Someday A Goat

Two months until xmas

We have 2 months until Christmas -- 62 days to be exact! Have you started budgeting and planning for the holiday? We set aside our first small amount mid-month (only $20, but you have to start somewhere!). The $200 we have scheduled over the next two months won't cover all the gifts we plan on buying, but it's something. We started late this year, and in prior years, we always used the "extra" October paycheck from my husband's company (he's paid biweekly) to put aside Christmas present money. This year our budget is structured a bit differently, so we'll have to be creative in both present selection and carving some extra Christmas budget from everyday spending.

A small habit for a big car loan

With the cloud of layoffs looming at my job, I've been hesitant to throw every last penny at the car loan. Our second largest monthly bill after the mortgage, we've paid the balance down by about 22% in the first 11 months of the loan. We have miles to go and can't sprint through a marathon; with an interest rate of 1.9% on the loan, it makes more sense to focus on emergency savings.

If I'm honest, we could cut our spending -- no cable, no trips, no weddings, etc. -- to speed up the measly pace at which we're building an emergency fund and paying off the car. But we're pretty frugal already, and at this stage of our financial lives, living bare bones isn't a necessity. Balance, however, is.

In early March 2011, I found a way to achieve a little balance while making headway on the loan. Biweekly payments are a popular way to reduce mortgages and pay down principal, why couldn't I do the same with the car loan? We allocate certain bills to each paycheck (more on this habit), and the car loan comes from husband's paycheck. Since he's paid biweekly, with half a payment per check, the timing was already perfect, and we have no prepayment penalty clause.

Not only are we saving on interest and shortening the loan term, it's also an emergency backstop of sorts, feeding my need for security. Due to the way payments are allocated, additional or advance payments are applied to the next payment. So by making biweekly payments on a monthly loan for the last 8 months, we're more than a month ahead of schedule and closing in on 2 months of breathing room. Sure, I could direct the bank to apply any extra payment to the principal, which would save even more on total interest paid, but at 1.9%, I like the double whammy of breathing room for job loss and a shorter loan term with less interest than if we made normal payments.

I've stopped clipping coupons

My sales bag, full of unclipped coupon inserts.

I'm still saving big at the grocery store, but I've stopped spending 2 hours every Sunday clipping and sorting , then culling expired coupons. All that work had become more and more of a chore, and with the plethora of great sales/coupon match-up sites, the weekly project basically became unnecessary.

Match-up sites I love: I Heart Publix (she's Atlanta area, which is perfect for me), Coupon Mom, Money Saving Mom (Crystal runs much more than a deal blog these days)

Sales/coupon match-ups can now be drilled down to the regional level, and last month as I stared at a stack of 15+ coupon inserts that needed to be clipped, I realized that I could just stop. Stop clipping, stop sorting, stop spending so much time. I will still have to occasionally cull inserts and booklets that are way past expiration.

I'm still on my kick of changing how I save, and this change has worked beautifully. I might miss a sale here and there if I forget my running list of match-ups since I no longer have clipped coupons organized by category, but the time gained is amazing. I'm not even going to bother with organizing the inserts in a binder. They all just go in a bag that lives in my car, with loosies in the front pocket. I might save one of my three coupon organizers for printables, but those just go in with the loosies for the time being.

Along the same lines, I've started checking coupon previews before I head to the store to buy a double paper each week. Coupon inserts were pretty thin this summer, and a double paper now costs $3.50, so I make sure it's worth the purchase with about 3 minutes on the computer before I head out on Sunday. Yesterday, it wasn't worth it for me, so I have an extra $3.50 in the budget.

In the past 6 months, I've started to realize just how few coupons apply to products we buy. I don't think I'll ever give up on coupons entirely, but it's no longer the only way I save. Weekly sales, menu planning and strategic stockpiling go much further.

 

Sales and reducing the amount of time spent on coupons

Public interest in couponing, via shows like "Extreme Couponing," seems to have an inverse relationship with my interest in coupons and sales. I'm still using coupons, but not nearly as much. I don't clip as many, I miss sales, I don't know what changed, but something did. My couponing was pretty streamlined as it was, and since we eat few packaged foods, I've gotten into the habit of planning meals around store sales.

