Blogging Away Debt Our Journeys to a Debt-Free Life

20 Comments

• Reply ND Chic | May 6th, 2014

  Excellent job on the groceries! I would take the excess and apply it directly to your debt.

• Reply debtor | May 6th, 2014

  Can I start by saying great job on this post! Very easy to follow and therefore easier to give (hopefully) helpful comments.
  First what did you do with the extra $226.86 of income? (difference between all your expenses and your total reported income). Do you keep it as a buffer in your checking? Just wanted to see.

  Personally, since you were so low on groceries this month (great job) and you use the envelope I would do a mix. If the difference was smaller I would just have said leave it all in the envelope for next month but with this amount I would probably suggest keeping about 30-50 in the envelope and throw the rest at one of your debts. Because I think you should reward yourself a little for being good this month. That’s just my approach.

  I would also suggest adding an entertainment/misc savings account to your budget. This is where I would draw money from for things like the bar, gifts, and other things you can’t particulalry plan for. Maybe like $50 a month and then it can build up when you don’t use it. Sometimes I pull from that account for like fancier meals. Once you spend it all then you tell yourself you can’t do whatever activity you were trying to do.

  Are you going to do an April debt update later on today? I think it would pair excellently with this post.

• Reply Mary from SC | May 6th, 2014

  Hi Jim – Great job on the budget post. We also use the envelope system for our groceries (and other categories). Our plan is to throw everything left straight towards our debt rather than holding anything back. That forces us to stay on track a little more than having a buffer. I like debtor suggestion of having an extra category for entertainment – if you don’t need it, you can always put it towards debt at the end of the month but it makes your entertainment budget realistic. Wishing you the best from SC.

  • Reply Jim | May 6th, 2014

    Hi Mary,

    Thanks. I really am thinking about doing the envelope system in other aspects mainly the ones dealing with food. But it is a little hard for me since I don’t really carry a purse, haha.

    I think your idea of not having the buffer might help me. So perhaps I will just throw it into the emergency fund, since that is what everyone is suggesting my main priority should be at the moment. Which I cheated a little and threw some at debt as well.

• Reply Jim | May 6th, 2014

  Hi debtor,

  Thanks. I decided last week to basically start writing like I would in a regular blog. Well that kind of style. I have done it with a post or two already. But you will really understand in this afternoon’s post.

  The extra income is still sitting in the bank account, I haven’t done anything with it just yet. I want to keep a buffer, simply because my savings is tied to a different bank all together than my personal checking. Do you think that is a good idea?

  Thanks for the boost of confidence, I think I might be able to do the same on groceries, not really sure. I do have a huge stockpile. So keep $30-$50 and add the same budget amount for this month?

  I kinda have all the categories you pointed out in separate categories, are you suggesting to have another category? Like under my entertainment, that is just my netflix. Oh wait I didn’t see a misc savings. I think this is a good idea, just have to figure where to come up with the money.

  I did already post the debt update last week. I wanted to post them up together, but it wasn’t the full end of the month, and I wanted all the numbers to be accurate.

  Just a hint that I decided to post something about yard sales.

  • Reply debtor | May 6th, 2014

    Re: extra income. No I don’t think you should necessarily budget that away. It’s a personal comfort thing. I work on a zero based budget so all my income is budgeted away and I have no buffer but then I’m single with no kids (I do have a line item called unexpected expenses). So I think the buffer could work for you as long as you don’t end up spending it on rubbish and actually know where it goes (if anywhere).

    On the groceries, yea that is what I would do. If you are significantly under again next month then I would consider revising your budget down.

    With the savings issue, I looked at your budget – i believe the $8 entertainment budget is your netflix payment? Since that is fixed, I would actually just call that line netflix. What I was getting at is more having a fixed amount that goes into a separate account whether you spend it or not (say $50). So when unexpected but expected items like gifts, going out with friends, maybe an entry fee to an event or fun stuff like that comes up – you just pull from that account. It’s kind of like a prepaid expense account if you excuse my acctg terminology. It will help even out the expenses over the year and provide a natural limitation on what you spend on those categories.

