a drop of water

Part 2 of 5 in Tips for Budgeting

Tracking Numbers – Knowledge is Power

1. Category Pools aka the Envelope Method – Discipline is required here.  If you put $25 into the restaurant envelope then you must hold yourself to spending only $25 in restaurants that week.  When the week (or whatever time period you’ve set) is over, the money left over can be moved to a savings account or kept in the envelope as a rollover amount for those weeks where more than $25 might be justified.

2. Automatic Disbursements – If your employer offers direct deposit, you can automatically disburse a percentage of your paycheck to a savings account so that amount of money is never really considered as part of your daily living expenses.  If our paycheck is $1000, we live in a way that uses up that $1000.  If we make our paycheck $850 dollars, we will live a lifestyle that uses up that $850.  Lets say you are paid every two weeks and put $150 of each paycheck into that savings account which you do not have regular access to.  After just one year you would have accrued a savings of $3900.  Congratulations, you have more saved than the typical American family.

3. Electronic Monitoring – Credit cards (lots of incentives–cashback, points, miles–for responsible use) combined with programs like www.mint.com or quicken make monitoring your spending almost automatic.  Seeing the relative percentage of how much money goes into different categories in graphs and summaries can be a sobering and challenging experience, but its helpful to know what we are investing in.  Spending really is investing.  Half the battle of being generous with our resources is knowing where we spend already.

Part 3 of 5 in Tips for Budgeting

Planning Ahead – There is always a Sale

1. Research – Amazon (and other websites) are brimming with user reviews on almost everything.  Generic brands are often cheaper for the similar quality (though not always, so read reviews!).  Sometimes paying more for the non-generic will be a better-longer lasting choice than the generic too.  Price compare with online, outlet and retail stores.  Ask friends and family for advice and past experiences with brands and products. There is always a sale, so you need to do the research to know at what price point an item is truly “on sale.”

2. Questions – “Do you really need this?”  Try waiting 30 days from the point of deciding to purchase something to actually purchasing it.  This practice helps avoid buyers remorse and also allows you the opportunity to be creative in using something you already have to meet the need the new purchase is suppose to meet. “What will this enable me to do and what will this disable me from doing.”  The typical example is, “what will paying for cable enable me to do”: sit in front of my tv at night while “what will paying for cable disable me from doing”:  deter me from having real conversations with people.

3. Buying tips – Consider supply and demand – try not to pay for items that are marked up just because there is short supply (i.e. Nintendo Wii’s).  Admittedly my friends and I bought Wii’s for MSRP and sold at 60% markup for almost a year so if everyone were to follow my advice, I would have no customers :).  Consider buying  Used-Like-New.  Jenn and I found the bedroom set that we had listed on our Crate and Barrel Wedding Registry on www.craigslist.com in like-new condition at a fraction of the cost!  Use shopping lists and stick to them, especially when going into warehouse stores like Costco.  These stores are designed to feature items on the aisle ends that you were not intending to buy, didn’t even know existed, and now suddenly think you need.  Just don’t do it (!Nike).  Some thing you should do is use coupons and search for online deals (www.retailmenot.com).  Some say coupons are a waste of time, but I would say being aware of coupons and refusing to buy items that are not on sale is more worthwhile for its perspective-habit building than its qualitative benefits.

Part 4 of 5 in Tips for Budgeting

Involving Community – You are not alone

1. Accountability - Budgeting sucks when you have no more money in your restaurant envelope and everyone else is going out to eat.  Budgeting can feel lonely and overwhelming, so involve your community.  When we share about our financial decisions and are open about where we are investing (spending) our money and include others in the decisioning process, it becomes a lifestyle for a group of people instead of just a loan dingy on a stormy sea.  This helps expand our perspectives and exposes us to others research, questions and buying tips.

2. Sharing – We seem to have a collection of household items that get used once and then sit on the shelf for the rest of their lives till they are donated or given away.  Consider buying these type of items with the purpose of sharing their cost and their use among your friends and family.  When did restaurants become all about quantity instead of quality?  Jenn and I like to eat out on our date nights, but it can easily get expensive.  We’ve been trying to share dishes instead because often times one dish is enough for both of us.  When we do order two, we tend to regret the stuffed feeling in our stomachs as we exit.

