Today’s post was written by Trevor from the Financial Nut.  Trevor is a 24 year old college student.  He owns his own business and will graduate from college debt free and with start on retirement.  If you like this post make sure you check out his site, or subscribe to his feed for free updates.

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Statistics say that fewer than half of Americans have a household budget. Kind of scary, isn’t it? As a result of our current recession, there’s a good chance that budgeting is becoming more common, as people are becoming more and more aware of their money (or lack thereof!).

With such a low number of people using budgets to control their spending, I have to wonder why budgeting isn’t more common amongst Americans. Is it that half of us are doing so well that it’s not necessary? Certainly not! Maybe it’s because many haven’t been taught to use a budget or that people just plain don’t know how. Whatever the case may be, it needs to be something that our society changes. Much of our current economic crisis may have been avoided if we’re collectively better with money, and at the foundation of that would be having and maintaining an accurate personal financial budget.

Not Everybody Loves Budgeting

My wife and I wrote up our first budget together 2 weeks after being married. Luckily I managed to marry a girl that is fantastic with money, so we enjoyed sitting down together to draw up the plan. First we wrote down what our combined net income came to be monthly; after, we listed each expected monthly expense and found out how much it cost us to live on a regular basis. After subtracting our monthly expenses from our monthly net income, we came up with a dollar figure that could be used for savings.

As I reflect on my experience drawing up my first budget with my wife, I have to laugh at the fact that I enjoy it so much! I mean, really- I know most people don’t enjoy it like I do. I love analyzing the numbers, figuring out how we can improve month to month, and working together with Alex (my wife) on setting goals that reflect our financial dreams. I understand that it’s odd to innately enjoy budgeting!

So in the spirit of helping to convince others that budgeting must be done, I again have to go back to the original question: Why don’t people like to budget?

Many, I feel, quickly connect budgeting money with negative emotion! A well-developed budget for them means restriction and lack of recreation; in essence, it means no fun.

Leisure Money Is Part of A Well-Balanced Budget

May I suggest that any well-written budget should include leisure money to maintain healthy levels of sanity amongst the masses. Alex and I decided on a dollar figure that we would set aside every single month for fun. That money must is used for eating out, bowling, skiing, the movies, going out for ice cream, and anything else we want to do together. We call this our “Date Fund,” and I believe it’s an absolute must for any couple. The benefit? You don’t feel guilty about spending money on yourself for entertainment when you’ve planned for it!

Our budget also provides us both with a separate “Leisure Fund,” enabling Alex to spend money on what she enjoys (clothes, iPods, etc.) and for me to spend money on what I like (basketball tickets, books, etc.). That dollar figure is a fixed amount for each of us per month to do as we please. If we don’t spend it all in the month it’s provided, we can save it and use it for something bigger and better the following month. Truly a “Leisure Fund” empowers both of us to spend our money on things we enjoy without feeling guilty for it.

As you decide to either start a budget or improve the one you’re currently using, take the time to include date money (for you and your significant other) and/or a “leisure Fund” for sanity’s sake.

A budget empowers if written the right way, and no budget is complete without those items. If you can remember the positive side to budgeting money (and there are many positives), you may find yourself enjoying it just as much as me!

Ashley here: We have a “dates” category in our budget too.  We also each get a fixed amount that is our own personal blow money.  It works really well for us.  I think a lot of people don’t make budgets because they don’t want to know the truth about the mess they are in.

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Hello everyone!  I’m enjoying a nice time with my mom who is visiting from out of town.  I have a guest post for you today from Craig, the marketing guy behind www.budgetpulse.com? If you enjoy this post make sure you visit his site and have a look around.  There are some great budgeting tools on there.

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Is Paying for TV Cable Plans Worth it?

Cable TV is a luxury item that seems to be a standard in households these days.  Families can spend a lot of money on cable plans for entertainment value, but is it worth it?  That is debatable for who you ask and how much you get out of it.  As technology increases, there are actually ways to watch your favorite shows through other methods which could actually lead one to cutting cable costs all together.

Movies:

One of the cheapest ways is to check movies out of the library. You can also loan/borrow movies amongst family and friends. Netflix is a great way to rent movies in an inexpensive manner and you do not have to worry about late fees.  They have a few different pricing plans set up and offer free delivery.  A great service that is hard to beat.  They also have a lot of movies that you can stream for free online, an easy way to watch a movie while you are waiting for the next one to come.

Streaming TV:

You can also stream shows of your computer.  There are several sites one can use. First, of course, there are the TV Chanel websites, which offer scenes of the show. Megavideo is a service where you need to pay / subscribe, but it will also let you watch up to 72 minutes of video free each day. After that, you have to wait at least 54 minutes to watch another 72 minutes. Miro is useful for downloading the network news programs. This is a good client for watching all sorts of video sources, including Youtube video and many other sites. It is especially good for various video programs involving technology. One more similar tool is Hulu.  You can legally watch full episodes of your favorite shows here in very good quality.