    For instance, if you put it away for 6 months without needing it, you could potential spend $300 guilt-free on a present for your wife (or yourself or a family member). If you only had $100 at the time, that’s the most you can spend. And then as someone else suggested, if the amount grew very large, you could always just throw some of it at a debt.

    Anyway, I’ve found that to work for me so you might consider trying it. I think since you have that $200 buffer, you could potentially find the money to do that (for example, the money you spent on alcohol this month would have come from there).

    Sorry for the novel. I just wanted to try and explain as best as I could.

    • Reply Jim | May 6th, 2014

      You are right. I will do just that. Just like Ashley I have a lot of gift giving this month. I am thinking the best course of action for this right now is to add the “buffer” money into my checking account associated with my emergency fund. (I don’t carry this card around with me) Just so it doesn’t get eaten away. Add the extra money found in my budget to the emergency fund. Once I get that fund to $750, I will attack the debt harder.

      • Reply Walnut | May 6th, 2014

        You could also do an envelope for your entertainment/discretionary/small splurges. Basically, pocket money. You and your wife each get ‘x’ dollars per month and you can spend it/save it up, whatever. Maybe it’s only $20 each or $50 each. It at least gives each of you a little room to breath.

        • debtor | May 6th, 2014

          To both of you – exactly!

          The only thing is I would be wary of lumping it into the emergency fund account for pyschological reasons.

          Personally, I hardly touch my e-fund (it’s in an online savings). The other savings I have are at ING/capital one. And that’s more like targeted savings. Reason being, I don’t want to get into the mindset that my efund account is something I can withdraw from – whereas that’s the sole purpose of the other savings.

          Guess it depends on your level of mental discipline.

• Reply Katie -DC | May 6th, 2014

  This is much easier to follow than some earlier posts. Thanks! Also, the budget billing plan for your electric has you pay a set amount every month that is an average of your annual usage. That way you don’t get hit with enormous bills if you run AC in the summer, or have electric heat in the winter. You should see on your statement an accounting of your actual usage and whether the amount you have paid leaves you with a deficit or surplus. The power company usually does an annual review and raises or lowers your bill based on your usage. Personally, I would stay on the plan if I were you. It just allows for fewer surprises in budgeting.

  • Reply Jim | May 6th, 2014

    Hi Katie,

    You are correct. I put the “true” amount in my monthly expenses report. But in my budget report I make it to what my budget is behind. I wished they did an annual review, it seems as if they do quarterly reviews.

• Reply Matt | May 6th, 2014

  Wow this post looks great – it’s clear. You guys seem to be doing a great job with the budget. I really don’t see any areas that would need trimming. I think it would be safe for you to put your oild and other etra money at debt.

• Reply Jim | May 6th, 2014

  Hey Matt,

  I am leaning toward the oil money toward debt. The extra money will pad up the emergency fund.

• Reply Meghan | May 6th, 2014

  Jim-

  You have mentioned several times that you have a large stockpile of food at home. Have you ever considered taking a month (or more) and eating down your stockpile? If you were to budget say $150 for fresh foods and put the other $200 toward debt or your emergency fund you could make a nice dent in them. It just seems that for every month you allow your stockpile to sit there you are paying interest on it in the form of credit card interest. I know you manage to get a lot of great deals, like the cereal example, but they aren’t actually great deals if they just sit there. (Plus, then you could do posts on the weird recipes you come up with from trying to eat from just your pantry!)

