Category Archives: Costs

Creating an Automated Budget

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I confess, I’m not a fan of traditional budgets! 

They require too much of my time. It takes too much meticulous work to track and record everything I buy.  And yet, I’m doing great from a budgeting perspective!  I know how much I spend per month and when my money go over what I have allotted.    

How is this possible?  I created a relatively automatic process that essentially emulates the basic goal of the traditional budgeting process years ago.  Since I’m a number cruncher, I created a spreadsheet (call Finances.xls) that has 16 separate sheet (and growing) about my finances.  I also have a House Mortgage spreadsheet that tracks the amortization of my mortgage loan, but that a separate post for another day… 

 
So how did I create a spreadsheet that for the most part automatically does my budgeting for me?  
  • First, I created a worksheet that tracks my income (this is a number at the A1 cell in my spreadsheet, then from there I subtract all of the taxes (federal, state, local, FICA, 401(k) contributions, life insurance ect.  Eventually, I get the Discretionary Income (the amount of money I’m actually able to spend from my checking account – per paycheck).
  • Next I created an “Expenses Page”, this page has all of my non-paycheck expenses added up to a total monthly balance.  I cut corners here though,  instead of creating a ton of itemized individual expenses, I just have the following:
    • Car Insurance
    • My Spending Money
    • Mortgage Payment
    • Credit Card (catch all!)
    • House Utilities
    • Son’s 529 (this is pulled automatically)
    • Daughter’s 529 (this is also pulled automatically)
  • I typically only touch the above expenses once a year to increase cost for such items as my credit card, house utilities, Car Insurance, etc!
  • Next, I subtract the above expenses from the first page’s Discretionary Income (my income worksheet is really labelled “My Salary Pay Play” – I like to do what if scenarios :)) and I get a leftover number (displayed on my expenses page – which is labelled “Pay Allocation”).  This amount is used to fund my Roth IRA at the end of the year (sometimes there isn’t enough left to fund the entire amount, luckily I have until April 15th to fund the full amount for a Roth IRA).

Where does the automated budgeting part come into play?   

Well, everything that I have goes through my bank, so at the beginning of each month I get a statement of the previous month’s activities.  So I’ll do a quick scan of that to check and see if I see anything unusual happened (there aren’t too many things that hit my checking account directly… almost everything goes through my primary credit card).  This only takes me less than a minute unless I spot something extraordinary (which hardly ever happens).  Next, I check the balance on my credit cards!  As long as it is less that the monthly amount I pegged for it in my spreadsheet, I ignore it.  If  it’s over, my wife and I will go through the itemized list that  the credit card company provides with the bill.  Typically we know that around Christmas, the credit card goes over by potentially a thousand or so.  We make sure that the next year, we start out slowly by making sure the balance is lower than typical to make up for the previous years December costs…  

So in a nutshell, my month checking account inflow and outflow, and the Credit Card balance acts as a trigger to make sure we are within our automatic budget.  This works well for use since we are both frugal and live a fairly simple lifestyle.  

When I started this process over 10 years ago, there wasn’t any great online site like www.mint.com, www.Networthiq.com (yes, of course I have a Net Worth spreadsheet page…) or any of the other great new sites!  I’m pretty happy with my current setup, it’s quick and easy for me.  

Do any of you use any unconventional, “not quite perfect” means to handle your finances?  Or do you just go the newer, easier route, with www.mint.com and other similar financial online sites?  

As long as whatever you use get the job done, that’s all that really matters!!!  

-D

Cost versus Quality Tools and Games

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Too many time, I see people choosing a brand name product for something that can be bought for a lot cheaper price with a non-brand name one.

Eastwing Hammer

Back when I worked construction (for a year or 2), I remember another young construction worker telling me that I should buy a “Eastwing hammer”.  I never hear of it before, so after work, I went to check it out at a  hardware store.  I was shocked, it was almost twice as much as a traditional looking hammer that was right beside it.

So I picked up theEastWing  hammer, and it felt well-balanced well and had a good solid grip.  I have to admit, I did like it.  But there wasn’t any way that I was going to pay twice as much for a hammer with the “Eastwing” brand name.  And besides , I already had a hammer.  The ironic thing was an older construction worker told me the same thing as the younger contruction worker did, but I noticed when he was hammering that he wasn’ t using a “Eastwing” hammer.  Now this hammer is a good quality hammer and if you do construction work professionally, it might be worth it.  But then again, you have to remember that the older construction worker got along fine without one.