Looking through the sales on Sunday, I noted just a few sales at each store I track (Walgreens, Target, CVS, Kroger and Publix). But more than that, I realized that my shopping habits had changed. I do most of my shopping at Publix and Target, with an occasional trip to CVS. Kroger has good deals, but the locations near me are not great. Some of the best deals are of the Buy 10, save $5 variety, and I usually struggle to get enough stuff for the deal. Good deals at Walgreens are few and far between -- I can't always put register rewards to good use, and I feel like most sale are buy one, get one 50% off. With the high everyday price and low quantity of most of the stock, that's not a great deal. I would say that 65% of the time, sales I try to take advantage of are sold out by Monday. Even CVS, you have to spend a good deal to get the best return. We just don't consume that much, I'm rather surprised to discover.

In the coming weeks, I'm going to focus more on updating our price book, and less on sales and coupons. Then I'll be able to shop smarter every day.

Don't get me wrong, I'll still glance through the Walgreens ad, but my focus will be on Publix and Target. I'll still clip coupons, but fewer. I'm going to watch every minute I spend on coupons and sales. I timed it on Sunday, and the 15-minute increments racking up makes me uncomfortable.

Bye to my love, ING Direct

Opening an ING Direct account in January 2009 was one of the crucial steps in our debt journey. As a requirement of a bailout from the Dutch government (ING Direct's parent company is a Dutch bank), ING was required to start the process of selling ING Direct USA.

Yesterday it was announced that Capital One is purchasing U.S. operations of the huge online bank. I'm very nervous about this -- I've had nothing but wonderful experiences with ING Direct, and I have doubts about whether Capital One will provide the same level of service. Changes won't be too likely until closer to 2012, but I am already thinking about other options.

Our account there has gone from a simple emergency fund and stash account for credit card charges to serving most of our banking needs, and I just recently switched my direct deposit from our brick-and-mortar joint account to ING. The interest rate dropped consistently through 2010, but having subaccounts with one log-in really flowed with the way my brain thinks about money. What will I be looking for in an online bank if Capital One drastically changes things?

Sub-accounts -- we have them for all manner of categories -- emergency fund, credit card holding, pest control, insurance, travel, gifts, large home projects (deck, now gutters), house emergency account. We have 15, and could probably reduce it down, but not by much. I have one log-in and only have to deal with one 1099-INT at tax time. This set up boggles my mother and most of my friends, but works beautifully for us.

Interest rate -- current APY on our accounts is 1% -- not much, but far and away better than many brick and mortar banks, especially with no balance requirement.

Easy, free transfers -- in and out. I'm not going to pay to send money to another bank account or my Roth IRA.

Checking AND savings -- I didn't think we'd use the Electric Orange checking very often, but I was wrong. So much so that I recently switched my paycheck deposit at ING since I was transferring most of over anyhow. Most of our day-to-day spending is on credit card paid in full each month, so our brick-and-mortar bank statements have become blissfully short.

Robust online bill pay -- ING Direct has the best bill pay service out of our three banks, although Bank of America has always had good online bill pay. ING is very good at magically connecting with my billers, and it doesn't take 5 days for ING to process the payment if they don't need to mail a check. I've also used the service to put money in my sister-in-law's account, and to mail a paper check. Rock on.

No long transfer delays -- Instant transfers from ING Direct savings accounts to Electric Orange checking, and speedy transfers in and out. Puts my Wells Fargo account to shame.

Easily manage accounts -- I've had a zombie money market account at Bank of America, and Wells Fargo (as did Wachovia before it) cannot seem to keep my married name on our joint account. I have easily closed sub-accounts at ING, and every single interaction with them has been smooth and quick. Why this is difficult for other banks, I'm not sure.

Gas prices have me thinking about 2008

A gallon of regular gas in Georgia is near $4, and it feels like the crazy gas prices in summer 2008, but my reaction this time around is entirely different. In June of that year, our debts weighed heavily, and high gas prices threw our budget seriously out of whack. Faced with a huge budget hole, we finally started making necessary changes in spending and saving.

Nearly three years later, the price of gas doesn't fill me with terror. More money for gas means less money for financial goals we have been working toward, month after month, but our budget isn't destroyed. The last six months have been full of financial challenges bigger than most we have had in three years, but we are much better equipped to meet them. We have a small but growing cushion for emergencies, bill money is set aside long before due and we pay credit cards in full each month. Most of all, we have gained confidence that we can make ends meet, no matter the situation. That is powerful, both financially and emotionally. I can't even imagine how I'll feel when the car loan is paid off. 

