question but long - simple budgeting

[brogansmomma]

I've never really been a budgeter. Money has never been tight and I've been subscribing to the "it's here so I can spend it if I want" school of thinking, I guess. Money still isn't tight (as in, I have enough money to pay my bills) but I don't have an emergency fund or savings though I make a very decent wage (and am a single parent with sole financial responsibility for my son). I have the money to put in savings etc but it just doesn't end up there. I've done a couple of no-spend months and done really well but once the month was over, instead of making the next one no-spend too, I've petered out.

I own my own home (not full out, I'm paying a mortage), own a car (free and clear but obviously have car-related expenses), work full-time shiftwork, have reasonable daycare costs as my mom looks after my son on my weekend and night shifts and I just pay daycare for whatever day shifts I work. I do have two credit cards - TD Canada Trust and PC Mastercard. My bank doesn't off very good plans for the amount of money I've ever had in savings and so I only get 10 free transactions per months on each of two accounts. The one account is a checking into which $200 of each paycheque goes as well as the gov't stuff (GST and all the child-related benefits); this is the account that daycare gets paid out of via cheque. The other account is what the automatic bill payments and non-automatic ones come from. I easily have a good handful including insurance, utilities, and interest on an investment loan. I pay the cards out of this account. Due to the low free transactions, I have been putting things like gas and groceries on a card and then paying it off at the end of the month in a single transaction. (Currently carrying about $2k on the VISA and $800 on the MC, with the MC due in a week or so ) I never carry cash unless I happen to come into some as it's been a rather large hassle to physically get to the bank (out of my way, only drive past when I'm in a hurry and/or not convenient to stop, etc). The non-chequing account is also not set up to be accessed by debit card (only at a teller) but this is not difficult to change.

What I would LIKE to do is keep both cards but lower the limits ($5500 is the current max on the VISA; unsure about the MC) to around $500 at most. Or, keep one around $2k and lower the other. I would like to shop with cash (but this terrifies me!); I like the "security" of knowing that I'm not going to be $5 short at the checkout with a cart full of groceries.

So the question that I have is actually pretty simple - I've come across a 3-column coil-bound ledger in my decluttering and would like to use it to keep track. I've briefly used Excel-based budgeting programs and the Pear Budget one (and liked both) but sometimes pure-and-simple simple is nice. Obviously one column for in, one for out, and one for balance. Any foreseeable problems with mixing my chequeing and savings accounts on paper? I do my banking online and am on it very regularly. I have no concerns about bouncing monies or anything like that. The ledger will work for tracking but what about the actual budgeting? Should I be using my Excel sheets? The ledger doesn't give me any way to see how much of a certain category remains. Should I write my utilities/mortgage/etc out at the beginning of the month (or half at each pay period) so they're not lumped in with the "extra" money?

I could easily ask a million more questions, I'm sure. Sorry for beating a topic that's been discussed umpteen times before...

Help!!!

[xekomaya]

Hmmm.. That's quite a question
Here are some thoughts --

It sounds like you need a new back account first off. Can you find a bank with free checking and savings? I'm in the US, not sure if you are, but just about all banks give free checking and savings with direct deposit. You'd have unlimited transactions in checking, up to 6/month out of savings. You shouldn't feel like you HAVE to use your credit cards just to cut the number of transactions.

You said you have 2k on one card, 800 on another -- Do you mean that these cards are paid in full every month, or is this debt? If its paid in full, I don't see a problem with that. Otherwise you need a plan to get it paid off. If you are in the habit of using the cards and paying with money earned later, you might actually be a month "back" on your finances. When you switch to spending more cash you'll need to watch the actual cash flow for a little while...

If you're paying everything with cash, there is no real worry of mixing your accounts on paper except as you mentioned, not looking at where the money is (checking vs. savings) and bouncing -- but if you check it online regularly enough it's not really an issue.

If you're using the credit card to pay bills and then paying them off later, your ledger won't represent your actual $$.

I actually use an excel doc. when I need to keep a better eye on my cash flow that lists everything that comes out of my bank account and when future bills will come out. I use another tab for each credit card that we pay off in full every month. As things get charged to the card, I enter them on the sheet and then the expected statement close value goes right to the payment date on my cash flow doc. On paper, you could just use another sheet for the cards and make a little note against your balance.

For actual budgeting, if you insist on paper , You can use a new sheet for the budget each month and list the categories straight down. Each time you spend something you'd enter it into a category and subtract across. We use a "save ahead" type budget where if I don't use my full grocery budget one month, I have extra for groceries the next month. If I overspend in a category, I likewise have less. I think the technique of a zero based budget looks at it a little differently.

