Octsoberfest

It happened like this: I decided I needed to quit my job and strike out on my own, in small part because I realized it would actually be cheaper to work from home. No more buying gas once a week at $4 a gallon, no more checks written out to the dog walker, no more eating out for lunch (I've never gotten the hang of that bring-your-own-lunch thing). In fact, my calculations indicated that I could save around $500 per month by working from home. (Of course there's the issue of how I'd make any money, but that's a discussion for another time.)

"Fumar acorta la vida"

 

Starting to work from home would mean not only that I'd be going through a huge life transition but also that money would likely be even tighter. These two factors led me to conclude that Oct. 1 was the perfect time to quit smoking. Cold turkey. Quitting smoking would save me at least $60 per month. And there's that whole thing about not wanting to be addicted; as much as I love to smoke, I do not love feeling like I have to smoke.

Photo © 2009 by David Aeschliman

My chances of successfully quitting smoking would be raised, I realized, by keeping myself away from temptation. Namely: the bar. Or any alcohol, for that matter. I have a tendency to chain-smoke when I drink, so if I cut the alcohol out for the entire month of October, it would help me stay true to my goal. Another positive side-effect was that I'd spend less money. Somewhere around $25 a week less.

And that's how I decided on a smoke-free, alcohol-free month of October, which my neighbor and I, after much discussion, renamed Octsoberfest. (I discovered later that other people have also thought of Octsoberfest. I guess there really isn't any such thing as originality. Darn.) If you're interested in reading about how it's been going, click here.

How much money could you save by cutting out one habit or vice for just one month?

Keeping a budget: The why

I'd like to back up for a second here and talk about a basic money management tool: the budget spreadsheet. In this post I'll explain why I think this is a useful and important tool. In a subsequent post I'll tackle the how.

A long time ago, in a land far away, I didn't even have a bank account: I got a weekly allowance from my mom and dealt in cash. Overspending was never a problem because I only had the cash in my pocket; once it was gone, there was nothing more to spend.

In high school I got a job and needed a bank account so I could cash my checks without having to pay a fee. Though I didn't have many financial responsibilities, tracking my funds became a little harder. I learned that I couldn't really trust my bank balance because it takes longer for some transactions to go through than others, so on Saturday when the ATM said I still had 50 bucks left and I was like "Woo hoo!" and spent it, and then come Monday something I'd bought on Friday went through, I was suddenly in the red and paying overdraft fees. Yuck.

That's when I started tracking my spending in that handy little transaction register your bank gives you. Very helpful. I'd just keep all my receipts and write down everything I bought in that little book, and it greatly helped in avoiding those overdraft fees. Except when I forgot to write something down. Oops.

But even the transaction register is no longer sufficient for the convoluted mess my finances have become. I have automatic payments set up for things like the mortgage payment and the electric bill. I have credit cards. I have automatic deposit. This means that there's activity in my bank account that doesn't come through me directly. I also have expenses that are important and substantial but don't happen every month, like my car insurance payment.

All this has brought me to the budget spreadsheet, a fantastical invention I became aware of when I temped for a property management company and saw how they kept their properties' budgets. Amazing.

The budget spreadsheet helps me do the following:

1. Anticipate how much money I'm going to be spending each month and on what (vs. how much money I'll be bringing in) so I don't run into that overdraft problem;
2. Track trends in spending so that I can make conscious decisions about where my financial priorities are...for example if I'm having trouble paying my bills but I see that I'm spending a ton of money on eating out every month, I can curb the restaurant binge;
3. Factor in how much money I need to set aside every month for those less frequent expenditures, such as aforementioned car insurance but also vet bills, dog registration, car registration, oil changes, etc.;
4. Planning for fun stuff, like travel or going to a show once in a while: I know that if I want to do these things I need to save up for them on top of what I'm already putting aside for #3 above. (Does no good to set aside money for car registration only to spend it on a concert because I forgot what that money was in savings for.)

Even when I don't have a steady income or steady expenses I find it helpful to keep a budget spreadsheet because it helps me see how much money I need to make in order to keep my head above water, and if I'm short $100 this month then something has to get cut out and I can use the spreadsheet to fiddle with the numbers--whittle away a few dollars here, a few dollars there, until I'm in the black again.

A narrow escape

Nearly every week I take time to visit the iTunes Store and download the newest free songs and music video (a money-saving strategy for adding to my music library, broadening my musical horizons, and finding new artists).

A few months ago I noticed something new: free eBooks. Since several of the free eBooks on offer appealed to me, I downloaded those as well, thinking I could use iTunes to read them. That did not turn out to be the case. After downloading the free Kindle app and having no success reading the free eBooks that way, I did some research and discovered that one can only read them on an Apple mobile device: the iPhone or an iPad.

When the iPad first came out I could not think of anything more senseless. It was somewhere between a smart phone and a laptop, but did not have the full capabilities of either. Who would possibly use this, I thought, and for what? But now a few of my co-workers and friends have iPads, and I've begun to see the possibilities.

So when I realized I'd need an iPad or iPhone to read the free eBooks, I started to think about it more seriously. I still viewed an iPad as a non-essential, luxury item, but since I could think of several ways I could use it, including using it to read these free books, I could start to justify a purchase. Even if it was (gasp!) $500. I had a tax refund coming my way--surely I deserved to be able to spend some of it on non-essentials?