  Comments on personal budget:
  – I notice in several instances your budgeted amount and actual amount are off by only small change, I assume that when you are making the budget you are rounding up. If these are fixed expenses I think you should list them at their actual fixed costs, otherwise you are accidentally padding your “I came under budget by X amount” number. (Plus since I know how you have “loved” the clichés lately, “a penny saved is a penny earned” and all, LOL!)
  – Also, I am sure this is just a typo error, but you were over on the phone budget but it is listed as a positive overage. Not a big deal as far as reading it, but if you used an excel type program to calculate the bottom line there will be an error in that math.
  – What do you consider a kid expense? Just curious if this is clothing, toys, lesson fees, school field trip fees, etc?
  -Is there a specific reason for fast food and restaurants to be listed separately? Seems they could just fall under a dining out category…. Then you would even be under budget as you didn’t use your whole restaurant budget!
  -You mention in the post that you and are family are often going, going, going, but I don’t see a gas category. Do you loop that in under auto and transport? Or do you manage to categorize every trip out as a business expense?
  -As far as the grocery cash left over, I think you should put all of it toward your emergency fund. That way you are doing something positive with the money but you are still “technically” holding onto it for yourself.
  -As for oil, I think if your end of year income usually increases to meet the need of the end of year oil increase there is not much need to set money aside for this. Perhaps just a few hundred to get you through that first oil fill-up, but even then I would wait until closer to the end of the summer to start setting that money aside (otherwise it, like the grocery stockpile, is technically causing you to pay more interest on debt). Also, if you were to have a fully stocked emergency fund by the time next winter rolls around then you shouldn’t need money set aside separately for oil at all, after all running out of oil especially because of the associated costs would be considered an emergency!

  Comments on the business budget:
  -You have said in the past that you pay yourself a certain monthly amount out of your business account and the rest of the money stays there. I must admit, I was a bit surprised at how low your business expenses were. Is there a set amount that you keep in the business account at all times? I guess my question arises because if the business account has been growing since you take a fairly set amount out each month is there enough to give yourself a yearly “bonus” if you will that you can use as a snowflake payment toward your debt. I think that it would make sense to keep maybe two months of standard business expenses in the account, given the nature of the type of business that you seem to do, and use the overage for something more in your favor like debt reduction (maybe catch up on a utility bill or something).
  -I’m curious as to what falls into the discount category? Is this like purchasing groupons or something? Just not sure how you buy a discount….
  -I am also curious what constitutes office expenses? If you have postage and supplies as separate costs I am not sure what else would be covered here. Do you occasionally work at one of those “rent-a-workspace” type places?
  -Now that your wife is starting her own entrepreneurial endeavor does she have her own business account? Or do you share the same account?

  This post you have written is much more readable with much fewer errors than recent posts, so kudos to you on that!

  Cheers,

  Meghan

• Reply Jim | May 6th, 2014

  Hi Meghan,

  This is exactly what I did this month with my stockpile and that is why it came in way under budget. I am going to see what I can get out of it this oncoming month as well. Although I don’t feel comfortable actually not having the money in my grocery fund from the gecko, I will put the left over money to good use. Hopefully it will be as good as this month!

  I also agree that I should budget the fixed expenses to the penny, so I get a total understanding. I will do that next month. And thanks for the correction, I will fix that when I get a chance tonight.

  I consider anything that I don’t have to buy on a regular basis for my children under Kids. So in my grocery shopping I will have my son’s diapers and wipes (Which btw I just ran out of size 4 diapers and had to buy them. The first time that I didn’t have them since he was born. But I do have 12 boxes of size 5. But I had a coupon for them :D) But clothes, toys, field trips, and fundraisers are in Kids.

  The reason I don’t classify both of these together, is because a Restaurant trip is a planned trip, and fast food is when we didn’t get to get home in time for either lunch or dinner.

  As for the gas, the way I have this structured is that I am an employee of my business. It is an perk of being an employee that the business pays for the gas. I am hoping since this is the first year with the new vehicle that I can have the business pay for the insurance and payment as well. I am not sure about this and have to consult with a tax expert.

  Here is an idea of what the vehicle is used for since I account for every mile on it.
  April 2014
  Total Mileage: 1792
  Total Business: 1444
  Total Medical: 75
  Total Personal: 273

  I was thinking the same thing about both the grocery and the oil!

