried my hand at timing the market by buying some pretty well known stocks which are at very low levels. This is something that people with a working brain will tell you not to do. If you’ve been following this blog for any length of time you know that my brain power is questionable at best.
$520.36 – Vehicle Maintenance – Now I know why people put a piece of duct tape over their check engine light. This also makes me wish I would’ve been friends with the Motorheads back in high school. Only $90 of this was parts, the rest of was labor. I need to hang out with Five cent Nickel’s Mom.
$210.83 – Phone & Internet – You might remember, that I posted about how I switched phone/internet providers. They warned me that the first bill was going to be a doozy. I just got the next one and it’s back down to earth($75), so this will be a one time budget buster.
$175.92 -Short Film Project – Back when I was “interviewing” for this gig, I told The Happy Rock that I was a man of many passions. One of which is film. My hometown hosts a fun little film making competition every winter. You get 47 hours to make a “film” then they show them all on Sunday night . They give out $1000 in prize money, but sadly we didn’t win any of it.
$150.00 – Obama Picture – Remember when My kids & I were in Time Magazine. Well we finally were able to attain the rights to the picture…for a price.

Biggest Budget Breakthroughs:

$48.30 – Gas - Actually I don’t think we had any Budget Breakthroughs this month. But I felt like putting something down. The low total in this category doesn’t really represent less gas used(well it does, but…), it just means that we didn’t go on any out of town trips this month.

Now for my rationalization.

If you take away the one time budget busters, we’re right in line with last months total. I also think we went a little wild because we have been suffering from a case of cabin fever. I can’t say for sure since I didn’t track expenses last winter, but I bet our spending increases every winter. Mainly because there is nothing else to do.

Not saying that makes it right, it’s just a theory.

Until next time,

-DD

» Filed Under Psychology of Spending, Spending

I’m going to Disney World! (In seven years)

Posted by Debt Destroyer on February 7, 2009

Millions of us just watched the Superbowl and its tradition to have a player yell at the camera and say that he’s going to Disney World (This year Ben Roethlisberger and Santonio Holmes got to go).

We here at the DD household have also caught Disney fever. You won’t be seeing us scream into cameras or anything like that. But we are very excited none-the-less. In fact, we just added it to our Wish List.

Yep, well be there sometime in…2016.

Well, we figured there’s no rush.

I’ve been there a couple of times in my life. First with my family and then later with my High School Marching Band. Both trips were a blast! But my wife has never been there, actually she hasn’t been too many places. So I figure it’s time that she gets out & about.

But how cruel would it be to go to Disney World without the kids?

My kids are of course big fans of the movies. We’ve recently checked out The Lion King from the library and now the only game my daughter & I play is called “Lion King” (We act out scenes from the movie with a stuffed Simba).

So we figured we better wait until they get older so they too can enjoy the trip. The way we figure it in 2016 our kids will 11,9, & 6. The six year old is a mythical child who doesn’t even exist, but I’m picking up some subtle hints that they’ll be joining us sooner rather than later. Such as:

“Lets have another kid.”

“When we have 3 kids next year…”

“Lets shoot for a February birthday this time.”

You can make fun of most husbands for not being very observant, but I’m a sharp one.

Now, I can only imagine what it will cost for a family of five to go to anywhere in seven years, much less Disney World. But this timeframe will give us plenty of time to save up and study up for the best deals.

If any of you out there are planning a trip sooner than me, be sure to check out Mousesavers. It looks like it’s full of great ways to save money on a Disney Trip.

I hope to be able to take lots of family vacations. We’ll start out with smaller ones like trips to the Black Hills and Wisconsin Dells. Then after the Disney Trip we’ll mix in Wash DC, NYC & Hawaii. When the kids are gone, the Mrs & I would like to travel outside the country (Europe & Asia).

Hey if you’re gonna dream, dream big right?

So trusty readers, do you have any travel plans that you’re saving up for? They can be short term or long term? It’ll be fun to see where everybody is going.

Until next time,

-DD

» Filed Under About The Debt Defier, Psychology of Spending

Teaching Toddlers About Money – The Pebble And The Dollar

Posted by The Happy Rock on February 5, 2009

The Happy Pebble(age 3) couldn’t contain his excitement as we pumped up a 3 foot long ‘rocket’ balloon and watched it sputter around the room. For him it was the joyous culmination of a life money lesson that he didn’t even know he participated in.

The story begins with the Pebble and I making a few homemade thank you cards for gifts received at Christmas. It took us a few weeks after the holidays, but gratitude is better late then never. We mailed the cards off and in not too long he received a surprise letter in the mail from his Great Gram. It had a return thank you note saying she loved the card that it was hanging on the fridge. She even reinforced her gratitude by including a single dollar as a surprise!

The Pebble was elated, since he is usually happy to nab the spare change from around the house and throw it in his piggy bank. His very first dollar. His joy grew after I mentioned that we should go to the store and buy a toy.

The next day The Pebble, Pebble Junior, and myself spent a good hour in Target. I had to stay patient because this is where the real magic happened and where he began to understand the power of a dollar. He would point to toys and I would kindly explain that it would be 10 of the dollars he has. He happily kept looking and asking, but wasn’t willing to accept the toys that he could afford. He also wasn’t willing to ‘save’ the dollar and wait so that he could get something bigger, even offering to kick in some money for the effort.

