may financial retrospective

In may, I spent a lot of money.  I only went slightly negative, but it's still unfortunate and regrettable. 

Why the heck is the blue 'household' pie-slice so huge above?  Timing, really.  May happened to have two vacations on subsequent weekends.  We went to Las Vegas one weekend, and had a fabulous time.  We ate some of the best food ever, had amazing cocktails, and saw a great show.  Unfortunately, those things are quite pricey.  Even though my in-laws let us share their timeshare and we drove instead of flew, having a good time in Vegas is still expensive.  And I didn't even gamble, beyond putting a single $20 bill into a slot machine.  And watching it disappear, of course. 

The weekend after that was a camping trip at an SCA event.  What can I say?  Apparently we enjoy dressing up in silly clothing, getting windburned, eating a lot of dust, and sleeping on the ground.  Anyway, when I go camping I tend to cook for people, so there was some non-negligible expense there.  Oh well, it's fun.

Both trips were known about ahead of time, and I was able to plan ahead enough that the expense didn't hurt too much.  No real problems here.  Some things are worth spending more on, especially when it comes to excellent experiences. 

Other than travel expenses, we're totally on track.  I made my full (but not overfull) debt payments, still have a comfortable cushion in my account, and didn't overspend on any categories other than that for vacations.  This month just means a little belt-tightening is in order for a while.

Onward to debt freedom!

have a plan

Living unconsciously (that is, without an explicit plan or road map) can be an okay thing.  Throughout my undergraduate career I drifted a lot, studying what was interesting and picking up a few accidental degrees.  I did what I felt like doing, and didn't think overly much about where I was going or what came next.

By and large, this worked out just fine; I've got a fantastic husband, several bachelor's degrees, a heck of a lot of experience performing on stage, and a wonderful circle of friends.

The downside is that the hakuna matata approach was applied to my finances as well.  I got a credit card, and then signed up for another one when I was at a conference and they were offering a spiffy-looking duffel bag if you filled out an application.  My parents continued to support me for a few years into college, and I generally spent everything I had.  Oh, my upbringing led me to be generally frugal and I didn't spend lavishly or anything, but I didn't really think about saving and didn't worry too much about carrying credit balances.  I lived beyond my poor-college-student means.  But I'd pay it later.  No worries!

Fortunately I went to an exceptionally inexpensive university, so my debt is a microdrop in the bucket compared to those who had to finance, say, law school.   However, debt is still debt, and it's still an albatross around one's neck.  Making a good salary but seeing such a large portion of it going to fund my past self is rather dissatisfying.  Think about what I could be doing with that money now!  I could be making our emergency fund so comfy that we really don't have to worry about it.  I could be saving up for trips overseas.  I could be throwing awesome parties for my friends.

Now I have a plan. 

My plan, as I've written about before, has several steps.  Fundamentally, it's the snowball method.

1. Stop putting anything on credit cards.  No really.  Even if you're going to pay it off right away.  You got yourself in this situation, so you obviously cannot be trusted.  Put down the plastic.  Credit balance only gets to shrink from here on out.  
2. Prioritize debts to pay off.  I chose the smallest-balance-first method because it provides small victories sooner in the process, though as it turned out in my case highest-interest-first would have resulted in the same prioritization.  
3. Budget a total amount of monthly cash for debt repayment.  For me, this is around 40% of my income, and that seems to be sustainable in my current life situation. 
4. Make minimum payments on all but the highest priority debt.  Throw the remainder at that high-priority albatross.  
5. When one debt gets paid off, throw a party!  Your snowball is now bigger.  All the money that was going to the debt you're now free of can now be assigned to the second-highest-priority debt. 
6. Throw snowflakes at the process when you can, but don't go overboard.  Even if it's for a good cause (getting out of debt), violating the master equation isn't very nice.
7. Rinse, repeat.

If you're a total nerd like me, a complicated spreadsheet can help, because it forces you to put all your numbers in one place (no hiding!).  It's also fun because you can adjust your monthly debt budget and it'll show you both how much sooner you'll achieve debt freedom and how much less interest you'll wind up paying.  Admitting you have a problem really is the first step.  Look at that total number.  Now look at how much interest you'll pay just for the privilege of owing money.  Notice that it sucks.  Now make a plan!