  There isn’t a set amount of money in my business account at all times. I save up for my next expense, then I usually get it. Whether that is a tool for the business, a course that will help me, a subscription to a magazine, or even a ticket to a convention. I do however usually put in the same amount every month.

  As for the yearly “bonus” I am usually looking at I could take as a business expense, but I could probably pay myself a bonus.

  As for the my discounts this is where if I hold a contest and I state you can have this product half off, and I actually get only like 35% I pay the other 15% out. The office expenses is actually in my quicken as other office expenses, this month was buying some new domain names and paying a membership.

  As for my wife’s account. Her company gives her a prepaid debit card, but yes if anything is over she would be covered in the business account. Because technically the business is signed under the company and not herself.

  Hope that explains everything!
  –JIM

  • Reply MW | May 7th, 2014

    You really should talk to an accountant about the way you’re doing your gas. I’m not sure what you’re doing now is legal (but I’m not a tax professional).

• Reply Morgan | May 6th, 2014

  Am I the only one who thinks you can’t afford to smoke?

• Reply Mary | May 6th, 2014

  Much better job on this post; it’s much clearer.

  A few things:

  For your utility bill-our utility has a budget plan and it works like this. There are only certain months that you can sign up for the budget plan for the upcoming year. They allow you to sign up when your bills are at the lowest so that you are getting a surplus of cash built up for the winter months. You essentially pay the same amount every month however they always include the current amount on your bill. I tried it once and didn’t like it at all. I ended up with a larger bill at the end so I never did it again. In my case, they just “estimated” that amount so it wasn’t a realistic number. What I do now, is take my total annual utility cost and divide it by 12 months. So let’s say for this example, that it’s $1200/12 month equals $100/month. My first bill might be $87 so I pay the $87 and then put $12 into another account that I have that is just for this purpose. That way, when the higher months arrive, I have the money. It’s a lot easier than doing those budget plans.

  Regarding not knowing how your budget plan works….you should never sign up for anything that you don’t understand. That should be your new rule moving forward. If you aren’t 100% clear on how it works, how can you determine if something is a good deal financially? Also, it’s better to walk away from something you don’t understand than to sign anything you when you aren’t 100% certain of the terms otherwise you’ll be paying more.

  For oil, that’s a lot of money on oil. I’d take your total for the 12 months and divide it by 12 just like the example above, and put that in an account for oil. That way, you’ll have enough.

  What I’d be curious though is for you to take your annual rent and your annual oil cost and add them together. Is it possible to rent a place that might have higher rent but where you don’t have to pay for the oil? For example, your rent is $600/month x 12 = $7200/year. If your oil was $5000/year then your total for rent/oil would be $12200. Is it possible to find a place to rent at $800/month that includes oil? $800 x 12=$9600 and you’d save $2600/year if you did that. Just a thought.

  Grocery budget was low however I imagine it might go up if you aren’t eating out as much. I’d be tempted to leave it for groceries for now and if you have a surplus in a month or two, then you can re-assess that number.

  Overall, I’d like to see you use your time better for maximum income. It seems like a lot of time to spend getting the yard sale items together, doing all of this couponing, etc. versus just working for more money. Much clearer post overall though.

  • Reply Jim | May 10th, 2014

    Thanks for the tips Mary. As for renting another place that does what you suggest, I really don’t think that is possible in my area. It is a great idea, but no house that rents out over here includes heat.

    My grocery bill was low because we ate out of our stockpile. I am trying to go as long as I can without really having to really go shopping. But I do estimate, that I might need to go for some stuff shortly. I don’t think my budget of $350 will go up because we are eating at home more, but you never know.

    I am using my time to gain more income, I actually went to a training for the one contract that starts next weekend! This month, I will be working one day each weekend. But starting next month it will go up to two days.

• Reply Jocelyn | May 7th, 2014

  Thank you Jim! It was very helpful to see the income in addition with the budget.