Category Archives: Savings

The Power of Spot Budgeting

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Okay, I’ve posted a similar post about this before, but there is power in this process!

What is Spot Budgeting?

Spot Budgeting is the lazy man/woman’s way of doing a limited form of budgeting.  The beauty of this technique is that instead of running your life like a bookkeeper or accountant, you just track 1 or 2 areas of concern to keep the spending in that area under control.

I use it to track my breakfast and lunches, presently I have a weekly spending budget of $20.

So what could you use it for?

 

Latte

Latte

 

  • That $4.00 latte 

     Don’t cut it out entirely, but have a weekly budget of $8.00, track it on a scrap piece of paper… piece of cake!!  Don’t cut it out entirely, but have a weekly budget of $8.00, track it on a scrap piece of paper…

  • Breakfast and Lunch meals (like me) set a max spending amount and stick to it… (so out of the $60 I use to spend, now I only spend a max of $20).  $40 dollars a week now goes towards investments.
  • Dinners out per month.  Maybe budget a max of 2 dinners out a month
  • Fast food dinners out per month.  Maybe budget a max of 8 to 10 dinners?
  • Entertainment. This is a prime area that you can cut out some of the fat, without living like a hermit.  There are many free activities that are still very entertaining.   Examples (walking or hiking, cycling, video games – “online or game consoles”. and movie night with friends).
  • Common sense thing.  You should know what you’re spending to much money on, and be able to create a spot budget for that weakness.

I’ve heard that it take 21 times of doing something to make it a habit.  With spot budgeting, I think it’s possible to change your behavior and make it a habit.  Then move to the next area you want to have spot budget.

Personally, I’ve been using this technique for the last 25 weeks, and I have to say… it works great!!!

What do you think?

Black Friday Tips

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Well, I’ve decided I’m not going to do “Black Friday” shopping today.  The hustling and bustling of the crowds just is not worth it to me this year.

Black Friday Craziness

If you are going out into the “Black Friday” jungle, I have some suggestions for you.

  1. Don’t go to the crazy places.  Target, Best Buy, Walmart…  I prefer to go to less crowded places like Staples, Sporting Good stores, etc…  They have deals too, but they should not have the massive crowds.
  2. If you have to go to one of the “crazy places”, think it out before hand with friends. The strategy I know of takes planning with your kids (or siblings) and friends.  So say you’ve determined that you want items from 2 or 3 stores.  You won’t make it to all 3 before the item is out.  So and your friends take your kids (or brother/sister) to stand in line with you.  Your friends (along with their kids) will stand at different store lines.  Then you’ll be able to buy multiple items at the store you are waiting at, while your friend do the same.  Then each of you and your friends will reimburse each other at the end of the ordeal.  This is a win-win for everybody.  Note, it’s important to use cell phones to coordinate during these transactions.
  3. This is obvious, but make sure you don’t have to go to the bathroom during your long wait in line…
  4. Keep your cool, you’re going to see things that will make you mad.  Even though you’ll save some dollars, remember this is still a small event in life…

Good luck in your pursuits, I hope you reap the reward of “Black Friday”!!!

-D

Spot Budgeting To Save Money For A Goal Fund

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First, let me say, that I’ve always admired people that create budgets and could follow them to the T.  I’ve actually tried to create a budget when I was in college, but it’s never worked out for me. There was always something that would pop up that I didn’t save the receipt for.

Surprisingly, while doing my Breakfast/Lunch experiment, I “out of the blue” realized that my experiment is really a form of budgeting.  I decided to call this type of budgeting “Spot Budgeting“.

Here’s how “Spot Budgeting” works for me:

  • First, every monday, I clip 5 sheets of paper I recycled together and use them as a log for things I do at work.
  • At the top, I add Breakfast and Lunch cost to these 5 sheets, 1 entry for breakfast and 1 for lunch on each sheet.
  • On Friday, I add up the total cost for breakfast and lunch, then I do the following calculation:
    • Is 60 – (weekly breakfasts + weekly lunches), greater than 40?
      • If 60 – (weekly breakfasts + weekly lunches) is greater that 40, then I pay myself the full $40 dollars for an allowance.
      • If 60 – (weekly breakfasts + weekly lunches) is less that 40, then I pay myself the amount that’s less than $40 dollars.
      • The following week I’ll make it up by not eating out for lunch as much.  Then I’ll pay myself the amount over $40 dollars that I didn’t spend.
  • Since I’m adjusting and tracking this weekly, I don’t do any monthly or yearly budgeting comparisons (this makes it simple).
  • Since it a weekly comparison, and it typically only involves 20 entries (only 2 a day) to log per week, it’s very simple and quick to do.
  • If I want to calculate my yearly savings, it’s just (40*52, which is $2080)
  • That’s it…  My budget is just for Breakfast/Lunch and during the typical workweek only.