We didn't do anything that special, the exact same advice is repeated all over the internet. All the same, here it is:

Cook at home

My husband gets a weekly lunch budget large enough to eat out every weekday, but he also shoulders cooking dinner almost every single night. We eat well, with lots of fresh in-season ingredients, and have one night out per week generally. Our oven (but not the range) is currently broken, so we've ruined a good streak of eating in consistently. Cooking from scratch can be incredibly cheap, but does require time and the willpower to clean. I am much more careful with our shopping budget, and we plan our meals every couple of days according to what we have on hand and what is on sale. 

Plan for irregular expenses

June 2008, I opened up an online savings account that offered easily created subaccounts. At first it was just efund, car insurance, termite bond -- I would put a tiny amount in each month and once the bill was due, I didn't have most of it, but I had some of it. The margin has improved over the years. We have added additional subaccounts like travel, but my favorite by far is credit card holding -- we transfer credit card spending every couple of days into a dedicated account, kind of like escrow.

Split budget tracking

Once in the mindset of splitting our budget into two, one for regular bills and one for spending, reducing expenses overall became much easier. Bills are relatively predictable, even with seasonal fluctuations for power and gas. We keep a good eye on energy usage, but these costs don't vary much after cutting out the fat. Tracking and reducing spending for the other category -- fuel, eating out, groceries, household goods, lunches and entertainment -- isn't so hard if the rest is on autopilot. 

Budget: Why it works for us

Much of our recent success is income catching up with spending, and fewer out-of-town weddings. That said, recognizing spending and controlling it week by week was the hard work of learning to live within our means. I hate not spending willy-nilly, but the self-discipline of the past 6 years will have exponential effects. Choosing to drop cable for a year and half made us not only appreciate our fancy package today, it also made us much stronger as a couple. Making hard choices with only a few dollars left in the bank account can tear a couple apart, or it can solidify the relationship.

When first engaged, I wasn't making much, and my now-husband was underemployed. My mom was concerned, and told me that surviving on love alone is hard, and being broke is not fun. I grew up wanting very little in life, but I had also seen that my parents started out with almost nothing and worked hard to make a wonderful life with plenty of financial security. If they could do it, so could I.

I didn't realize at the time how very right she was. Trying to scrounge up dinner for $5, night after night, can really wear a couple out. The stress of ever-mounting credit card debt can lead to fights. The garage door breaking can induce a lot of despair. Married life isn't compartmentalized -- we don't just stick a strict budget and all the money worries in a little box leave it there. It bleeds into every facet of life, and every day has required discipline, hard work and a willingness to compromise on both our parts.

But there's also a lot of beauty. The perfect anniversary dinner, made for under $20, complete with a rose from our yard. Our pride at having paid off thousands in credit card debt that hung over our heads for years. Being able to save for a vacation instead of spending every last dollar. Ripe tomatoes from our garden. When I look at my husband, I feel confident we can handle life's curveballs. Even if it's a worst-case scenario, I know that we are a team and can accomplish more than we thought possible.

Having a budget made this possible. We've blown the budget more weeks than we haven't, but at least we tried, day after day. Following a budget won't make you happy, but the results sure will.

Our insanely complicated budget series

• Budget begins on payday
• Common sense on a ramen budget
• Earning interest by using credit cards
• Conclusion: Why it works for us

 

Egg salad got us out of debt

We paid off the last $190.88 in credit card debt. We could have paid that and more from the emergency fund months ago, but that felt like asking for a disaster that required cash. So we paid it off slowly, month by month, until we reached the last $190.88.

I though I would feel jubilant, and possibly go out for a really nice dinner. But we had egg salad sandwiches and spinach salad for dinner. This low-cost, high-protein dinner got us through many a lean weekly budget, and apparently, will help get us to our other financial goals. We have a big new car loan, an emergency fund and Roth IRAs that all need attention now that the debt is gone. Content, and a hell of lot less worried, best describe the way I feel. 

I never thought I'd be able to write this post. After years and years of working toward eliminating credit card debt, we've finally done it. 

The double float: earning interest on our budget

In January 2009, the budget was under control enough that we added a rewards card tied to CostCo. We get cash rewards and improve my husband's credit history further. With debt still on other cards, we started slow with what was allowed -- fuel and grocery store. As cash rewards accumulated and self-discipline developed, we added categories like utilities, then everyday spending, to almost every single purchase. After 22 months, we have paid in full each month. 

