Budgeting for Mere Mortals - Part 1

Over the years I have experienced a number of different “stations” in life. I have been young, single and doing OK. I have been young and single doing great. I have been married and a mother, doing OK. I have been a single parent and NOT doing OK. I have been a single parent and doing great. And I am now a single parent of adult children doing OK. The one common trait I have learned as I reflect back is that the one time in my life I felt the worst and had the worst health was when I was in debt.

I may be at a point in time in my life that I am no longer making the big bucks, while the cost of living is increasing by leaps and bounds, but I am out of debt and my health has never been better. I am enjoying life despite the tribulations of the economy around me. There is no more monkey on my shoulder that is weighting me down or holding me back. I am more independent and self-reliant. My dreams and goals are within my reach, thanks in part to my budgeting goals and stubborn tenacity. Yours can be too.

Let’s face it budgeting is like cleaning the toilet; it’s a pain and must be done or we just don’t feel right. Life is just too darn short to spend most of it not feeling right. So how do we attack this financial chore and keep our sanity? The first and hardest step to me is self examination of your own lifestyle.

Life Style Self Examination – Needs vs. Wants

I am a visual person when trying to grasp a difficult problem, so I tend to make lists to visualize each related issue. I do this with self-examination too. Take a sheet of paper and then look at yourself and visually and physically write down your Wants and Needs. Keep in mind that Needs are what you as a human cannot survive without, like food and water. Wants are your desires and wish list items, but they do not sustain human physical, spiritual or emotional life.

This is hard because when it comes to say food, for example, we Need food but having Sirloin Steak or caviar 5 days a week is a Want and not a Need.

We Need shelter. That shelter must be healthy and sturdy. It must keep us dry, warm or cool and reasonably comfortable. It is a Want to have a spa bath off a master bedroom suite that is large enough to hold the entire family without bumping elbows. It is a Want to have the heat turned up to 80 in the winter so we can run around naked or in summer clothing while in the house.

We Need clothing to protect our fragile human bodies. We may Want that designer pantsuit or mink coat, but we do not Need them to survive.

We Need liquids, water in particular but we may Want, milk, juice, wine, soda, beer or fancy bottled water. We humans love variety, but we do not Need it to physically survive.

Where this really gets difficult is when we look at items in our life styles, like comfort foods. We love comfort foods but do not need them to physically survive. Yet at some point a certain amount of comfort foods are needed to keep our spirit or emotional state healthy. This is where Moderation comes into play and we humans historically have a very hard time with moderation.

When budgeting, the Needs and Wants List has to include just about everything along with the kitchen sink, so be as detailed and honest as possible.

Moderation

Taking your Wants List, write down how often you indulge in Wants. Go ahead and include a weekly bubble bath or spa treatment, the weekly movie or dinner out and deserts or junk foods. Be honest and list all these “Comforts” for your emotional health that you indulge in and where there is an expense, list these costs. You will use this later to calculate the costs for a month and year.

Now apply Moderation to them. If you get your hair or nails done every week or month, list how much money you would save if you reduced that to every two weeks or months. Most likely you will find out that your emotional health does not suffer and now you have extra monies for other things, be them wants or needs.

Do the same for your Needs List. This is where you include mortgage or rent, utilities for heat/cooling, lighting, cooking and storing foods. Watch out when you reach clothing and be sure to only include the Needs and not the Wants or Desires. No name brand designer tags, those items belong on your Wants Lists.

If you are like most people there will be a few Wants or Desires with costs where the costs can’t really be separated out, like: TV or Stereo, where it is hard to tell how much the electrical cost is compared to the Needs electrical costs. Or items like satellite or cable TV, lighting or phone services (landline and cell) or internet services, appear as Needs but most of the time are not. Other items like milk or juice you may see as Needs, but are really Wants because as long as we have water and eat properly we get all the fluids and nutrients we Need from other food items. Do however separate French Fries, chips, dips, soda and alcohol, top grade meats and deserts out, or the purchases/rentals of DVD’s and CD’s.

Utilities can be reduced by lowering the thermostat in the winter to 67 or 68 degrees and raising it to 75 in the summer. Using a glass for brushing your teeth or filling the sink with water for shaving and washing your face or reducing shower time from 15 minutes to 10 minutes and baths from every night to every other night.

Further utility savings can be accomplished by applying the myriad of “green” energy techniques and gadgets. But don’t be too drawn into these gadgets, some actually cost more money than the savings they provide. For instance replacing all single pane windows in a house costs thousands, when for a few hundred dollars and a little human involvement, you can replace all your drapes with thermal backed drapes and open and close those drapes accordingly each day.

You should now have a deceit list of items to apply Moderation to by, say cutting each item in half. Or if you feel you must wean yourself, cut them by one quarter the first 3 months and one third the second 3 months. Put the savings into a jar or tin can labeled Moderation Savings. So if your electric bill gets lowered by $2.00 a month, that goes in the Savings Jar and do not spend it for at least a year. Take a look at this Savings every few months and record the amount of savings. Or if you don’t want to wait that long, at least keep a record of how much you save after several months and extrapolate the annual savings. I did both.

A key aspect of taking control of your financial life is to Get Organized. Now I am far from an organized person, despite what my family and friends believe. You see I am a “pile person” by nature. I have piles that are for bills, piles for shopping coupons, piles for paycheck stubs and the like. So my first challenge was to get all this stuff into some organized fashion and in a relatively safe storage place.

I did this by putting my piles into large manila envelope and then the envelopes in one cube type cardboard storage box. This took several weeks and several re-distribution sorts until I had the information in groupings that would allow me to accomplish the next critical steps to a budget so that I could design one to meet my needs and stick to it too.

• First it was two envelopes: expenses and income.
• Then those were broken down into some specifics like: Mortgage, Auto, Groceries, Medical/Dental, Credit Cards, Utilities (which included phone and cable TV), Pay Stubs, Income Tax Returns and so on.
• Then I got even more detailed and had envelopes for each utility, each child, auto maintenance from insurance and the loan, groceries were separated from food stuffs and health and beauty stuffs, RX’s also had their own envelope, Child Support became separate from pay stubs and stock interest and so on.

Once I was actually on a budget and debt free, these envelopes became file folders and the general break down envelopes became my weekly and monthly collection envelopes, which I keep in very easy to see and reach and use on a daily basis locations. For instance the envelope for all expenditure receipts like groceries or RX’s is in the kitchen, the rest are in a box in my study. I no longer go more than a month before recording and filing these items away. Tax time has become a breeze and I need very little time or effort to save for a new goal. I am also achieving more goals than I ever did in the past.

Whatever you do, find a technique and storage place that works for you and then stick to it.