Tag Archives: Budgeting

Saving By Paying Attention – Impulsers, Part 1 of 4

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Impulse Buyer

I have friends, lets call them Impulsers (yes, I made this term up), that are constantly driving to the store to get a snack, pop or ice cream or _________ (insert convenience item on the line to the left).

Typically the Impulsers group are non-financial people that don’t understand (or were never taught) finances so they never picked up even the most basic money skills.  They usually buying everything on impulse, whenever they want it, including big ticket items like cars and boats.

The Impulsers typically live paycheck to paycheck, or worse, go into debt spiral!  Money is like air to them; they breathe it in (salary/wage income) and breathe it out (consumer items and non-appreciating assets) and then some…

Impulsers are not bad people per say, but a little naïve about money management!  So what do you to do if you have a close friend that is bad with money like the Impulsers?

2 Ways to overcome Impulsers’ weaknesses:

  • Budgeting!  Yep, the “Impulsers” have the most to gain by using a budget versus any other group! Ironically, there is an excellent personal finance blog out there called www.Budgetsaresexy.com that actually is really cool.  So cool, that I believe the Impulser’s group would appreciate it and perhaps get hooked on it.  They might start to reading it on a daily basis.  This would be a win-win for anyone in the Impulsers group, because they would derive entertainment value out of the Budgetsaresexy.com website, while at the same time learning a thing to 2 about budgeting!  J.Money even has a special Millionaire Club group, that is basically a pledge of things to do to try to reach that elusive Millionaire level status.  This hands down is the coolest blog about budgeting you will ever find!
  • What if they don’t want to do read a blog? Well, that brings me to what I’m trying to do currently with a friend.  First, we are close… almost brothers, so that gives me a little extra wiggle room, versus a friend you might have know for only the last couple of years.  What I’m going to do is have my friend and I do the budget together!  You might be wondering what am I going to use as the carrot?  Well, my plan is to use the old “I need help” and “Let’s try this out as a team” approach.  The reason for this approach is that your friend doesn’t believe that he/she has a problem.  But, like most good friends, if you come to them asking for help by doing something together, it might have a chance!  You’ll have to spend some time creating the program in addition to the work creating budgeting program.  But if you do it right, and have periodic meetings (monthly or maybe quarterly) somewhere fun (maybe a bar?) it might work!  During these meeting times, voice your concerns to your friend about your financial goals and talk about your expenses and how you plan on controlling them.  You might be able to even animate certain expenses.  By animating certain expenses, it will give it a face!  That will enable you and your friend to recognize the face of the enemy and try to conquer it by keeping it contained (via the budget)! He/she should be able to pickup your concerns and how they relate to him/her.

Also make sure you really do it all out (afterall it’s really a stealth mentoring thing). If you don’t follow through with your budget, how can you expect your friend to either?  I think it might be fun, actually!  Perhaps another win-win scenario.

If you have any additions or any questions about my suggestions please jump in and post a comment.  The water is warm and friendly here are Money Reasons!

-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