What saved me was to think more seriously about that $500. What else could I spend $500 on?
a) New clothes--I hadn't bought many new clothes in the last couple of years; I lost weight last year and most of my clothes didn't fit me well anymore.
b) Ten nice dinners with friends--one of my favorite ways to spend "extra" cash is to treat my friends to a good meal and treat myself to their company.
c) An inexpensive, week-long trip--a priority in my life is to travel and experience new places and cultures, both in the U.S. and abroad.
d) A car tune up--my car is overdue for its next major service.

This kind of thinking helped me realize that if I do have an "extra" $500, I have other, more important spending priorities. I was on the verge of making an expensive impulse buy, and I'm glad I took the time to think about it differently. In the future I plan to use this reasoning more often to help me live in better alignment with my long-term goals.

Update on the food budget

Back in September I decided to try to save money on food each month by allowing myself $15 a day, whether I spent it on groceries or eating out (see original post). It's time to check in about that experiment.

The plan went well September-November...with a minor hiccup due to buying a couple friends dinner. But for the most I stayed within my food budget. What was interesting though is that after a couple months I found myself craving food from the supermarket, so I gradually began to buy more groceries and eat out less frequently. The general principle of spending $15 a day, however, remained intact.

December went...not so well. Which is to say that I spent almost my entire food budget in the first ten days of the month (I blame the cookie decorating party) and then had to live off of cans of soup and whatever else I could scrounge up until I went to my mom's for the holidays, where, fortunately, I ate for free right up until payday came around again.

In late December I started seeing a Naturopathic Doctor. All of a sudden I'm supposed to eat breakfast, take flax seed oil, take a daily vitamin, and eat red meat twice a week. Seriously?? My whole $15 a day thing pretty much hinged on only having coffee for breakfast. And have you seen how expensive flax seed oil is?!? Outrageous.

Oddly enough, though, I came in significantly under budget in January ($11.90/day) and only slightly over budget in February ($15.89/day). Could this actually be working??

It appears so. Hurrah! Here are a few tricks that I think have contributed to success:

• Chunking my budget. Instead of thinking I have $450 this month for food, I'm thinking I have $15 today, or $100 this week.
• Offsetting "splurge." I spent too much in early December, and the trade-off was cheap meals the rest of the month. If I go grocery shopping, I have to subtract what I spend at the store from my weekly allowance. The added expenses of breakfast, flax seed oil and red meat are offset by eating cheaper meals a few times a week. And if I decide to treat myself to sushi at Miyamoto, I know that means a few nights of very cheap dinners--black beans and rice, for example. Or a can of tomato soup.
• Dealing in cash. Whether I take $100 out of the ATM at the beginning of the week and use it to pay for groceries as well as meals out or whether I get $40 cash back when paying for groceries with a debit card, I've found it enormously helpful to deal in cash as a way of tracking my spending each week. There's an immediate, tangible consequence to spending cash: once it's gone, I'm done spending money on food that week. End of story.

The little things

In an attempt to shave every little last bit of unnecessary spending out of my monthly expenses, I recently downgraded from an Android phone to a flip phone, which will save me $40 a month.

And then I started thinking about all the other little things I've cut back on or cut out of my budget in the last two years and wondered how big a difference they're making.

In addition to downgrading the cell phone, I've cancelled my Netflix subscription, reduced the number of haircuts a year from four to one, stopped buying facial cleanser, cut back on the amount of wine I buy at the grocery store, and switched from doggie daycare to dog walking.

The result? I'm spending about $317 less a month, or about $3,810 less a year. Not bad!

Now if only I could figure out where all that "saved" money has been going instead...

The goal

Balance. What I really want is balance.

Because yes, I do want to live within my means, but I also want to have time and energy to do the things I love. I want to be able to make choices that are socially and environmentally conscientious, and I want to look good and feel healthy. I don’t want to have to choose between these things; I want to find ways to balance them all.So here I am: single, 32, with a house, a dog, and a job that (at least in theory) pays a living wage. And I am struggling to live within my means. I am lucky enough to have escaped student loans and car payments, and right there I am better off than a lot of people. And yet I still find it hard to balance the things that are most important to me.

I don’t think I live excessively. I don’t throw big parties or go clothes shopping more than once a year. I don’t buy expensive cuts of meat, or even buy meat every week. I don’t go out drinking every night or every weekend (anymore). I’ve cut out a lot of the luxuries: regular haircuts, buying wine, facial cleanser, cable TV.

After taxes and bills, my money goes to food, gasoline, auto maintenance, dog care, cigarettes, and the very occasional impulse buy of a book or movie. Really, that’s it. So as you see, when it comes to cutting things out of my budget, I haven’t got a lot to work with.I’ve been trying to put aside a couple hundred dollars into savings each month, but each month there seems to arise some unexpected expense (emergency trip to the vet, visit to the doctor's office that I hadn't planned for, travel for a conference, etc.) that not only prevents me from saving money but actually results in my having to take money out of savings. The situation, therefore, is this: not enough money coming in to cover my expenses, and a dwindling savings account.And yet I want to travel and take classes for fun. I want to put money into savings so I have an emergency fund in case my dog needs another $2,000 surgery or (god forbid) I lose my job. I want to wear pretty clothes, buy local & organic food, and use environmentally friendly cleaning products.The point of this blog is not to whine about all the things I want that I can’t afford. And I am well aware that, compared to many people in this world, I have it really good. No, the point of this blog is to find out if I can have more of what I want by using the resources I do have differently. The Penny Pincher gives me the incentive to start getting creative.