Bonus points if you can stay out of debt after achieving freedom.  But that's a future mission, and is beyond the scope of my project right now.  


At this rate, I'll be completely debt-free in December of 2013.  Sooner, if I can scrape together more snowflakes.  Here's to freedom!

april financial retrospective

Another month, another financial retrospective.  This month we see the recurrence of the lovely purple pie slice of savings.  It's small, but it's there.  I certainly can't be always expecting windfalls like last month's extra paycheck!  In any case, this is a sign that things are going well, and I'm not violating the master equation.  As long as I practice sufficient conscious spending and keep my debt 'expenditures' down to the base snowball amount, it appears that I can allow myself a few small splurges.  It seems like a good balance.

This month involves a rather large number in the 'household' category.  This has a few reasons, most notably our large six-month anniversary party.  The bouncy house was affordable but not cheap (and certainly more than worth it for the experience of getting to play in one as a grown-up), and I racked up some charges buying party supplies.  Admittedly, I seem to have overestimated the need, despite the very large list of attendees, so we will now have paper plates and plastic cutlery until the heat-death of the universe.  Warehouse stores can be tricky propositions.  

Additionally, due to my newfound financial stability (not attributed to me being sensible or anything, but rather to disallowing extra enthusiasm-fueled debt payments), I was finally able to contribute to our joint account for the first time in a while.  That account is used to pay bills and such, and also houses our emergency fund.  We like to keep its balance relatively steady over time, but it's been dropping a bit lately.  Happily, that corresponds with me getting my affairs more in order, so it should be a trivial problem to correct.  I do hate being a drain on our finances, so I'm very happy that I can resume being a contributing member of our little household economic society.  Feeling competent and useful is definitely one of the benefits of being financially responsible. 

Also, I seem to have spent about $50 more than usual on fuel this month.  I've no idea why.  Perhaps I drove to work a few more times than usual instead of taking the vanpool.  Though gas prices are always climbing, I don't think they've jumped quite enough in merely a month to justify the marked increase in fuel expenses.

I have a line item in my budget spreadsheet labeled 'fudge factor.'  I use this to make up the difference between my tracked spending and the actual balance in my checking account at the end of the month.  Usually I misplace (forget to record) a bit, and that makes the numbers line up, as well as reminding me that I need to get better at tracking everything.  Weirdly, this month the fudge factor was negative, meaning that I wound up with more money than expected.  I haven't spotted any spending that has yet to post to the account.  If I get to it, I may go through and actually track the balance through to try to find the discrepancy, but for now I'm baffled.   Some of the strangest artifacts show up in this process at times.

I did splurge a little bit on myself this month, in that a good friend and I went on a thrift-shopping date and I picked up a pile of clothes.  Not too much was spent, and I was extremely picky so everything purchased not only was a 'good deal' but fits well, looks good on me, and goes with my overall style.  Yes, it seems a bit weird to be adding clothes to the situation right when one is on a crusade to reduce quantity of clothing and create a more curated wardrobe, but on some level it makes sense.  I don't go shopping very often at all, and as a consequence my wardrobe has not notably evolved much in the past decade.  My personal style, however, has definitely changed in that time.  I also must admit that my body has undergone a few changes as well.  Consequently, much of what I already have is ill-fitting and/or simply uninteresting. 

Fashion trends aren't particularly relevant, because the style I seem to be working toward is more 1940's professional (in this month's haul were several gorgeous pencil skirts that make me feel fabulous) than whatever is 'hot' right now (I found a pair of Converse high-tops that were made to be folded down to show off the pink plaid lining.  There were even eyelets in the tongue to make sure that it stayed firmly in place folded down over the laces.  This is a thing?).  However, this is still a significant departure from my jeans-and-tank-top wearing teen and college years, so my closet does need input as well as output if it is to evolve into a lovely, appropriate, small collection that I feel great in.  It's difficult to get rid of a piece you may not like if you've nothing to replace its function with.  So it's my hope that adding really high-quality pieces I actually like and will wear will free up some of my mental blocks on getting rid of older things.

