The Today Show recently aired a segment featuring a young couple with two kids who were challenged to cut their spending budget in half.  These types of stories are always intriguing, and not just because it is fun to pick apart another family’s budget (human nature, I suppose).  It is inspiring to see what lessons the people actually learned when the process was over.  Often times individuals have no idea how much they are spending on a particular category because they’ve never taken the time to add up the daily expenses and convert them to a weekly or monthly outgo.  Here’s a look at the couple’s before budget:

The Roberts Average Weekly Spending Budget

• Gas:  $25.00
• Starbucks:  $20.00
• Eating Out:  $165.00
• Grocery Store:  $140.00
• Entertainment:  $100.00
• Lawn/Home Care:  $95.00
• Night Out With Friends:  $40.00
• Shopping:  $75.00
• Total Miscellaneous Expenses:  $660.00 per week

That’s Not a Typo - $660 a Week

The budget probably doesn’t look all that different from other families out there (I even saw a couple familiar frivolous activities I used to engage in, and a couple I still occasionally do).  Like most young families, the Roberts like to eat out several times a week.  I know from experience this gets expensive when you have four mouths to feed.  And from the video it didn’t look like they were dining at a budget eatery for their evening meals.  Even Chick-Fil-A adds up quickly if you visit a couple times a week!  Mrs. Roberts was seen in the video getting a pedicure and manicure, and paying $25 to get her SUV washed and detailed.  All signs pointed to the fact these guys were mega consumers.

What Lifestyle Changes Were Implemented?

During their weekly spending diet the Roberts participated in a pot luck dinner, rather than going out to eat.  They washed their own car, mowed their own grass, and made lunches at home.  All great moves to cut back on spending.  They also visited a farmer’s market to help cut down on their grocery bill.  Here’s a look at their after budget:

• Potluck Dinner:  $30.00
• Lunch Out:  $6.00
• Farmer’s Market:  $12.00
• Gas for Lawn Mower:  $3.95
• Drug Store:  $24.64
• Grocery Store:  $95.00
• Total Miscellaneous Expenses During the Spending Challenge:  $109.38

Lessons Learned

It’s difficult to determine from an eight minute video whether or not the family’s lives were really changed.  I got the impression from the segment that both the husband and wife enjoyed spending money, and spent freely before the Today Show challenge.  It would be interesting to follow up with them in six months to see how many of these changes “stuck.”  One thing I did see in the video was the family engaging in more quality, family time.  They spent a Friday evening at the park feeding the ducks, and a weekend day playing on a Slip-n-Slide in their backyard.  It appeared they really were living the good life.  I don’t think it occurred to the Roberts prior to this exercise that it was possible to have fun without spending money.  Hopefully they now appreciate that less is more, and that they can put the excess money they were spending frivolously to better use.

I’ve included a link to the video segment:  Living With Half as Much

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

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, 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 home gym equipment have you found to be the most useful?  Are there any other sources of purchasing cheap, reliable equipment?

photo by A_of_DooM

This is the fourth article in a series on Life Skills for the New Graduate by The Life Skills Network. All week we’ll be featuring tips for new grads. See the bottom of this post for details and the rest of the lineup!

The tassels have been turned, the diplomas distributed, and the caps tossed in celebration. It’s the morning after graduation, the pomp and circumstance is over, and reality is setting in. Thoughts of job offers and relocation may be dancing through your head. You are probably looking for a place of your own close to a new job, but not too far from your mom’s cooking. It is an exciting time for new graduates. However, it is also a dangerous time, financially.

New Digs

Next to getting a car as a teenager, few things are as liberating to young adults as moving out and finding a place of their own. Unfortunately, the temptation to prove your independence usually leads to overspending on things like new furniture, decorations, and electronic gear. I remember when I moved into my first place. I had a perfectly good television with a little entertainment center capable of holding my small collection of DVDs, my TV, and my beloved Xbox. However, my new living room was larger, so I would need a larger television. And if bought a larger television I would need a larger entertainment center to hold it. Since the new entertainment center had a place for a stereo I’d need one of those, too, and a few more DVDs to fill in the space around the stereo. You get the idea.

I’ll Just Charge It

While I had all my expenditures mapped out pretty well, going so far as highlighting them in catalogs and printing out their order page from retailer’s websites, I had done a particularly bad job of saving up for the occasion. That’s fine - I have a credit card! Big mistake. I charged a few things here and there, and made minimum payments on the balance. When a new movie came out, or I needed a recliner, or a new mattress, I charged those, too. Pretty soon I had accumulated a fair amount of debt in the name of “upgrading” my new living space.

Save and Spend Plan

Ten years later, and a lot of heartache and hard work to pay off those post-college debts, I can honestly say it’s a struggle to even remember what that credit card balance represented. At the time it was very important to buy a new futon, or a new welcome mat with my alma mater’s logo, or a new surround sound system, but now I realize all that was just stuff. Stuff comes and goes, leaving behind only a trail of guilt and credit card debt to be remembered by.

If I had it do over again I would have made up the same wish list (although it probably wouldn’t be quite as glamorous now) and prioritized the items 1-10, well, more like 1-30. I would open a new subaccount at ING Direct and label it “Wish List.” In this account I would set aside a specific amount of money each paycheck until the balance was enough to buy item number one. I’d transfer the money to my primary checking account and pay cash for whatever was my top priority. Once that was safely in my new house or apartment I would do the same for item number two, and so on.

This concept of saving for specific items forces two habits that are worth taking with you into adulthood. First, it gets you into the habit of saving a portion of your early salary, something you should also be doing for long-term goals, like retirement or a downpayment on your future home. Second, the delayed gratification forces you to scrutinize your list and decide if the new refrigerator with ice through the door is really worth $100 for the next twelve paychecks. Chances are, there are things you would rather do with your money than tie it up for six months waiting to buy a refrigerator. Suddenly, opening the freezer and grabbing a few cubes doesn’t seem like such a chore.

Resist Temptation

As a new graduate you will be subjected to every marketing ploy in the retail furniture book - 0% financing, 90-days same as cash, no payment until 2012. Don’t believe the hype. None of these creative financing options will leave you feeling as good as spending hard-earned cash and owning your new furniture, appliance, or electronic gadget the minute you leave the store’s double doors. There’s no feeling like owning something outright. If you really want to be successful in financial life this is a must-learn lesson, and unfortunately, one you probably didn’t get from your college experience.

Here is the rest of the lineup for the Life Skills for the New Graduate series:

• Monday: 10 Financial Tips for New Grads at My Dollar Plan
• Tuesday: 7 Common Interview Questions For The New Graduate at The Wisdom Journal
• Wednesday: Inexpensive Tips For A Greener Life After College at The Good Human
• Thursday: Tips for Furnishing Your First Place at Frugal Dad
• Friday: 5 Do’s and Don’ts Of Living The Good Life For New Grads at My Super-Charged Life

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photo by Oi Max