As streaming TV becomes more popular and the quality improves even more, cutting cable may be a good choice to save money.  If you don’t watch a lot of TV or diverse programming, this may be something to at least consider in the future.  Nobody likes commercials or paying high prices for cable.

Ashley here:  I personally don’t see us voluntarily cutting cable any time soon.  I don’t even watch that much TV and I want to keep it.  It’s just that when I want to “veg out” nothing really beats getting cozy on the couch and watching some random junk on TV.  I’ve watched a few shows on the computer but it’s not for me.  I would need a much nicer set up to make it work.

Are you willing to cut your cable bills completely for online video?

pic by: Aaron Escobar

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Here is my last entry into the “Where’s my money going month”.  I have to say I hated this exercise.  I found it tedious and boring.  One good thing that came of it is that I now know what people are talking about when they say they don’t want to track their spending, especially manually.   Another good thing is that in order to do this exercise I asked my husband to put all our receipts from this month in a separate envelope.  Normally we put everything into a canister, but keeping the current month’s receipts separate turned out kinda handy… so we will being doing that from now on.

We follow a budget and we do track our spending, but not in this way.  It really illustrated the importance of finding a system that works for you.  Cause this didn’t work for me and I just wanted to give up.  I almost didn’t post this.

Anyways… here we go.

Groceries: $407

Eating out: $315

Gas: $141

Medical: $32

Haircut: $14

Valentines day: $30

Household stuff: $269

Birthday gifts: $107

Credit card payment: $120

Electricity: $178

Life Insurance: $100

Car Payments/ Insurance: $854

Mortgage/ HOA: $1,257

Cable/ Internet/ phones: $208

City: $133

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Well, I’m late again… but at least I’m doing it.  Here is how we’ve spent our money so far this month as of the 17th.  This is for the project over at Finance for a Freelance Life.

Groceries: $341

Eating out: $161

Gas: $107

Medical: $20

Haircut: $14

Valentines day: $30

Household stuff: $71

Birthday gift: $17

Credit card payment: $120

Electricity: $178

Car Insurance: $130

Life Insurance: $100

I’m surprised at the grocery bill so far.  Yikes!  We only budget $400 so hopefully there isn’t much left to buy.  I guess I only have to go grocery shopping one more time this month, so we should be fine.  I’m also surprised we spent $30 on Valentines day.  And that doesn’t count the salmon we bought for dinner, I counted it in groceries.

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I know I’m late updating my monthly budget for the project over at Finance for a Freelance life.  Here is the money that has been spent so far in February.  Some bills we pay at the end of the month that are actually for the month coming up.  For example, the mortgage.  We paid February’s mortgage at the end of January.  I’m going to record the money that actually comes out of our checking account during the month of February.  So you won’t see bills like the mortgage be recorded until the end of the month.  I hope that all made sense.

Anyways, here is how we’ve spent our February money as of 2/08/09

Groceries: $109

Eating out: $93.44

Gas: $40.43

Household stuff: $22.55

Birthday gift: $17.24

Credit card payment: $120

Electricity: $178

Car Insurance: $129.98

The category I’m most interested in seeing is the eating out category.  The way we have our budget set up normally “eating out” comes out of a few different categories, depending on the reason for the eating.  If we go out as a family then it’s one thing, if my husband gets lunch at work or I stop for lunch with a friend, then that comes out of our personal “allowances”.  So I don’t really know the exact total that gets spent at restaurants.

Also, groceries includes paper and cleaning products.  Household includes other house stuff that they don’t sell at the grocery store.  Like my husband bought a tool, that’s included in the household.

pic by: zzzack

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I don’t normally post on Sunday but I wanted to share something with you.  And being the first of the month I didn’t think it should wait.

Finance for a Freelance Life is doing something fun this month and I wanted to spread it along.  She is challenging her readers to track their spending manually for a month and then report back.  Might be eye opening.  Keep in mind, this is not budgeting, only tracking.  I’m going to be participating and I would love it if you would too.  Even if you don’t report back, at least do it for yourself.

We already track our spending manually, but my husband does it, so it will be an adjustment for me.   I also want to break it into smaller categories than what we have in our spreadsheet currently.

Ok, back to your Sunday…

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I often get the label of frugal.  I find this strange.  It surprises me that people see me that way, since I don’t really consider myself very frugal.  I suppose it depends on your point of view.  Compared to some I am exceedingly frugal.  Compared to others I am wasteful.  And that’s right where I like to be, between the extremes.