Or perhaps I just like shopping and am trying to rationalize.  What do you think?

To return to the financial picture being painted, overall April went quite well.  I contributed to our joint fund, splurged on a fantastic party and fabulous clothes, and still showed a net savings.  I call that a win!

belated march financial retrospective

I've been tragically derelict in my blog-writing duties of late.  So here is my much belated financial retrospective for March. 

In terms of expenses this month, the most notable things were tickets to two separate food festivals (and associated purchases), and quite a lot of money going toward a big camping event in Arizona.  Mr. Geek and I both play in the SCA, a group of silly history buffs who dress up in medieval clothes and hit each other with sticks.  March saw the second largest SCA event in the country, and so there are tickets, travel expenses, and gear for my camp kitchen on my spreadsheet.  Fun, but pricey.  But sometimes fun is worth it.  Frugality means not spending in some areas so that you have the ability to spend on the things you actually care about.  It's a good goal.

How am I doing on my mission to curtail food spending?  Not so hot.  March's 'grocery' entry is the largest of this year, but part of that was due to feeding several people out of my camp kitchen for a long weekend.  They did help offset the cost, though.  I fear that I must devise more active methods of reducing the grocery budget, for the simple 'try to spend less' approach seems to not be working. 

This month we see the glorious arrival of a fifth, purple pie slice in the chart, one marked 'savings,' thus indicating that for once I did not violate the master equation.  For my documentation purposes, 'savings' is defined as the difference between income and expenditures.  While this situation was largely established due to luck rather than discipline, I'll take what I can get.

In my mission to re-build my checking account cushion I failed miserably right up until the end of the month.  Despite my best efforts (and not overpaying on debts past my allotted snowball, no matter how much I wanted to), there I wound up, back at the same not terribly sizable balance.  Fortunatly, March has a bonus pay period in it.  Yes, it still means that the money from that paycheck must cover two weeks of groceries and fuel and the like, but it is effectively exempt from monthly expenses such as credit cards, car payments, and my membership in my commuting vanpool.  This left me with more money than expected at the very end of the month.  So while I can't attribute this month's success to any victory in personal planning and I didn't get to use my bonus paycheck for anything particularly interesting as suggested in the article linked at the beginning of this paragraph, I have technically succeeded at this month's mission to re-establish my cushion.  Huzzah!

february in finances

In my ongoing financial makeover, February had some upsides and some downsides.

In the 'upside' corner, we have a massive proportion (59%) of income going directly to debt reduction!  This really took a whack at my consumer debt balance, and will help attain my debt freedom goal that much sooner.  After all, paying it off sooner leads to the balance being lower sooner, which in turn results in paying less total interest, which is a total win.

Now for the challenger.

In the 'downside' corner, I got a bit overzealous with debt payments.  I paid the amount planned for in my debt snowball spreadsheet, and then a few days later I threw a couple hundred more on there for good measure.  Then I looked at the total balance, and hey, it's only a few hundred over an even thousand mark, so I should just knock it down to there.  Round numbers are nice.

Unfortunately, that resulted in an overall debt payment that was more than I should have bitten off.  My total savings (defined as the difference between income and spending) was, drumroll please...

... -7%.

Yes, that's a negative.  I violated the Master Equation.  Okay, so it was in order to pay off debt, which is certainly better than overspending myself in order to buy overpriced and unneeded new shoes, or buying stuff on Amazon.  Still, it's suboptimal.

As a result, I'll be going on a little bit of a debt-repayment fast for a month, and for March I will pay ONLY the amount indicated by my snowball.  No more.  There certainly is virtue in throwing every possible penny at the problem, but that only pertains to real pennies.  Not the ones that deplete the modest cushion I keep in my checking account.  This getting-into-financial-shape project involves not only killing off all my debt, but also becoming intimately acquainted with the meaning of 'affordability.'  Affordability means having the money, not needing it for anything else, and only spending consciously.  Unconscious spending is what leads to maxed out credit cards.  Despite the fact that my overspending was 'for a good cause,' it still doesn't help me learn good money management skills.  So there will be no whimsical extra payments for me, at least until I can build that cushion back up.

