How do
you manage money? Do you have a budget? Do you do this as a family or is one
person responsible for the budgeting? If needed, how could you improve your
budgeting skills?
We don’t really have a hardline budget with
certain dollar amounts set for each type of everyday living expense (i.e.
grocery, clothes, household goods, etc…), but we do still manage to live within
our means. For larger expenses, we do discuss and keep in mind the larger
picture and how we want to spend money whether it be on home-improvement
projects, vacations, etc.. For these things, we usually create a ‘wish list’ of
bigger items we would like and then prioritize and take things off the list
based on how much we can afford to spend on those things. I feel very fortunate
that Mark and I pretty much have identical philosopies when it comes to family
finances so there is never that struggle of one of us having to reign in the
other's spending habits or money management.
Neither of us are overly frivolous spenders -
that being said, Mark and I are both aware that we do indulge ourselves in
things that aren't necessary and that the money we spend on those things would
probably be put to better use in savings or go toward more important things. We
are both level-headed and reasonable people, so we have an underlying trust in
each other’s spending judgment. We tend to have an unspoken threshold of
discretionary spending of around $100. Typically, if something tops over the
hundred dollar mark, then we will discuss it out of respect for one another and
to get input on whether we should be spending that money on some other higher priority
expense. Our two biggest splurges are eating out and vacations. We love to do
both. We are fortunate to be able to do both. I am sure that being able to
afford these splurges is greatly due to the fact that we don’t have any of those
small people (I am referring to kids…not midgets – but for the record, we don’t
have any of those either) to be financially responsible for - you know all those expensive things
that they need and want and must have. Sure, the dogs have some expenses…but
they don’t need childcare, clothes, schooling, and all those other fun things
that many parents (my own included, back in the day) have to make sacrifices of
their own in order to provide.
Last year, actually, Mark and I made an
assessment of things we were paying for that either weren’t necessary based on
usage, or that we could reduce the amount of what we were paying each month. If
you haven’t done this recently, I really recommend it – you may be amazed at how
much you can save without really even noticing what has been cut. The biggest
single expense we eliminated was reducing our cable down to just a few VERY
basic channels and then signing up for a Hulu Plus subscription. I am amazed at how much we save each month
by cutting out the cable (and no we don’t even miss it…we were watching LESS
than three hours of TV per week so it was a total waste). Also, with the
mortgage rates being down from when we bought our house, we were able to
refinance the house and reduce our monthly mortgage payment. Another big one
was that my last car payment was last year, so that was another good chunk of
change we didn’t have going out every month – granted that wasn’t one that we
could really just choose to get rid of – but the timing worked out really well.
So anytime I drive by a car dealership and have the urge to stop and look, I
just think about not having a car payment – that usually
works!
So,
while Mark and I don’t particularly set a certain dollar amount that we budget
for individual types of living expenses, when it comes to the major life
purchases and credit cards, we do have some financial principles that we live by
so I thought I would share some of those with you this week as well:
Credit
Cards
One of our biggest philosophies
is regarding credit card debt. The most important thing
regarding credit cards that Mark and I live by is…pay the TOTAL balance due in
full EVERY month….I repeat…PAY THE ENTIRE BALANCE DUE EVERY MONTH. Aside from
precious few circumstances, we never let a balance roll from one month to the
next. It can so easily turn into this conglomeration of debt that just keeps
growing and rolling over from month to month (did anyone else just have a
flashback to that old movie 'The Blob'??). I have seen it become a vicious,
vicious cycle for people and I hope to never be in that situation - which is why
we have such a strict 'rule' about this. This is almost one that you have to put in place from the moment you first get a credit card, because once that debt starts rolling, it can be really difficult to dig your way back out in order to start fresh with no prior balance due. It is certainly okay to
have and use credit cards, let’s face it…we no longer live in a time where
people have that one credit card locked away to use for ‘emergencies only’.
Anyone who spends much time with me will tell you that I live and die by having
my credit card. I very rarely have cash on hand, so I always use my card. This
does have certain advantages…it makes it easy to track where you are spending
your money. Yes…I am referring to that dreaded end of the year summary booklet
from Visa that provides that sobering breakdown of much we
spent by category…let’s just say the ‘restaurant’ section makes Mark and I want
to vomit every year when we see the total dollars spent on that! Woof.
Cars
Thankfully, neither Mark or I have any
particular need or desire for expensive or fancy cars, so we both drive
relatively inexpensive vehicles. We do require one SUV (or truck) – we have a
Saturn Vue which we bought used in order to pull the boat to and from the lake.
Mark drives that because his daily work commute is much shorter than mine so it
is cheaper on gas for him to drive the larger, less fuel efficient vehicle to
work. My daily round-trip commute for work is 70 miles, so I drive a smaller,
more fuel efficient vehicle (Nissan Sentra). This car has been wonderful in
regards of cost and saving money on gas. I got a GREAT deal when I bought it
new, and aside from regular maintenance and upkeep, we have literally had to put
NO money into mechanical repairs for my car…but yes, I admit…there are some
cosmetic things that could be done – stupid, stupid concrete pillars in the
parking garage at work! The Nissan is now paid off, and I plan to keep it as
long as it holds up – having one less car payment is really
nice!
Home
For most of us, buying our home
will be the biggest purchase we ever make. Before
we found our house, Mark and I had found a different house first. We loved it
and made several rounds of offers on it. We came to within a few thousand
dollars of having the offers and counter-offers meet. But that is as close as
we were going to get. So, we walked away. Period. No pouty faces, tears, or
sadness about it. Of course we could have afforded an extra few thousand
dollars spread over the life of a mortgage, but for us that wasn’t the point.
We set the amount we would spend on a house and took a hard line when sticking
to it. Our simple home buying philosophy is this: buy the house
you can afford…NOT the house that costs how much the mortgage company will LEND
you…those are TWO different houses…most likely in two different neighborhoods!
A lot of people have convinced themselves that ‘the bank won’t lend me more than
I can afford…right?’...WRONG. Need I remind you of the less than dismal housing
market?? Exactly.
Retirement Savings
You
have to start saving early for retirement, even if it is just a tiny little bit
at first. Every year that you put it off, that is money that isn’t earning
income for you (yes, I know…insert market jokes here). We feel that it is
important to contribute at minimum whatever your company will match. If you
don’t maximize your company’s retirement matching program, that is literally
free money you are letting pass by. We have also come up with a plan to
increase our contributions while minimizing feeling it in our take-home pay.
Every year when we (hopefully!) get raises, THAT is when it is easiest and least
painful to the pocketbook to go in and increase your percentage of
contribution. It doesn’t have to be your whole raise either, just a small
portion of it.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Now that we have covered
spending on ourselves, there is one more area to address - giving something
back...whether it is to your community, church, or favorite organizations...Mark
and I both feel that it is important to give something back out of appreciation
and gratitude for the things we have been blessed with. Regardless of
your income, there are always ways to give something back – whether it is
through donating your time, skill set, or money. Not only does it fill a need
and help others, but it also makes you a better person. It is important to
recognize that somewhere in the world, there are always needs that are much
greater than your wants. Plain and simple – it’s just good karma…need I say
more?
So...I would love to know...how do manage the family funds? Do you have any advice for the rest of us??
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