The development of our household budget has been a wild ride. After we first married, some ten years ago, we rarely sat down to discuss finances, detail a monthly budget, or even discuss longer term plans such as retirement goals, etc. Over time I took on the role of handling the finances in our relationship and made a few half-hearted attempts at a budget on a most infrequent basis. It wasn’t until I finally had a financial wake-up call that I realized budgeting, and better communication about money, were the keys to our financial success. To this day, I have a difficult time setting a budget amount at the beginning of the month and sticking to it.

When Budgeting, Think in Shorter Terms

One of the ways I’ve found success in budgeting is to think in shorter terms. Instead of trying to plan for an entire month’s worth of income and expenses, I’ll just plan out the next two weeks (which works well since I’m paid biweekly). Personally, we find it easier to anticipate upcoming expenses over the next couple weeks than for the entire month. But even a two-week plan has pitfalls. Things always tend to sneak up on us that we forgot to account for when setting the budget. Kids’ yearbooks, medical expenses, or a trip to the vet can blow your budget out of the water. For this reason I’ve started thinking about my income and expenses on a daily basis.

The Daily Cash Flow Battle

I don’t literally mean I lay out a budget every single day in a formal manner. I mean that I break down my incidental, or miscellaneous, expenses budget for the entire month down into a daily amount. For instance, if I set aside $360 in June for incidental spending (eating out, clothes, gifts, entertainment, etc.) then my daily incidentals budget is $12. That means I can spend an average of $12 a day on these miscellaneous budget categories and not break my budget. I keep this figure tucked away in my memory bank and while out and about during the day keep sort of a running total in my head. There was the $3.00 breakfast sandwich on the way into work; $1.00 for the drink out of the machine; $5.00 for a coworker’s kid to go to band camp. I’ve already spent $9.00 of my $12.00 budget for daily incidentals. That means if I want to stop by Target and pickup that new CD that came out it will have to wait until another day.

One Bite at a Time

This plan reminds me a bit of that saying, “The best way to eat an elephant is one bite at a time.” By breaking down an entire month’s worth of budgeted expenditures into a daily limit we are forcing ourselves to keep an inventory of our expenses as we go about our lives. Not much room in this plan for a $40.00 pair of jeans you happened to see in the window on the walk to work. If you continue to win the daily battles when it comes to daily cashflow, ultimately you will win the war against debt and overspending.

photo by IntangibleArts

Welcome to Sunday Conversation #7! If you would like to participate in next week’s Sunday Conversation, simply ask your question in the comments section of today’s post and I will respond next Sunday. Remember, any subject is on the table (but keep it family-friendly).

Sherri asks a follow up question to my ideas on how to find about a community when considering relocation.  “You say WHAT to look for in a new place to live, but I think the hard part is HOW to find out about those things in a realistic way. For example, when checking out schools, the information on the web is usually insufficient or lopsided. I think talking with live people who are there – prospective bankers, realtors, etc. – is more helpful. Who would you recommend to talk to, and what other avenues of gathering information would you use?”

I think some of the most objective opinions you can get are from area small business owners, and as you suggest, realtors.  Try to think of industries related to the type of information you are seeking.  For instance, if you are interested in schools, drop by a teacher supply store, or maybe a locally-owned children’s clothing store.  Owners there should be able to shed some light on the various school zones in the area.  For general “town gossip” there is no place like a hair salon or barber shop.  Stop in for a trim and talk up the stylist or barber to find out more about the area.

An anonymous commentator asks, “Do you think that psychotherapy is a good personal and financial investment? I have a severe anxiety problem and my pastor at church thinks that I need to address it through counseling before I get married in the next six months. I have checked with several behavioral health facilities and many charge 100 dollars or more an hour. I have good health insurance but it is a shame that even some of the best insurance (like mine) barely covers any of the cost of behavioral health visits.