While the other categories were certainly dwarfed by the debt pie-slice, they're worth looking at as well. 

My mission to reduce the grocery budget took a nosedive, and I spent even more on food in February than I did in January.  Too many Costco trips, and too little planning for sales.  We are getting better at planning out the week's meals, though (more on that soon).  The household category also got hit a little harder than usual this month.  A part on the grill needed replacing, and spring is the best time to do that, prior to the grilling season hitting.  We also needed a new baby gate to keep the dog off the stairs.  The previous one was a $15 pine-and-plastic number, and between us accidentally kicking it when climbing over and the cat launching herself off of it (hopefully someday she'll learn to go over, not just on), it was thoroughly dead.  It was literally held together with zip strips for the last month or so, but ultimately it gave up completely.  I decided to 'splurge' and buy an actually decent one that is made of metal and can swing open.   I figure that otherwise I would have been replacing it every six months or so, and those $15 expenditures add up (not to mention the nuisance of having to go shopping all the time).  Sometimes spending more money is actually a bargain. 

Next up is the personal category.  A while ago, my mother sent me an extremely generous gift: two beautiful rings that she didn't wear any more.  One, set with an oversize amethyst, was her engagement ring, and the other is a large heart-shaped zirconia.  Both are gorgeous.  Unfortunately, both were also yellow gold, which goes with nothing I own.  In my ongoing quest to minimize my jewelry collection (I now own five pairs of earrings. FIVE!), it makes sense to have everything go with everything else.  So the majority of the 'personal' category this month was spent to have the rings re-plated in white gold, and one sized to fit better.  It wasn't cheap, but I got to patronize a jeweler I adore, and added two stunning pieces to my much-less-crowded jewelry box.

The main other expenditure was at Goodwill on my birthday weekend, when my good friend took me thrift shopping in order to get me out of the house while Mr. Geek put together my surprise party.  Suffice it to say that there were absurdly many layers of subterfuge involved, and it was indeed quite surprising.  But as for the shopping trip, I acquired a number of well-fitting, professional blazers for work, and a gorgeous pinstripe skirt suit that was promptly worn (after Dryel-ing) for a presentation the following Monday.  Oh, and a few super-shiny gowns that might get to come out later in our ballroom dancing career.  It was my birthday; I refuse to regret that purchase.

Coming in a distant fourth, transportation costs were up a bit from last month, but with gas prices what they are that is hardly surprising.  In any case, transit costs seem to be the least of my worries, despite the crazy commute.

That's where I stand financially, dear blogosphere.  Here's hoping I'll be able to report a positive (or at least non-negative, for crying out loud) savings number next month!

progression

In the continuing financial theme that seems to have manifested this month, today I completed a milestone!

If step 0 of Operation: Debt Freedom was to curb all credit-based spending, the subsequent steps then must involve paying off the balances on each extant line of debt.  As of this morning, my highest-interest credit card finally has a zero balance.  Count step 1 completed!

Since I'm using the debt snowball method, this means that my snowball just grew a little bigger and picked up some speed.  I no longer have any payments to make on this card, so all the allocated money for debt reduction (aside from required minimum payments) can now all be piled on my next-highest-interest debt.  In my case this means my other credit card, which will unfortunately take a fair while to pay off due to quite a few travel-related expenses that have been sitting on there and building up interest.

Hooray for small triumphs!

conservation of dollars

Budgeting.

It's not a dirty word, I promise.  For most of the past year I've been tracking all of my spending, and adding it to a spreadsheet on a month-by-month basis.  A few small cash expenditures almost certainly slipped through the cracks, but overall my spreadsheet represents everything that comes both in and out.

Before I started tracking, I naïvely assigned fairly arbitrary 'budgeted' values to the various categories I'd made up off the top of my head.  The reality of my spending adjusted those numbers quite a bit.  I'd like to share a little bit of my financial tracking system here, as well as illustrating the lessons I've learned.