There definitely is a scale of frugality.  Everyone lies somewhere between extreme spending and extreme frugality.  This blog as helped me move towards frugality on that scale.

If you would like to be more frugal but can’t seem to get started, here are some tips.

1. Track your spending:  If you are not tracking your spending then this is where you should start.  It’s the road map to good financial skills.  You can’t know where you are, where you want to be, or how to get there if you don’t have an idea of how you are spending your money.

2. Start small:  You don’t have to wake up one morning and have a brand new set of habits.  Work on them slowly over time.  Pick one area of your spending to work on at a time.  I started with groceries.  And not even all my groceries, I started with meat.  I was never an ad checker, but I knew I should be.  But it was overwhelming.  So I started very small.  I would go through the ads and only look at the meats.  After a while I got an idea of what the various meats should cost.  When there was good a deal, and when it was all just smoke and mirrors.  Scoring a few good deals got me excited and gave me confidence.  Then I got curious about what else was in those ads.  Now I use them to plan my meals and stock up on all my groceries.

You might not want to start with groceries.  That’s fine.  You can start with your laundry, or entertainment, or your car, or your bathroom stuff.  Whatever.  Just start looking for ways to spend less money in your chosen category.  Once you feel like you’ve made significant progress then…

3. Branch out:  Once I felt like I had the grocery bill under control I started looking at other things.  I became a sale shopper, with coupons in hand.  Constantly looking to shave a few bucks off my total.  Always thinking, could I get this cheaper?  Will this make it to the next markdown?  Can I find a coupon online?  Can I get free shipping?

4. Take it easy:  Don’t get so caught up in finding a great deal that you buy things you have no use for.  This is harder than it sounds because getting a good deal can be addicting.  Just because something is 90% off doesn’t mean that you need it.  If it’s not something you would buy anyways then you aren’t being frugal.  You can’t spend money to save money.

Pic by: rogerwp

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Net Worth is an interesting thing.  It’s so fluid that it’s hard to measure, for me anyways.  I hate all the inconsistencies of it, as timing can play a huge roll.  For example, if I had measured our net worth before we went on vacation it would have been $1,300 higher, even though we fully intended to spend that money.  It was already spent in my mind.  Anyways, out of curiosity I have calculated a very simplified net worth.  It doesn’t take all our stuff into account, it also doesn’t include any money we have saved for a particular purpose, such as vacation.  I also wasn’t sure where to put the debt for the landscaping.  Should I add it in as a separate line, or just subtract it from the equity of the house.  In the end, it doesn’t matter, so I added it as a separate line.

House - We have $61,000 in equity.  I lost $57,000 in 2008.  It’s down $133,000 from the high.  All these numbers are according to Zillow, which may or may not be totally accurate, but it’s down a lot… enough said.

Investments - We have $9,750 invested.  This is down $5,000 in 2008.  That hurts, a lot.  But it’s not new information.

Emergency fund -We have $12,337.45 saved in our emergency fund.  It’s down $500 because we’ve dipped into it a few times.  Once to buy the new fridge and once to get wills.  Both good reasons, but still scary to see that we didn’t save any money this year!  Yikes.  We did pay off debt though.

Cars - In the van we have negative equity of $5,300.  In my husband’s car we have $1,730 in equity and in his truck we have $12,500 in equity. This brings us to a total of $8,930 in equity in our cars, according to Kelly Blue Book.  I don’t know what our cars were worth last year so I can’t say what the difference is.

Debt- We owe $6,040 on the landscaping.  This is 2,577 less than last year at this time.

So that means our net worth is…**Drumroll**… $85,977.

Obviously down from last year, by about $60,000 give or take.  Clearly, the value of my house dropping like a stone was the biggest factor in our losses.  But the value of the house and stock market are not in my control, so I can’t really feel badly about that.   The fact that our Emergency Fund went down a bit is not ok.  While I do feel it was for good reason, we still need to keep an eye on that.  A few “emergencies” a year and it won’t be long until there isn’t a savings left.  Also, I feel good about the debt situation.  We reduced our total debt by $13,309.  If you only look at what we can control I think we did ok.  Not great. Not terrible.  Just ok.

Edited to update the value of the truck.  My husband let me know the error of my ways.  Sorry honey.

Pic by: tenioman

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I’ve never really sat down and broken down my bills into percentages.  Personally, I never really saw the point.  If you have a budget that is working for you then who cares. The guidelines are nice, but at the end of the day your budget needs to work for you.  You will be forever frustrated if you try to fit your life into a box someone else made.  But, if you are in the process of making a budget for the first time, or reworking a budget that doesn’t fit, then it’s a great place to start. But I was curious how I compared to others and to the suggested percentages.  Here are the recommended percentages according the experts.  The percentages are of our net income.