I have plenty of money saved up and I have a very well paying job. But I could potentially spend hundreds or thousands of dollars on these sessions and it might be a rip off and/or not even work at all!

Would I be better off getting free books at the library or trying Yoga or something and saving the money? My fiance is very supportive but I don’t want this to be an issue in our marriage. Any ideas?”

First of all, I would highly value the opinion of your pastor because he knows more about your story, and has likely counseled dozens, if not hundreds, of people in his position.  From a purely economic standpoint, I can understand your concerns over the cost of therapy sessions.  Have you checked with your human resources office at work?  Some companies offer a number of free visits per year for behavioral health issues.  Personally, I would deal with this as I would any other type of health issue.  It has the potential to damage your relationship with your fiance, and could ultimately cause problems at work–affecting your ability to earn a good wage.  For those reasons, I consider therapy an investment in yourself.

Luke asks, “How do you find the time to do web work as well as spend enough time with your family?”

It isn’t easy. In fact, these last few weeks have been more challenging than ever.  This is the busiest time of year at my full time job, my wife is in an AirCast thanks to a severely sprained ankle, and I have been covering all household duties for the last several days.  To make more time for writing, without sacrificing time with family, I have adjusted my schedule a bit.  For instance, at the time of this writing it is 11:50 on Saturday night and I am catching up on writing while others are sleeping.  During the week I will typically rise around 4:30 to get in a couple hours of writing, site work, etc. before having a quick breakfast with the kids and then heading off to my full time job.  It isn’t easy, but I enjoy writing, and if I am ever going to make something of a side career out of this I will have to do it at odd times while I “earn a living” during “normal” hours and work in some quality time with the wife and kids while they are awake.

Dawnf asks, “I was wondering where is a good place to put the 3-6 month savings cushion? My bank suggests a money market fund so it’s liquid but I worry that I could lose part of my principle by doing this. I could stagger it in Cd’s that come due in different months & just take a risk I might have to crack it earlier to get a better rate or put it in savings? Just curious how others handle this type of an issue.”

We have the first $1,000 of our emergency fund in a local bank savings account earning a ridiculously low interest rate.  I have it there for the sole purpose of having immediate access to local, liquid funds.   The remainder of emergency funds and other savings are stashed away at ING Direct, earning a better interest rate, but one that does not necessarily guarantee us protection from high inflation.  Personally, it’s a risk I’m willing to take with these emergency funds because I don’t want the added risk of losing capital in the broader market.

If you are not concerned with inflation, but more with the risk of money market accounts versus CDs, I would suggest you go with what you are comfortable with.  However, most money market accounts and money market funds rarely, if ever, lose value like stock and bond funds do.  It is possible, but the likelihood is that your capital invested in money market funds is safe.

Do you have a question you would like to see answered here next week? Simply post a comment to this article below and I’ll include your question in next week’s Sunday Conversation.

Last week I mentioned my wife had severely sprained her ankle.  It’s been a tough week for her and she didn’t seem to be healing, so we decided to get a second opinion with an orthopaedic surgeon.  Turns out she actually tore ligaments in that fall, and is now in an AirCast boot for the next four weeks.  Talk about going from bad to worse!  Well, we are fortunate it was not broken, and the tears do not require surgery.  I’ll be keeping up with most household duties for the next month or so, and the roundups may be lighter than normal as I am not getting to the feed reader as often as I would like.

From The Life Skills Network

9 Black Belt Techniques for Fighting Laziness at Work.  Maybe it is the heat, or being “one down” at home, but I’m seriously lacking in motivation at work.  Next week, I plan to put a few of these ideas to use and hopefully pick up the pace a bit.

A Simple Life is a Good Life – I Believe Less is More.  I’m currently reading a great book on this subject (look for a review early next week).  I’ve recently tried to simplify several areas of my life from weeding out unnecessary junk in our garage and closets to consolidating bank accounts.  I have found that the less things I have to worry about the more peaceful life seems to be.