The Equation
I've always loved being able to reduce a seemingly complicated system into its simpler parts.  If all the rest can be derived from a few core principles, why bother remembering all the fiddly details?  Despite all the specific, complex, and/or baffling budgeting tips out there, it all comes down to one fundamental equation.

$ in > $ out     (1)

As long as this holds, your financial plan is sound.  It's really all you need.  All the rest (earn more, use x or y pesky little money-saving tip, clip coupons, etc.) follows.  

The Tools
For day-to-day tracking, I'm in love with the pocketmod.  It's really just a way of folding a piece of paper into a little book, and you can specify the type of list or information you want on each page, and it will let you print it out.  I use the first two pages for a running to-do list, and the rest for recording transactions.  It's super low-tech, but it works for me, and always lives in my bag.

I know people out there love Mint, Quicken, etc., but I'm a fan of old-fashioned spreadsheets.  More specifically, I love Google Docs simply because I can update and read my budget from anywhere, and never worry about not having an up-to-date version of the file.

To calculate how long it will take to pay off various debts, I was thrilled to find this debt snowball spreadsheet.  It lets you choose from a variety of methods, including the downright sobering figures on how much interest you'll be paying for how long if you choose to only make minimum payments.  While the higher-interest-first method makes the soundest financial sense in that you wind up paying less interest, there's a lot to be said for the psychological encouragement that comes from the lowest-balance-first plan since you get more victories earlier in the game.  Fortunately, for me those wound up being one and the same.  Thanks to this sheet I know exactly how much to throw at each debt in turn, and exactly how long it will take.  You can also enter in 'snowflakes,' or one time payments, in case you want to toss a little extra money on the highest priority debt, and it will take that into account.  Get Rich Slowly also posted a review of this spreadsheet.

Lessons Learned

• Don't bother setting initial budget values.  Just track your actual spending, and go from there.
• Feel free to revise your categories.  Today I wen through and made a brand new sheet for this year's tracking, and took the opportunity to reformat, recategorize, and edit.  There were several categories that are no longer relevant, and instead of having a random list I have to poke through every time I want to add a value, I sorted them into categories.  The pie chart at the top of this post has my new projected monthly expenditure breakdown for 2012.  There's not a lot in the 'savings' wedge, admittedly, but that's because I'm throwing everything I can at my debt snowball right now. 
• If you're using a spreadsheet for tracking spending, I highly recommend a second column next to each month's numbers, for notes.  That way, in case you wonder why the heck your 'other' category was so high in April of last year, you'll know that it was because your best friend got married and you suddenly had to buy an overpriced chartreuse layer cake gown.  If you set the column to not wrap the text, then you can simply make it super narrow and it effectively disappears.  Then it won't be in the way of looking at the overall figures and you can always expand it if you get curious. 
• Tracking really isn't that hard!  I got lazy sometimes and would figure that I could always just look at my debit card bill and figure it out from there.  Unfortunately, the 'what the heck was this charge for' line on account statements are often far from clear, and I've spent my share of time looking up addresses in an effort to divine where I spent that particular $15.  Just writing it down when I'm at the store is a lot easier.  
• Put a place for income on your spreadsheet.  The corollary to this is that you get a savings entry, being the difference between your income and your spending.  This number gives you a healthy little panic attack when it goes negative, meaning that you broke the cardinal rule.  See equation 1!
• Don't accrue more debt while you're paying it off.  My general financial awareness improved by several orders of magnitude when I set a personal moratorium on credit card spending.  When you're spending real money instead of pretend numbers on a statement, you suddenly care a lot more.  A couple of times I've gotten pretty close to being genuinely broke, and then had to become a serious cheapskate for a week or so until my next paycheck came in.  It was a good experience.  While I was previously in a pretty good habit of paying off what I spent on the credit card (above a certain amount of permanent balance; bad me!), it just feels different when you feel each purchase rather than just tossing whatever lump sum you've got around on the card later.  I'm definitely spending less on trivial things this way.  

Some Final Thoughts

Tracking my spending and building a real budget has been quite an illuminating process, and is actually kind of fun.  You don't need to learn complicated software or get a budgeting app, and the manual process is probably more satisfying anyway.  Give it a try!