So here it goes…

Mortgage: 24%
Household bills: 12%
Transportation: 25%
Savings: 5%
Credit card: 5%
Medical: 1%
Spending: 15%
Groceries: 11%

Household bills consists of the HOA dues, cable/internet/ phone, electric, cell phone, and the city.

Savings consists of retirement and e-fund savings.  It doesn’t consist of extra money paid to mortgage.  If I put that into the savings category it changes savings to 7% and mortgage to 22%.

Transportation consists of car payments (15%), insurance (3%), and gas (7%).

Credit card balance is from landscaping the backyard and is at zero percent interest.

Medical consists of one copay a month and the copays for our monthly medications.  It does not take premiums into account.

I’m curious to know what your budget percentages look like.  Especially your transportation costs.  Cause Dang! 25% is a lot.  So I’m curious to know how it compares to yours.  I will say that it’s my number one financial goal right now to get the cars paid off and never have another car payment again.  That would bring down the transportation costs to 10% and up the savings to 20%.  Which would be awesome! Of course a big chunk of that savings would go to buy a car… so call it what you will.

Pic by: Jeff Keen

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Remember a few months ago I was having a really hard time deciding when to take our Disneyland trip?  Well, we decided on January and that means it’s coming up real soon!  So we are getting down and dirty about planning the details.

We have about $1,450 in our vacation budget and it breaks down into 4 basic categories, tickets, gas, hotel, and food.

Tickets: Costco is having a deal where if you buy a season pass through them you get a $50 gift card to use in the park.  So we took advantage of that.  We are planning to go next December so we will be able to get two trips on the year pass, which will save us money in the long run.  And the $50 gift cards are just icing on the cake.

Normally we would spend $507 for tickets to the park.  Year passes cost us $821 plus we get $150 in gift cards.  Which brings our over all cost down to $671 for a long term savings of $343.  (This is for two adults and one child.  We don’t have to buy my son a ticket yet since he is only two.)

Gas: Hello gas prices!  When we were planning this trip gas was like $3 something a gallon.  So I’m thrilled with today’s gas prices.  We are expecting to spend about $100 on gas.

Hotels:  We got pretty close to what we were planning on for hotels.  We were thinking $50 a night and we got them for $55 on Priceline.  (not counting all their dumb fees)

Here’s the thing… our son is the world’s lightest sleeper.  He needs things just right if he is ever going to fall and stay asleep.  And any parent knows… a tired child can turn your world upside down.  So when we travel it means the whole family has to go to bed when the two year old does.  Honestly, my husband and I have had enough of laying in a dark room and whispering from 7:30 on.  It’s really not fun at all.  On our Grand Canyon trip we vowed to start getting two room suites when we travel.  I’m not expecting to be able to watch TV after bedtime but I would like to be able to maybe sit in a chair with the lights on.

Ok, that said we can upgrade our room to a two room suite for about $60 a night.  I haven’t called to see if we can get a deal, this is just what I’ve determined from their website.  But $60 a night will put a huge cramp in our budget.   After we pay for tickets, gas, and our current price on hotel rooms we have about $680 left in our vacation fund, including the $150 in gift cards.  If we shell out another $240 for hotel costs that leaves us $440 for food.  Which brings us to…

Food:  We have to feed 4 people for 5 days.  It actually breaks down to 4 breakfasts, 5 lunches, and 4 dinners (52 meals in all…wow).  While $440 should be enough to do it, it is also every last dollar.  And I’m not naive enough to think that A) I’ve thought of every cost B) I’m going to take two kids to Disneyland and not buy them one single thing and C) nothing will go wrong.

We have been talking about what food we can bring with us to try to keep our eating costs down.  We usually have breakfast in the hotel room.  I bring muffins and we chow down before we start our day.  It’s as much of a time saving thing as it is a money saving thing.  If we upgrade rooms we will have a fridge so we could potentially bring milk for the kids.  That would cut out all breakfast costs.  We usually get lunch at the park, but we were talking about bringing lunches.  This would save us about $125 or more.  I need ideas for tasty, filling, easy to carry lunches.  Peanut butter and jelly can only be eaten so many days in a row, unless you’re 7.

But let’s say we eat 4 dinners for $40 each and lunch on the drive home for $25, that is $185.  Round that to $200 and we have a $240 slush fund.  I think that is about perfect.  AND it includes getting the upgraded room!

So here is your mission if you choose to accept it:  Comment with some ideas for good lunches to bring to the park.  Also, do you think I could get a deal on the more expensive room if I wait until we arrive to ask for an upgrade?  Is it worth the risk?

Pic by: Idcross

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