I’ve either mentioned this to you in person, or just via the blog perhaps, but with my new job comes just one paycheck a month. Even though it’s a bigger paycheck, the first month was rough, to put it mildly. I believe we had about $20 left in the checking account when my paycheck came around again. What ended up happening is that when I got my first paycheck I paid many of our bills for the month and then paid off the credit card bills that contained the rest of our daily expenses–but that was really paying for the previous month not our current spending. We also had some unexpected and irregular expenses (which really shouldn’t be unexpected or irregular if my budget worked): replacing a dead weed whacker, new glasses, expensive prescriptions because of a gap in PL’s health insurance since she can’t be on my new plan and the school plan hadn’t started yet. We were able to make it through the month and lucky enough to be able to bail ourselves out with savings to avoid carrying over balances to this month, and we started fresh on September 1st with no outstanding balances. But, it was a bit of a wake up call that we need a better way of planning our spending and keeping an eye on things.
So, here’s the new system that starts today:
1. No more Mint or Bank of America “My Portfolio” for keeping up with our budget goals
I’ve written about both of these free online budgeting services before, and I played around with then both a good bit but neither works the way I want it to. Plenty of other bloggers have listed the pros and cons to the many online budgeting programs, so I won’t detail that here. Simply put, both programs have some big pros and some smaller cons, but clearly I had a breakdown in their usefulness since I ran out of money 🙂
2. Continuing to use Bank of America’s portfolio for frequent monitoring of expenses but not budget planning
One thing I do enjoy about these budgeting programs is being able to link multiple accounts–checking, savings, credit cards–all in one place to see all transactions and their categories. I need to do better at splitting transactions though–something that’s easy in the program if you hang onto a receipt. For example, if we go to Sam’s club we typically don’t leave without spending $100+ on things like detergent, kitty litter, razor blades and trash bags plus some grocery items, but I should split that transaction into groceries and household items so that long term I will have enough data to see a) whether Sam’s actually saves us money b) which items we should buy there and c) to better predict how often we’ll need to budget for those big trips. Mint is a little slower on the uptake of processing your transactions but BoA is pretty good. So, I want to just keep an eye on things during the month by logging in and seeing where we stand budget wise, but won’t use this service for more than simple monitoring and adjusting our spending as needed.
3. My own budget spreadsheet
Taking some helpful advice from Rachel on her budget, I sat down and figured out which categories of our expenses were the same every month, which things happen every month but are different amounts, and which things occur without a monthly pattern. I made a master monthly and yearly budget column for everything, averaging out even those irregular patterns into a monthly amount–I had done this before but it’s that monthly average part that frustrated me. To help solve that problem I decided to then add a column for every single month as well–treating each month differently since their actual expenses are different. I looked back at our power and gas bill history (something that was quick and easy to do using our bank’s online system), putting the monthly bill amount from last year as our goal for the corresponding month this year. Our gas and power bills vary wildly depending on the season, and while I was right on with my monthly and yearly estimates in the master budget, it was frustrating to try to account for these swings in a static budget. So those budget goals for the month are already filled in going forward, and then in months that I know things like car registrations are due, I also filled in that amount in that month’s budget as well. So the overall amount for the year and the monthly average is included in the master budget which is balanced, I might add, but that random $8 for magazine subscriptions doesn’t show up every month, just the total amount in the month when it gets paid. I think that if each month’s unique budget comes in under the master monthly budget, we’ll have the money in the account for those other months when we need it. Will that actually work out mathematically? I hate accounting, but I think it will work out, but hope someone with a better head for this than I have will let me know if I estimated that wrong before I find out the hard way that it won’t work that way.
4. Cash only for eating out
When I got paid, I took out $120 in cash for our monthly budgeted restaurant excursions, and another $20 each for those random things that you just need cash on hand for occasionally. When it’s gone it’s gone. I know a cash system works well for many people for paying for gas and groceries too, but for now we are confident we can manage those expenses so we’re just sticking with cash for restaurants.
5. A new credit card
After reading a great New York Times article on some of the recent happenings in the credit card world–seriously, go read it– I reevaluated the Bank of America credit card account (formerly MBNA) that I’ve had since 2001 and then added PL to in 2004 or 2005 when we co-mingled our lives and finances. The limit continues to shrink, without warning, even though we’re terrific customers–I think they hate me since I don’t carry a balance. That’s really happening everywhere right now, and I totally get why since so many of us are up to our ears in credit card debt and then not able to pay it off. But, my card’s limit was cut in half and then cut by another 30% (without notice except for me seeing it on the account). This card also has no rewards back to us for using it either, so we’ve rarely been using it lately (only for big things like airline tickets that might normally put us over the limit on our other card). While I’m certain we really could and should get by without a high credit limit, is sure is nice to have. I guess this has less to do with our daily money management, but I found it helpful for thinking about the big picture of our finances as well.
One credit card mentioned in the Times article was a card with Charles Schwab bank that will put cash back into a brokerage account. I already have a Brokerage account and IRA with Chuck, and they handle our mortgage as well, so I did some more research on this card. No annual fee. A higher APR than I’d like (13.4%), but we rarely carry a balance and sadly, that rate is actually pretty competitive right now. Unlimited 2% cash back on purchases, deposited directly into your brokerage account each month. I’ve been completely pleased with Charles Schwab in every bit of business I’ve ever done with them, so I decided to apply for this new card–it was super easy since I already have a brokerage account with them but if you don’t I think you just do both at once. The 2% will be nice, even if it’s not a huge amount, and putting it directly into the brokerage account contributes more to longer term investing goals than just giving us $20 in free groceries once a quarter like our Kroger card does now. We were approved and will now have a Charles Schwab Visa Signature Card (so Bank of America with their lousy platinum card can bite me), so the Visa Signature category also gets us some other discounts other places. I’ve researched reward cards before, typically airline ones, but they usually come with an annual fee and we really don’t fly enough or spend enough to rack up enough rewards to cover the fee.
So, that’s where we are today. It’s nice to start a new month with some nice goals and a clean slate going forward with better money management. We actually have a fair bit of income left over after our budgeted expenses are paid each month, unless I forgot some giant category, so I’m hoping to continue to save that and pay for our ever growing wedding expenses and any travel we might have time to do. Wish us luck.