In the beginning I set aside the cash the day it was charged so we could cover the bill when due, putting this cash in a separate ING account called credit card holding. I soon realized we had a double float -- since the cash was transferred same day, we earned interest as we waited for the bill to close and then a second period before the balance was due. I'm probably using the term double float wrong, but that's what I've called it in my head. We pay a week prior to due date, just in case, and we get on average a month and a half of interest on any given charge. We were cash-only for a while, and on the timeline of our debt reduction, opening this card was at the turning point where our discipline caught up with our dreams. 

At first, we couldn't completely cover all cards -- dental visits, one of our big out-of-pocket expenses, couldn't always be paid cash immediately. Setbacks are part of the process, but that one card was always paid in full.

I like the convenience and consumer protection of credit cards, and I love the rewards -- as long as we pay in full. The funny thing is, being given this clean slate of sorts drove us to eliminate the balances on other cards. With $150 balance left on one card, we could easily pay it off entirely from savings. But slow like the tortoise has worked. 

This requires daily attention, and things quickly go awry if untracked. In our excel ledger, I record transactions specific to each card, grouped by date ranges immediately upon spending. Every few days, I transfer to credit card holding from checking. In the beginning, I made transfers every day, even if it was just $3 spent at the grocery store. I had little trust in our ability to ever pay off credit card bills in full on a regular basis, and I'm still slightly amazed we're there. Our confidence is growing that we can indeed live differently.

Just so I don't give the wrong impression, adding a credit card for daily use would be unhelpful for most people in credit card debt, and downright disastrous for some. We were five years into our debt reduction journey before I had a smidgen of trust that we could handle it. Once the debt is almost gone, though, it's a nice way to earn a little interest. 

This float gives extra leeway on expenses now that we're paying off all new charges in full. A power bill $113 higher than the $275 I have budgeted can come out of the float -- I allocate that amount to a future paycheck and still have the entire amount before the bill is due. As our savings increase, this will become less necessary, but in this economy our cash savings are priority. The $150 balance mentioned above is the last lingering bit of debt that is paid separately from charges each month. FIngers crossed, it will be paid off next month. 

Paying credit cards in full is an amazing feeling -- I've been scanning in old statements and want to cry each time at the stickiness of credit card balances. We kept putting money toward balances that seemed to go nowhere. Increasing our income and decreasing our spending, as always, is what fixed our financial future. 

Our insanely complicated budget series

• Budget begins on payday
• Common sense on a ramen budget
• Earning interest by using credit cards
• Conclusion: Why it works for us

 

Common sense on a ramen budget

Tracking spending completely, just for a short time, is crucial to setting realistic budget categories. If you don't know how much you spend, it's hard to push and cut back. Expense tracking can be done in any way that works -- in a notebook, on your phone, in the checking register.

I track expenses in Quicken, and we've done additional cash accounting at different times. Here's where being realistic comes into play -- if you average $120/week for groceries and dining, aiming for $40/week is arranging to fail. A budget isn't set in stone, reducing spending can be done gradually. Check out The Simple Dollar for more on gradual budget category reduction.

Once you know where your money is going and worked with a loose budget, establish a firm budget. Think of the budget as a whole, and then break it down into two sub-budgets: expenses v. disposable. Expenses include all the things that don't change month-to-month -- mortgage payment, utility bills, car payment, regular savings for irregular bills. Disposable budget includes spending on food, entertainment and auto fuel.

I simply started by subtracting all regular expenses. With the leftover money, I divided it up somewhat reasonably between food, entertainment and gas. It was such a small amount when I started doing this that to call it reasonable seems pretty silly. It gets easier though. Some weeks I can even send a little extra to the last credit card or the efund. It's helpful to track spending compared to budget for a while, or even permanently. We wouldn't be able to focus on our goals without budget tracking, it's just not an ingrained habit yet. 

With a little common sense, you can still have some fun and the occasional beer. I revisit our budget at least once a year, usually in the spring. If we have a significant financial change, such as purchasing a car, I use the opportunity to look things over then as well. 

Our insanely complicated budget series

• Budget begins on payday
• Common sense on a ramen budget
• Earning interest by using credit cards
• Conclusion: Why it works for us