11 Fun and Frugal Summertime Activities.  I plan to use several of these ideas to get the kids out of the house a bit over the next few weeks.  I especailly like the plant tour idea.  When I was a kid I toured a candy factory and an airplane jet engine manufacturer–I thought both were about the coolest places in the world!

How I Teach My Kids About Money and Life by Using Bricks.  This one is a real gem!  Ron eloquently describes how lives are built just like a building, one brick at a time.  Good decisions lead to solid “bricks,” and a solid foundation.

How Do You Budget With an Irregular Income. I’m fortunate to have a steady income at the moment, but at some point I would like to work for myself.  Simple Mom provides some great thoughts on how to make a budget work when your income is unpredictable.

Other Great Reads Around the Web

My Book Writing Journey From a Dream to a Deal and a Finished Manuscript.  Looks like Trent has wrapped up the final manuscript for his book.  As a long-time Simple Dollar reader I’m looking forward to reading this one!

Are You Financially Healthy?  The Five Stages.  The debt spiral reminds me of a hamster wheel–the faster you run the faster the wheel turns, but you never gain any ground.  You have so much debt that your minimum payments drain your available cash, so you are forced to charge things the last week of every month.  It’s a vicious cycle!

Fifty Frugal Date Ideas.  I enjoyed this list because most of them required some type of fun activity (which you would expect from a Money and Fitness blog).  I remember when my wife and I were dating we played basketball at a local church and had a great time.  This list is a great reminder that it doesn’t take a lot of money to have fun.

Thoughts on Retirement and Financial Independence.  Some interesting thoughts here on how to find your “number.”  I have a number in mind, but it is a very general target and depends on other factors like whether or not I’m completely debt free (mortgage and everything), whether or not my kids are finished with college, etc.  $1.2 million sounds pretty close.

Rate Your Job, Company and Salary at GlassDoor.com.  The Digerati Life clues us in on an interesting new concept where site visitors may read reviews on a company, salary information for specific positions, etc.  I imagine this would be very helpful when looking for a new job, but I wonder about liability issues for disclosing salaries and negative information about your current employer.

Creating My List of Financial Priorities.  Fresh off a Money Magazine mention, NCN shares his personal list of financial priorities including retirement investing, insurance, budgeting, college savings, etc.  I always enjoy reading what others are doing for various aspects of their financial plans.

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Last year I justified the expense of a year-long gym membership as an attempt to get into better shape. I did pay cash for the expense, and because I paid up front I received a few additional months as a bonus. Unfortunately, that membership is coming to an end in August, so I am beginning to think more about frugal ways to continue my exercise program at home. I’ve set a $200 budget for outfitting a home gym with a few key pieces of strength training equipment, and some additional workout gear. Here is a look at the things I’ll need to buy to build a home gym, and my budget for each item.

Shoes ($40). I’ve been cursed with bad feet (thanks Dad). A good pair of shoes is a necessity for me, but I refuse to pay $100+ for a pair of the latest Nike Air “Whatevers,” so I’ve been looking around at various online shoe stores and a few local sports shops. With a good pair of shoes I can find plenty of places to walk, and even run a few intervals for cardio training. I am not normally brand conscious when it comes to shopping, but shoes are the rare exception. I have a wide, flat foot and have found that New Balance (which typically comes in wide) is the most comfortable shoe for my feet. Because I usually destroy the inside of the shoes before the outside, I try to extend their life by picking up a sole insert or two before recycling them as my dedicated “lawn” shoes used for cutting grass, gardening, etc.

Stopwatch ($25). I don’t personally need one because my old Timex Ironman still serves me well. I’ve replaced the battery and the strap from the original, but it is still ticking. And to think some people pay thousands for a Rolex that doesn’t tell time any better than mine! Watches with a stopwatch feature, or a dedicated stopwatch, are a necessity when running intervals, measuring rest between weight lifting sets, etc.