Eventually after looking through all 10 aisles more than once he realized that he couldn’t afford something big and happily settled on Rocket Balloons. It included a mini air pump and long balloons that you pump up and let go to see them rocket around the room. Even though it was twice what he had(I didn’t tell him), it was still under $2 and he had learned a lesson in the value of a dollar and had great fun doing it. He shyly gave the money to the cashier and beamed with excitement until we could open the package and start playing. Lesson over.

Any readers have great stories to share on how they are teaching their toddlers about money?

» Filed Under Children and Money, Psychology of Spending

DD’s Monthly Expenses – January 2009

Posted by Debt Destroyer on February 3, 2009

Here is the latest installment of my family’s monthly expenses. Without further ado here’s the breakdown:

$830.00 – Mortgage
$759.00 – Daycare
$664.10 – Health Insurance
$484.69 – Electricity
$452.50 – Groceries
$180.00 – Pearl Jam
$175.00 – Student Loan
$158.23 – Misc Household
$146.84 – Clothes
$117.01 – Gasoline
$84.19 – Water, Sewer, & Garbage (quarterly)
$60.00 – Medical Co-Pays
$51.93 – Dog Food
$25.92 – Eating Out
$11.67 - Vehicle Expenses
$4.60 – Movies

For a grand total of $4205.68…Yowsers!

Even though I used to freak out when we were this high, I have a feeling that the $4000 range is where we’ll be at for the foreseeable future.

Biggest Budget Busters:

$664.10 – Health Insurance – I’ve already talked about this expense in another post so I won’t dwell too much on it here. And I probably won’t put it here again since it’s now a steady part of the budget, but I wanted to include it this time so help account for the big jump.
$484.69 – Electricity – Welcome to winter. This was by far the highest this bill has ever been for us (for example last month it was only $207.88). But December was unusually nasty this year, so I’m hoping for a lower bill next month. I also made some adjustments which I’ll talk about in a future post.
$180.00 – Pearl Jam – $40 of this is the price of 2 memberships of their fan club, and $140 is for the Super Deluxe Edition of the re-release of Ten. I know this was not a good financial decision, but no die hard Pearl Jam fan could possibly pass this up. (Can’t wait for the 20th anniversary tour!).

Biggest Budget Breakthroughs:

$84.19 – Water, Sewer, & Garbage - This is about half of what it was just last quarter($159). It makes no sense why it is so much less. I should probably call the city to investigate, but I didn’t want to look a gift-horse in the mouth.
$25.92 – Eating Out – This is the one area that the envelope system has really helped us out on. We’re having trouble reigning in the Misc household expenses, but we’re doing a great job of limiting eating out.
$4.60 – Movies – Actually this should probably be listed under eating out because this total reflects the price of a medium drink. My wife’s parents treated us to a movie & popcorn, we only had to pay for our drink. We went to see Gran Torino. I don’t know about you, but I really like Clint Eastwood’s later work.

Well there we have it. I’m already a little worried about next month’s total because since I switched phone & internet service, the billing cycle is a little screwed up (notice it’s not on my list this month) and the first one is a doozy. But it’ll all be taken care of by next month.

Until next time,

-DD

» Filed Under Psychology of Spending, Spending

Screw Saving Money…I Want a Snowblower!

Posted by Debt Destroyer on January 16, 2009

shoveling

I’ve had to shovel snow at least once a day for the past 6 days.

I’m sick of it!

I live on a corner lot so that means I have two long sections of sidewalk to shovel within 24 hours after it snows. I also have a longish driveway which adds to the misery. Throw in our walkways to and from the house and it takes me about an hour to get done. Longer when I have to bust up drifts after a blizzard.

Did I mention this is all done in below zero temps!?!?

Every time after I get done and I’m trying to thaw out with some hot chocolate I tell myself that when my feet and hands regain feeling that I’m going to go to the store and pick up a snowblower. I of course never do. There are a few reasons for this:

I’m a cheapskate.
I don’t have the money.
It means I’m old and can’t handle shoveling.

#1 & #2 go together. If I don’t have the money for a snowblower, I really shouldn’t be thinking of getting one.

But reason #3 is a tough one to swallow.

Sad to say but I think I am getting too old to handle shoveling. For the past few mornings I’ve been waking up with a mighty stiff back and a sore knee. It feels like I just got done with a tennis tournament. I’m thinking if I’m gonna blow my budget on a snowblower, I might as well get some new comfy boots so I can walk behind it in comfort.

But that’s a dream. There’s no snowblower coming my way anytime soon.

My parents never had a snowblower until I moved out. That’s because I was the snowblower. My kids don’t know it yet, but they too will serve the function of snowblower until they move out. My daughter just turned four. I figure she will start being a useful helper in about 6-8 years.

Can I handle 6-8 more years? I hope so.

With my snowblower dreams dashed for now, imagine the choice words I used this morning when the city plows came by and blocked my driveway with a 3 foot wall of snow right before I had to take the kids to daycare.

Good news though…after a few more days of below zero temps, the weather report is looking good (if you call 20 degrees good). And the main thing is that there is no snow in the forecast.

Hallelujah!

Until next time,

-DD

» Filed Under Psychology of Spending, Spending

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