Honestly, you can work it all out on paper, and keeping a ledger for your actual accounts is probably very useful to have physically, but the difference when using Quicken or MS Money, etc, is amazing. Money generates better reports and I felt I had a better idea of my actual finances moment to moment, but Quicken has the Savings Plan that corresponds to how we actually budget and that just makes my life easier so we're with Quicken right now.

Oh and unless you find the higher limits tempting, I don't see why you'd lower your credit limits. I know people have different feelings on this board, but $5500 is really not a high line of credit. I would only lower it if it made an emotional difference to you.

Hope some bit of that was helpful. GL!

[zersha]

I know others on this board will disagree with me, but I wouldn't lower those cc limits. Unless you really don't think you can keep from using them.

If you lower them, it hurts your Fico score because your utilization score will drop. I guess if your Fico score isn't important to you, then lower them to whatever you want.

Your bank doesn't sound very good. Is there any way you can shop around for a better deal? For savings, you could set up an online savings account with somewhere like ING, TD Ameritrade, or Emigrant, and have money taken out automatically each paycheck. I have ING and TD Ameritrade, and I like them both. ING has a better interest rate, but TD Ameritrade is super fast in transfering the money back to you if you need it. But one reason I like the online savings is because since it's more of a PITA to get the money, we will often not even bother. If it was in our local credit union, I know we'd access it more.

Not sure about what will work best for you for budgeting, but we just use an Excel spreadsheet (well, actually OpenOffice because we're too cheap to buy Office) that we designed ourselves.

[bwylde]

Can't you switch everything to PC Financial? We've never had to pay a cent in fees and it's great for banking; in over 10 years of having an account, we've never had a problem. We get tons of PC points to use for free items in the store and I highly recommend their high interest savings account if you are trying to save.

We also put everything on our Mastercard and pay it off at the end of the month (to get the points), but we ONLY do it if we are able to pay it off. If you are finding yourself slipping into debt by doing this, you should switch to doing it differently (aka, switch to a no fee account).

[lightheart]

Originally Posted by brogansmomma

I like the "security" of knowing that I'm not going to be $5 short at the checkout with a cart full of groceries.

I sometimes will pay part with cash and then put the remaining on a credit card. Say my bill is 56.14 I just tell the cashier I'd like to pay 50 in cash and put the remaining on a cc. not a big deal... unless...

I have never had luck trying to break a bill though, (think it's more of them not being able to physically count change back, relying on the screen to do the math) say my bill was 56.14 and I had a 50 bill and asked to pay 30 on the bill... I should be able to hand over my bill, get back 20 in cash and then put 26.14 on my card....

The first way is easy though, sometimes I will do this because I know I won't get to the bank before my actual cash runs out and sometimes I just run over what I had planned on spending at the store because I found a sale and want to stock up or I splurged on something special.

(I do pay off my balances on my cc each month)

[brogansmomma]

Thanks mamas!! I'm still trying to figure out how all of this is going to work. I think I'm overcomplicating things but I'm having trouble seeing it. Lack of practice, I guess.

I could leave the max's up on the credit cards but I am worried that I won't be as disciplined as I need to be. I like the thought of having the balance available for emergencies. Freezing my cards won't work for my VISA since I know that number and expiry by heart ; the MC is relatively new (I got it when I moved because I wanted to be more frugal and thought that getting cash back on groceries wasn't a bad thing) and so I don't know that number without looking it up.

I think the biggest challenge and the biggest thing that will make a difference to my savings is to not be such an impulse shopper. Especially online (a sewing board I belong to, Amazon.ca for books, yarn, etc) I see such cute fabrics (I DO sew) or cooking/reference/kids books and as I'm not struggling for money, I buy them. I do know that that is something that I want to change. I do want to use the credit card less because even though I pay it off each month (these balances were zero previous to February), it's too easy to use the cards; cash would give me so much more accountability.

I do have an ING account but I haven't used it in about six or eight months. I opened it when I started saving for my house because the interest rate was awesome. When I needed the money for my house, I pulled all but about $30 out of it. If I did use the ING account, it would have to be a manual transfer (and therefore a transaction) since my employer will only deposit to two accounts and I currently have the bulk of my pay going into one and $200 of each cheque going into my chequing account. I do agree that I need to take a look at other banks - my options here are BMO, CIBC, TD Canada Trust (the easiest one for me to get too), Scotia Bank, and a credit union; I *think* that's all. Oh, and PC Financial, which I did have an account at at one point; think I closed it but might also be open with just a few cents in there.