Weight Bench ($85). A sturdy weight bench can be used to perform a variety of exercises, both with free weights and your own body weight. I like to use dumbbells for curls, flies, bench presses, dips, etc. Some benches also come with attachments for leg extensions and leg curls. Though it isn’t necessary, an overhead rack to perform bench presses using a full-sized barbell is a nice feature. However, this usually adds significantly to the price and the space required to store the bench. Since I’ll probably be using a small area of our back patio my options are fairly limited here.

Dumbbells ($50) . Used dumbbells are pretty easy to find on places like Craigslist, or at a used sporting goods store. The problem with dumbbells is that you need a variety of weights to do different types of exercises, but buying ten different sizes can get expensive. I’ll probably buy a heavy set for presses and a lighter set to use for curls, triceps work and flies. Besides, after tearing my rotator cuff a year or so ago and having surgery to repair, I avoid overly heavy weights as a rule.  Eventually, I hope to stumble upon a set of Powerblocks, or a similar set of dumbbells which features the ability to select your desired weight from a single rack and one pair of dumbbells.

Of course, this is not an exhaustive list of potential home gym equipment.  Cardio machines, punching bags, and exercise balls and mats are also popular additions, but the items listed above will at least get you started.  I’d be interested to hear from those of you who have setup a home gym.  What other pieces of equipment have you found to be the most useful when building a home gym?  Are there any other sources of purchasing cheap, reliable equipment?

photo by A_of_DooM

Anyone who has carried a heavy load of debt is keenly aware of its ability to strain your budget and your relationships, but is it possible that being deep in debt has physical side effects as well? New research indicates that owing too much money causes physical stress that is detrimental to our overall health. Add this to the many reasons to make a plan to get out of debt.

Stating the Obvious

The number of families across America saddled with high levels of debt is both staggering, and troubling. Unfortunately, we’ve been part of that statistic since running up debt mostly attributed to my attempt to return to school and finish an undergraduate degree. Since that time getting out of debt has been our number one priority, but for others it hangs around as sort of reminder of past financial sins. Whatever the case, keeping debt around has many negative consequences, and not all of them are directly related to finances.

Limited Options, Missed Opportunities

One of the biggest reasons not to get into debt is because it has a way of limiting your options. At work, those deep in debt are many times forced to stay in a bad job because relocating is simply not an option when living paycheck to paycheck. At home, debt increases the incidents of money fights between couples, many times in front of their children, who ultimately suffer the most stress worrying about their parents’ relationship.

High levels of debt affect our ability to be givers, and many times forces us to pass on the opportunity to donate to a cause we believe in. Think back to when you were in debt, or maybe you are still struggling to climb out, as we are. How many times have you heard of a neighbor losing everything in a fire, or a local child struggling with a serious illness, and think – I sure would like to help them, financially, but I just can’t afford it. We can’t afford it because we are sending the money we would like to donate to banks and credit card companies.

Financial Peace

Now imagine for a moment that you are debt free, and you have that 6-month emergency fund in place, and you are saving for retirement and your kid’s college plans, and towards that next car you plan to buy with cash. You aren’t worried about paying the next utility bill, or insurance premium, or prescription refill. You are now able to quietly help those in your community when the time comes. Imagine if entire neighborhoods became debt free. Imagine an entire city. Dave Ramsey was right when he described debt freedom as “financial peace,” because it is this feeling of calm that enters your life that makes all the sacrifices to get there so worth it.

photo by pedrosimoes7

Over the last several weeks I’ve shared our plans to spend the economic stimulus check. Initially, we planned to divide the $1,800 three ways, saving some, spending some, and using the remaining amount to pay down debt. Then we leaned towards just putting it all in our emergency fund. In the end, we decided to scrap both plans. When I opened the mailbox last week and finally saw that check had arrived I made an impulsive decision, but not the kind I would have made ten years ago.