Now my next stage is to take the money I save by budgeting and put it into a dividend yielding stock (etf, bond, mutual fund or whatever).  Then use the dividend paid by that investment to increase the amount of money I have for lunch.  See my attached spreadsheet table below:

So after 3 years of saving, I can afford to buy another cheap lunch per week, while I’m at lunch… so instead of 2 days out for lunch per week, I’ll added another lunch out with the guys after every 3 years of savings.

My view on the “Spot Budget” is that you are no longer paying for the lunch out of your earned money, but instead using the money from your investment dividends.  So after the 1st year of investing the money, this will effectively be my “Lunch Fund”.

To speed up the savings, I also add “Additional Savings” to my “Lunch Fund”.  The “Additional Savings” could come from bonuses, part of my tax refunds, etc.

Additional Main Adult Total Yearly Amount & Interest Monthly Weekly
Savings Savings Allowance Contributions Interest Interest Rate Earnings Earnings
2009 1000 2080 3080 3,080.00 $154 3,234.00 5.0% $12.83 $2.96
2010 2080 2080 5,160.00 $258 5,418.00 5.0% $21.50 $4.96
2011 2080 2080 7,240.00 $362 7,602.00 5.0% $30.17 $6.96
2012 2080 2080 9,320.00 $466 9,786.00 5.0% $38.83 $8.96
2013 2080 2080 11,400.00 $570 11,970.00 5.0% $47.50 $10.96
2014 2080 2080 13,480.00 $674 14,154.00 5.0% $56.17 $12.96
2015 2080 2080 15,560.00 $778 16,338.00 5.0% $64.83 $14.96
2016 2080 2080 17,640.00 $882 18,522.00 5.0% $73.50 $16.96
2017 2080 2080 19,720.00 $986 20,706.00 5.0% $82.17 $18.96
2018 2080 2080 21,800.00 $1,090 22,890.00 5.0% $90.83 $20.96
2019 2080 2080 23,880.00 $1,194 25,074.00 5.0% $99.50 $22.96
2020 2080 2080 25,960.00 $1,298 27,258.00 5.0% $108.17 $24.96
2021 2080 2080 28,040.00 $1,402 29,442.00 5.0% $116.83 $26.96
* The idea here is to pack food, which saves money and to pay my allowance out of that money

This is my first “Goal Fund”, eventually I plan on have other “Goal Funds” that will pay dividend for other goals, perhaps vacations, taxes, etc.

Well, this is my evolution of my lunch experiment into a Lunch “Goal Fund”.  I’m kind of excited to see this come to fruition!!

Goal Fund for lunch

Goal Fund for lunch

– D

Saving Money Using Google

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Google is great for searching for your favorite topic of interest, but did you know you could use it to save money too?

Last Feburary, my dryer started making a horrible metal grinding sound (I tried turning up the TV to drown out the sound, but it got louder). I didn’t want to buy a new dryer (these are hard time afterall…), so I decided to try to figure out how to repair it myself via google.  So for the search criteria, I entered “whirlpool dryer squeak” and I was able to find some good site on what the problem and how to fix it.  I like to put just the key words in the search windows.

I tried to type things like “whirlpool dryer is making a squeak sound“, but that wouldn’t give me as good of results as “whirlpool dryer squeak“.

I didn’t even know how to get the dryer apart to figure out the problem… until I googled it. It turned out to be the felt gasket, that the drum twists around over. It cost me $20.00 in total to fix the dryer.  I ordered the part (off of ebay), and install it. Normally, to get a repairman out, it would probably cost me at least $150 to $200 and they would do exactly the same thing that I did myself.

I’ve been able to do this with my car brakes and with other car repairs too.

During one of the coldest days of last winter (-10F), my heat pump decided to stop working.

Using google, I was able to quickly figure what the problems was, but I didn’t have time to order the part. From a few websites, I was able to determine what to do, and I was also able to determine that the part would cost me only $26. Unfortunately, I didn’t want my pipes to freeze, so I called a repairman so they could get it fixed that day.

The repairman did exactly what the websites stated to do, but instead of costing me $26 by doing it myself, the repairman’s fee cost me $234.

The moral of the story, the internet (using google to find a fix-it guide) is a great resource for saving money by diy (doing it yourself).

Google rules!

-MR