Friday, December 14, 2007

Number Crunching 101

It's Friday, time for a financial check-up. Despite having an InBasket full of items to enter into Quicken, I know I'm broke until payday. What I don't know is if I'm broke after I get paid and I think the answer is probably yes.

It's been six months and nothing has improved. My laptop is dying and I'll need a new one, gasoline will soon be $4 a gallon, emergencies have nothing, I want a dishwasher and a bathroom shower, and pretty soon I will have to start paying off the student loans and get myself out of debt. I'd love to be like the couple having a difference of opinion on the money show I found on the radio last night: she wants to pay off their house, he doesn't but they do have the money to do it. I want to be in a fantastic position to buy the rest of the family land. Hell, sometimes I pass a property for sale around SLU or closer to me and I would love to invest in it. There's a gorgeous Victorian farmhouse on Hwy. 22 surrounded by live oak trees. It'll probably be bought and torn down by a subdivision developer asshole. Hell, I want to have money in the checking account between paychecks.

So it's time for a new approach. I'm not throwing out Quicken and micromanaging receipts into what I spend money on. It's too damn useful to get the yearly estimates for the bills. But it doesn't work for day-to-day.

So when the article 5 steps to fix a broken budget showed up Wednesday, I could SO relate.

Step 1: Understand your motivation. I want to control my overspending so all my bills are paid, but I don't want to feel deprived. I want to having savings I can access for big sorta planned things and emergencies. I want to know that I have a good start on retirement. Have enough money to not worry about running out of gas.

Bills, gasoline, and savings are the biggies. I am buying a dishwasher no matter what in January, so I'm not counting it in the equation. I can buy a laptop by the month, but I don't want to do that until I get the gasoline and savings squared away. I don't want to get my school money in January and be barely living from paycheck to paycheck in March.

There's a good summation: I don't want to live paycheck to paycheck. That means having savings and everything else covered.

Step 2: Know your numbers. Alright, have nearly 18 months worth of that data. But you need to have what you can spend right in front of you. In other words, balancing the checkbook. *Shudder* I suck at it! I never write stuff down, hence moving to the enter everything into Quicken once a week. But that doesn't do me any good when I'm in the store and have no idea what to spend.

New solution: cash in hand. All purchases that are not a bill or otherwise automatic will be made with cash. Now I just have to remember to get the cash budget out before going to the store.

Step 3: Get real. "Your budget is more likely to implode if you tighten your belt to quickly." I feel like I spend too much on groceries for one adult. And I probably spend way too much on luxuries.

Damn, now I hear back from Centennial and I'll have to change my phone in order to use the TomTom. Double-damn.

That's two places to start trimming back in 2008.

Step 4: Find a system that works for you. This is where I fall down. I keep flopping on micro versions of budgeting; I'm going to try a macro system: The 60% solution.

60% of gross income should be spent on committed expenses.
10% of gross income should be spent on retirement savings.
10% of gross income should be spent on long-term savings/emergency fund.
10% of gross income should be spent on anything you like.

I'm ignoring the school money in the calculations right now, and I already know I spend over 60% on committed expenses. 10% in retirement is only off by 1.12 a month, and that can be easily fixed for next month.

Now what I'm worried about is the 10% for long-term savings/emergency fund. First, where do I save that much money? Second, where can I put it so I can't touch it BUT it's not tied up in rules and regulations when an emergency happens? I made that mistake with the Roth IRA. Everybody says how good they are and you need one, but I didn't need to start one yet. In fact, the summer I opened it, I had to go withdraw most of it with a penalty.

Long-term savings/emergency fund needs to be able to be direct deposited. If it depends on me remembering to do it, I won't save. *Starts researching* Okay, all the options seem to tie the money up for too long or take too much money to start with. I'm going to have to stick it in the second savings account until it builds up.

CRAP! Made a really stupid decimal mistake. Let me fix before I get boggled. The math is mostly right, I think. Math is right, *whew* I just forgot to move decimal over when going back to percentages.

Now to figure up the 60%. *TWITCH* Okay, even adding together the 60% and 10% fun money, I need almost $1000 a month to get to the monthly trimmed amounts I worked out in August."That's okay, you have the school money." But I left it off for a reason, namely, I need to have a working budget without counting on it completely.

Well, that was a fun number crunching. The imaginary Fun Money is still sitting on the table, but the 60% ran out in the Debt Bills categories (loans to pay back), not even reaching Discretionary Commitments like groceries. And Debt Bills doesn't even contain school loans payback yet. Hell, left off the car loan too.

Okay, fixed it in Excel and... run out of money in Gasoline. So not only do I not have any food or home maintenance stuff or luxuries, I'm also unable to pay off any debt, nor go to work for a full month.

Well, now I feel like a big fraud. A lying sack of shit. No wonder I hate dealing with a budget, if I feel this way.

  1. January: Change Deferred Compensation to 2.5% of every paycheck
  2. Research switching to the managed accounts under Deferred Compensation. Would like to start in January, afraid I will have to wait until April.
  3. Set up direct deposit second savings account for 10% of paycheck.
  4. Get my refund on Citizens Fair Plan bail out. I need that money

Read Free!
The BookWorm

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MerylF said...

From a money management point of view, if you are this badly in ebt, the best thing you can do is funnel all of your money into debt repayment, with the exception of groceries and fuel. Scrimp and save. In the long run, you will save hundreds of thousands of dollars by clearing debt first.

You make zero purchases until your debt is clear. No savings, no retirement, nothing. Just. Pay. Debt.

Fripperies like the dishwasher can wait.

KLCtheBookWorm said...

When you're ready to throw the computer out the window, it's time to turn it off.

I'm not done with the budget. I had to stop and go home, and I didn't pick it up when I got back here.

But I'm not waiting another decade for a dishwasher or shower. Not happening. Whatever else happens, I'm getting my house where I can live in it at a better standard than what I have now. Ignoring the dishes for a week because I don't want to dry out my hands just doesn't work. Having to drive to wash my hair, I'm so DONE with that.