Another example was when I was with a buddy in the game section.  His wife wanted him to buy the board game called  Life, and we found it easily enough, but…  There were 3 of them. one was a cheap knockoff version, another was a traditional board game, and the third was a leather portable case to carry the game around in (price included the game too).  Instantly, he wanted to buy the most expensive version.  I flat out asked him why?  He tried to make excuses like “but it’s portable and has a case”.  I countered with get a rubber band and use it on the box that it came in.  Try as I may, he still decided to go with the fancier one that cost three times as much.  Later he told me I was right and that it wasn’t worth it (but I bet he would do it again :).

The point is, look and assess if it’s worth it paying 2, 3 or more times what the cheaper but sill highly functional version is selling for

This is a tricky area, because sometimes the more expensive product is the best solution!  But for some thing like a hammer that you won’t uses much, it’s a no brainer…

Income Loss From My Wife Being a Stay at Home Mom

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After posting “How I Have Lost Over Half A Million Dollars Having Kids, So Far!”, I started thinking about how many of my family and friend’s spouses work.

Let me start with our parents… Both sets of parents work.  All the people I know at work, their spouse works.  My boss who makes at least twice as much as I do, spouse works.  Where I live, only one other neighbor’s spouse doesn’t work, the rest do.  My college-educated sister and brother-in-law (great people), both work.  My sister is having a baby in Feb. 2010, and she claims she’s going back to work a few weeks after the baby is born.  They already make more than me…

So, I decided to go out to the website:  money.com to use their calculator for net worth and see what the median (the median, mind you) net worth would be for someone in our conservatively theoretical income range!  The number came out to be $644,100.

Missed Income

Missed Income

And that is the median!  Both my wife and I are very frugal and based on our frugality habits, I recalculated the number…  I figured for us it would be somewhere in the $800,000 to $900,000 range, Grrrr!

Who is to blame for this?  Well, unfortunately, me!  My wife and I discussed whether she would work or stay home raising the kids years before we had our first child.  I told her once I make over a certain amount, she could stay home.  Ironically, I accomplished that number more quickly then I imagined, and so she stayed at home after my son was born. In hindsight, I don’t think this was the most prudent move on our part.  It especially hits home seeing my 20 something sister start to pass me already with respect to net worth, did I mention that both she and my brother-in-law are both studying for their MBAs?  In a future post, I’ll have to tell the story about how my sister won a free house. So now that I know I’m behind compared to our theoretical income group’s class, what can I do?  I’m thinking it’s time to start some side hustling (frugaldad.com’s coined-phrase).

How do I feel about my discovery?

Sad, but not too disappointed.  My kids are doing very well in all aspects of their development.  It’s a hefty price to pay though, especially when we’re practically the only ones doing it these days in a world of the two-income earner households.  Shoot, If we had that money now, I could go into a semi-retirement state if I wanted to (I’m not old enough to think about that now though)… Oh well, the moral of the story is, think twice before and your significant other decide to quit work to raise your kids.

Don’t Be a Scrooge

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Future Scrooge

Life moves fast

 

In the classic tale “A Christmas Carol” by Charles Dickens, Ebenezer Scrooge was rich because he was extremely frugal (miserly really).  So frugal that he never gave to charity, and was always out to save a buck.  I know that this is just a story, but truth be told, most rich folk aren’t like this, the statistics back me up on this.  But I’m not going to talk about the frugality and amount of charity that the rich dole out (as interesting as that is).

I want to bring to highlight another aspect of the character Ebenezer Scrooge.  That characteristic is his loneliness and lack of real friends.  In the story, his newphew would stop by at his uncle’s place and invite him to a Christmas party every year.  But Scrooge would bah humbug it off and not go.  I started wondering, what is the cost of missing an annual parties like that?  Very high and here’s why:

  • The friends (you included) at the Christmas (or any) party will only be that way once at that time.  It’s not replicatable.  So if you have kids, they will only look, think and be (unique) that way at one time in life.  You can never get that event back.  If you were there at the party, you could be videotaping it for memories in later years.  I wonder what the cost of such memories would be?  The only way to really know is to ask someone older that missed them.
  • When you miss social events, you miss the opportunity to network.  But really, that should only be 10% of the reason you would go to such an event.  Go because your like people!  Go because life is more than the perceived piece of paper in your wallet/purse.
  • Believe it or not (depending on the party composition), most likely you will learn something new at the party.  Where I live, we have neighborhood parties, and at the minimum I learn at least 1 new thing at each and every party.

Why I’m writing this is because I missed a 2000 New Year’s Eve party because I had to be on-site at my company (I’m a techie).  The funny thing is if you aren’t there, you really don’t know what you missed (but you did!).

So what I’m saying is “Don’t miss out on life”, there are more important things that just work and money.  Do the Carpe Diem thing and “grab life by the horns” when you have the opportunity.