Debt Repayment is a Natural High

People who are clinically addicted to shopping often report a “natural high” experienced when they purchase something. The feeling is usually followed by post-purchase guilt over the expenditure, and is only remedied after buying something else. Well, I’m now addicted to the euphoric feelings produced by paying off debt. I took that $1,800 rebate check, drove right past Best Buy and Target, and immediately deposited it in the bank. The next morning I confirmed it had posted to our account and scheduled an online payment to my credit card in the amount of $1,800. And so after weeks of waiting for the check to arrive it was gone in a matter of hours.

Do I Regret the Decision to Pay Down Debt?

Not one bit. If I had used the stimulus check to buy a new sofa (something we do need), a 42″ plasma television (something we don’t need, but sure would be nice for football season!), or some other material purchase I would probably be writing a different article about buyer’s remorse and the dangers of impulse spending. However, I resisted the urge to spend the tax rebate check on such items, and was excited to see that credit card balance drop by $1,800 overnight.

It All Boils Down to Contentment

We are fairly content with our current possessions, and I would have to think long and hard to come up with something that I really want, or need, that I don’t already have. Sure, my vehicle is seventeen years-old, and the leg on our sofa is broken, and my computer was purchased around the turn of the century, but all those things still serve me well. The truck still runs, I repaired the sofa leg myself, and I’ve made some small upgrades to the computer to extend its useful life. No sense in replacing these things just for the sake of getting something new. So when that stimulus check arrived it was a relatively easy decision to simply drop it on our remaining credit card debt.

photo by: Daquella manera

How do you plan to spend (or how did you spend) your economic stimulus check?

With less than 200 days (185, to be exact) until Christmas it is comforting to know that our budget debacles of previous years will not repeat themselves. For the last several years, the weeks leading up to Christmas were often spent hunting last-minute gifts while trying not to disrupt the delicate balance of our household budget. In the early years of our marriage we frequently turned to credit cards to foot holiday bills, but fortunately we recognized that was not a sustainable habit for financial success. For the last few years we have budgeted small amounts from the paychecks leading up to Christmas, but that means several trips to stores or rounds of online buying, and doesn’t exactly help spread Holiday cheer.

Christmas Savings Fund to the Rescue

A couple days after Christmas last year we decided to do something that up to that point we had never been able to do–save for an event and not touch the money for another purpose. We opened a savings account at our bank (I have since moved it to ING Direct–here is one of my ING Direct reviews), and scheduled transfers in the amount of $25 per paycheck, or $50 per month, to our “Christmas Savings” account. Next year, when we are ready to do our Christmas shopping, we will transfer the money to our primary checking account and take care of all our Christmas gift purchases at once.

What About Left-Overs?

If you are as frugal with your gift purchases as you are with your own purchases throughout the year, you will likely have some amount left over in your Christmas savings account. With these surplus funds you could get a head start on funding next year’s Christmas savings account, make an extra payment on debt, send a little to the kids’ college funds, or my personal favorite–give it away to someone who needs it more than you.

After reading the inspiring book about the life of Larry Stewart, Santa’s Secret, our family is beginning a tradition of giving away $100 to a complete stranger during the Christmas season. This year, we are planning to go out for breakfast on the morning of Christmas Eve and leave a $100 tip to our server. You never know what kind of impression such a random act of kindness may have on someone, and their family. Imagine a struggling single mom working at a Waffle House on Christmas Eve, wondering how she will fill the stockings for her little ones at home. That $100 could mean the difference in her kids continuing belief in the spirit of Christmas, or disappointment on Christmas morning. For us, that is what Christmas is all about!

When the temperatures outside is approaching 100 degrees it is hard to even think about Christmas some six months away. However, now is the perfect time to start planning for the expense! By spreading out the costs of presents and gift-giving throughout the year, you will feel less of a pinch around the holidays and be able to enjoy a debt-free, worry-free Christmas season.

photo by: krisdecurtis