I guess maybe my first step is checking out banks?

Definitely taking notes. My basement flooded the other night and while it was floating in inches of water, the flooring (laminate) all needs to be replaced as well as the bottom few inches of drywall. While I'm at it I'm obviously going to try and figure out the source of the water (besides the all-day rain that we had trying to soak into still-frozen ground) and have that fixed. It is an insurance claim most likely and I do have a mortgage where, as I pay down the principal, that money is available as a line of credit of sorts, but it really does smack home the importance of having an emergency fund and savings. Like I said, I have money (so I'm not trying to squeeze my budget until it screams), I just need to prioritize and make quite a few changes in my spending.

Thanks again, ladies! And don't stop with the replies.

[Piglet68]

I don't get why you need the two bank accounts - can't you have the GST, child credit, etc deposited into the same account as your pre-authorized payments, etc? THEN you could use your ING account for savings.

I'm in Canada and I'm loving our local credit union. Do check yours out when you consider other banks. I was at CIBC for 15 years and left because they treated me like shit when I really needed them.

As for budgeting, I use a simple Excel spreadsheet I made myself. I'd be happy to send you a copy - PM me if you want. Basically there are two main columns, one for projected expenses and one for actual expenses. I enter actual expenses as they come in (about 2 or 3 times a month by checking online) and by comparing it to the projected expenses I can see how we're doing. I also have two additional columns for Food and Miscelleneous (which is everything other than gas, food, and bills/rent). In these columns I itemize each expenditure and a running total is set up in the main "actual expenses" column. So I can see quickly how much of our grocery budget we've eaten up at any time, and track where it's coming from (are we eating out too much? is DH buying lunch at work too much? etc). I enter credit card purchases just like debit and cash purchases so I'm not "hiding" expenses from myself on cards. It also helps make sure I don't use more credit card than we can pay that month as we always pay off the balance each month.

Here in Canada we don't have FICO scores so I don't think changing your limit would make a difference, espeically since you have a mortgage already. I wouldn't bother changing it if you are responsible with the cards. I think you'll find having a budget will help with that.

Finally, in our budget there is a projected amount for savings and we have a year-end goal for our savings based on our desire to buy a small acreage and pay off the last of our low-interest debts. So if we overspend one month it FEELS as though we have lost money even though we can afford it, because we are robbing ourselves kwim? That has also helped curb my spending immensely.

[xekomaya]

Originally Posted by Piglet68

Finally, in our budget there is a projected amount for savings and we have a year-end goal for our savings

That's what really helps us. Now that we've bought our house, DH and I have struggled a little with the budget since we have yet to agree on a new goal to work towards -- it's funny to see what a huge difference it makes in our spending habits. Doesn't have to be a buying goal though. Calculate out what you'll need for retirement, what you want as an EF, etc. Those can be just as fun to work for.

Originally Posted by brogansmomma

I think the biggest challenge and the biggest thing that will make a difference to my savings is to not be such an impulse shopper.

Have you tried giving yourself an allowance? It feels a little silly when all the money is yours but it might work and also curb impulse spending when you're out or tempted to buy online. I also find it very satisfying to buy something I've saved a few months for.

I would say your first steps are definitely to look for a new bank and then to sit down with some paper and map out your general budget. Write down all the after tax money you've got coming for the rest of the year (19 more paychecks or so depending on how you're paid), subtract out the bills you definitely have to pay, subtract out what you'd like to save, and then decide what you can spend in the rest of the categories to meet you goals. Divide that up by month and then you can use whatever system you like to actually keep track.

Practicing to be more frugal and keeping a budget are really two things to work on separately. Just because you allocated $400/month for groceries doesn't mean you have to spend it. It can be a lot of fun to try and 'beat the budget' especially in categories like gas, groceries and utilities.

[ekortering]

Peggy,

Hi, it's Erin I'd suggest doing a very simple envelop system for 6 months. If you're not used to using cash it will be like boot camp for you, but I bet it will really help change your mindset. I'd probably keep your utilities and daycare expenses as direct withdrawals from your checking account(s) and allot XXXX amounts for "disposables" (groceries, gas, clothing, fun money, etc). If you REALLY want to know where your money is going, I recommend using either Quicken or Microsoft Money. This is coming from someone who absolutely DESPISES entering expenses into Quicken but does it because DH really wants her to.

[llamalluv]

This has nothing to do with your question - I was getting a headache reading

But...

If you have a small amount of wiggle room in your budget but lack the self control, can you arrange to have a portion of your paycheck direct deposited to a separate savings account at a different bank?