3. Be relational – Ultimately, the things we buy really don’t provide us with lasting satisfaction.  It is more about how those things we buy bring us into relationship with others.  Relationships, memories, friendships, and the like are what is lasting, beyond the latest and greatest, shiniest and fastest electronic device, shoe, bag, car, and tv.  Books have a great power here.  I find myself often buying books to own them, read them once and then display them on a bookshelf as proof of my worth, but this renders books to mere dust collectors. If we buy a book, read it, then give it away it opens up opportunity for dialog and discussion between people.

Most would agree that budgeting is a good habit.  It keeps us from spending beyond our means and helps us save for rainy days.  But in practice many people find themselves on the extremes of the financial spectrum.  They are either spending above and beyond their means or they are stingily hoarding money for a possible future unknown event.

Those who spend, spend, spend see little value to budgeting and saving and elevate the importance of a moments whim above everything else.  Those who “hoard, hoard, hoard” place their security. identity, and their own worth into the bottom line of their account statements.

Having the right perspective on money and budgeting is transforming.  It reorders the priorities in our lives, sheds light on the resources we have available and frees us to efficiently help our neighbors in community. Budgeting frees you to give more and to turn your spending into investing.

In the following three posts I want to share some perspectives on three aspects of budgeting and managing your money:

1. Tracking the Numbers – Knowledge is Power
2. Planning Ahead – There is Always a Sale
3. Involving Community – You need not be Alone

This idea has been ruminating in my head since I started cleaning out my shelves of books that I read once, maybe twice and which now are collecting dust, in order to make room for Jenn’s new school books.  I typically purchase books on the friends recommendations or because I’m familiar with the author.  I buy because I liked reading “new” books (this has started to change as I’ve found myself borrowing more and more books with others notes scribbled alongside the margins).  I buy because for some silly reason I’ve incorporated a shelf full of “famous” books into my identity of accomplishment or self worth.

So what if I purchased books with the intention of giving them away or purposefully sharing them with friends, family and people around me?  Instead of buying new books to fill up dusty shelves that must be cleaned and take up space, the money invested in the purchase of the book would be reinvested in the lives of those around me.  Books are one of those things in life have can keep on giving if given the opportunity.  My $10 could go much farther if the book I buy is being passed around, instead of sitting on my shelf.  Not owning the books you’ve read does cause a problem when you want to refer to it again, but this can be solved by 1. A library or 2. keeping a good book journal as you read of quotes, passages and ideas that you are forming and want to remember later.  Keeping the book journal may seem like a pain, but writing things down helps me retain more of what I read.  I don’t want to read just for the moment (sometimes that is the case, maybe), but I want to read more so for the long term planting of seeds in my mind.  I can read all the books in the world, but if I retain nothing, what the difference between that and not reading at all.  Books mentor me, and if I can retain more from my mentor, then good.

Buying a book with the intention of giving it away when you are done helps remove some the financial and impersonal obstacles of idea exposure.  What I mean is, when you give someone a book as a gift, they are probably more likely to read it than to find it on their own and either buy it or borrow it from the library.  Giving a book away creates ground for future discussion on the book, aka relationship and community.

So what if we were to take this perspective to everything we buy.  What if we made the things we buy more accessible to our community.  It takes some risk, but it is ultimately acknowledging that the resources you have are not just for your benefit, but also for the benefit of those around you.  What if we buy things with the intention of sharing it or giving it away.  Obviously consumables wouldn’t fall into the category of “giving it away” but they might be able to be shared to some extent.  I think this encourages taking good care of the stuff you buy, since when you share it, or give it away, you want the person receiving it to not feel like you are giving them your trash.  I could see this working with kitchen appliances (mixers), particular electronic devices (scanners), gardening tools, etc.  It would be a lot easier if I lived closer to people who had a like mind, but still doable.  So if you need anything of mine, just let me know.