Budgeting Is Annoying, Tracking Isn’t Enough

March 16th, 2010

Tracking my spending let me feel some progress. Over the past year I would push down my debt a little with only one little problem. Pretty soon those balances would start to climb back up. Everything said and done at the end of the year if you only looked at my balances you would say I wasn’t any better off. However, a year of tracking my spending in GnuCash (an Free/Open Source alternative to Quicken) did have benefits.

After a year I had a pretty good idea where I was spending money. Looking over the records I could find out how much I spent on gas, food, or the book store. The traditional answer would be to look at this information and build a budget. $X a month for gas, $Y a month for dining out, $Z a month for the book store, and somewhere in the budget a set amount to use for paying off my debts. Check the other blogs out there and you will find a pattern. Plenty of people look at this process and hate it. A set amount a month for gas? You may have noticed but gas prices have an annoying tendency to change without notice. A set amount for the book store? The authors I by don’t come out monthly.

There are ways around this. You might put some money into labeled bins, with the budget not being how much it starts the month at but how much you add a month. Put in $20 only spent $12? Next month add twenty more for a total of $28. Or you might spend $12 then take the leftover $8 and put it towards and extra debt payment. But the variations on that system strike me at this time as too much work. Too much work and I’ll probably find excuses to avoid it. It might be a good system to switch to eventually, but I don’t want to pay off my debts eventually I want to pay them off soon.

So I looked at what I was already doing and kicked it up another level. I was already tracking my spending in GnuCash and in the last few months of 2009 I took it a step forward and was using some of the automatic features to add each months regular expenses shortly before the start of the month. An entry for the rent, phone bill, etc., would each show up and serve as a warning that I’d better leave enough in to cover them. So just after new years I killed each of those automatic entries.

Did I just say I got rid of something useful? You bet I did. Because I decided I was ready to do something even more useful. After deleting each of those automatic entries I took a second look at my known expenses and income. In went an entry for every paycheck of 2010. Next an entry for every rent payment of 2010 was entered. A moment was taken to appreciate the remaining predicted balance at the end of the year — wow, that was more than I expected. Each of the regular bills followed, phone, Internet, car insurance, with each one having every payment for 2010 entered. Finally I included a monthly transfer from checking to savings to make sure I was building up the start of an emergency fund.

The good news, the balance at the end of the year was a positive number. The better news, the balance remaining at the end of the year was more than enough to pay off my two credit cards. So those became the next entries. I started working through month putting in payments to the two cards while making sure to leave money behind for unexpected expenses. The really nice news? If I keep to the plan I can have both cards paid off around October. Extra payments might bring the pay off date sooner, running into problems (yes car engine, I’m looking at you) might push it back a little. But, because I have made sure to leave a little behind each month and include transfers to savings, I should be able to cover unexpected expenses without immediately reaching for plastic.

A little more than a year ago I went back to tracking my spending. This let me keep an eye on where I was and avoid the splurge & panic cycle where I would receive a paycheck, pay the immediate bills, spend a bit on myself and then start worrying about making it to the next paycheck. Now I have a plan. With this plan I know I can not merely make it to the end of the year but that I can have no debt at the end of the year.

Progress One Year Out

March 14th, 2010

Hello world. It has been almost a year since I last posted here. There are a number of reasons but the largest was not wanted to acknowledge that I wasn’t meeting my goals. One year out I am at pretty much the same place I was in 2009. The good news: I am in pretty much the same place I was in 2009. While I didn’t make progress I haven’t backslid either.

In large part I believe that is due to the subject of my last post in March 2009. I had started tracking my spending again. But after almost a year and a half of tracking what I was spending it became clear that while it helped it would not be enough on its own. So starting at new years I decided to do more. That is the subject of my next post.

Lesson Learned: Track Your Spending

March 15th, 2009

I have learned that it is important to track my spending. Quite a few people swear by Quicken, some by Microsoft Money, some with custom spreadsheets, and some still due so with pen and paper. I have started using Gnu Cash, which has dual advantages of being free and running on Linux.

For a few years in the early 90s I used Quicken. I always knew how much money I had, avoided overdrafts, and even made savings plans. Then in the mid 90s I found myself reinstalling Windows and just didn’t bother to reinstall Quicken. At the time this wasn’t much of a burden. I still lived with my parents and had almost nothing in the way of bills. I didn’t have any credit cards to build up debt and even taking expensive trips to the bookstore I was still able to put aside some money as savings.

I hadn’t realized that I was setting myself up for a trap. I had recently lost one job and started another that didn’t pay nearly as well. The money I was putting in savings dwindled. Then my sister and I moved out of our parent’s house and I found myself with bills that previously didn’t exist. Rent, a car payment, almost weekly visits to the gas station, food, expenses I hadn’t needed to deal with before. Worst of all my savings balance was starting to shrink.

Shortly after moving out I received an offer for a credit card and jumped at the opportunity. The initial credit limit was only about $300 and at first I stayed out of trouble. In fact I would regularly sign into the web portal for the card and pay off charges the same day I made a purchase, or at most within a day or two. Then came the birthday where I decided to splurge. Sure I couldn’t pay it off in one month without cutting into other entertainment expenses, but I wasn’t going over the limit. Then there was the car repair bill. I started carrying a balance, and the world hadn’t ended and suddenly it seemed a natural thing to do. That began the habit of carrying a balance.

My savings continued to dwindle, credit card balance grew every time the limit was raised, and worst of all were the (fortunately rare) overdraft fees when I would lose track of my checking account balance. Despite the occasional overdraft, and the slightly more common close call, I insisted I was fine because I would log in daily to check my balances. Strange how that usually let me catch things before an overdraft, but now always. There would from time to time be a charge that took weeks to show up, and I would have forgotten about it in the meantime.

After one close call last year I decided I needed to start tracking my money again. My sister uses Quicken now, but as I spend most of my time in Linux I decided to give Gnu Cash a try. There are a number of benefits that I have found.

  • I know how much is in my accounts, even what hasn’t made it to the credit union or credit card company yet.
  • I can see at a glance where I am spending my money.
  • I can plan for known future expenses by entering them in advance, and see how much is left over or how much I am short of being able to afford the expense.
  • Better still, no overdraft charges since I started tracking my expenses.

That last one? This month I made a mistake. In a moment of confusion I paid my car insurance bill twice. Previously that could have been a disaster. I was often riding my checking account balance much to close to the edge. By actually tracking my spending I have been able to do a much better job of keeping a buffer for unexpected and unplanned expenses. As a result, despite making an extra large payment towards the the credit cards this month, accidentally paying the car insurance twice is just an inconvenience rather than a disaster.

That makes the few minutes spent keeping Gnu Cash up to date more than worthwhile

Reducing the Damage

March 8th, 2009

This past week I decided on the way home that I wanted to go out to eat. Further, I decided I didn’t want to just walk across the street for fast food. This was a decision that could potentially be damaging financially and physically. There were however a few things I was able to do to reduce the damage.

First, I checked how much money I actually had before going out. Second, instead of driving to the restaurant we walked. According to Google Maps we walked a total of 2.2 miles going to and returning from the restaurant. Financially that saved the cost of 2.2 miles worth of gas (less than a dollar that day, but over time this adds up) as well as 2.2 miles worth of wear and tear on the car. Third, walking provided a psychological incentive not to order more food than we actually needed since we would have to carry any leftovers home. In terms of health, my sister’s selection probably was a touch higher in fat than usual, but for once I managed to exercise a little portion control (if you ignore all the tortilla chips I ate waiting for the food to arrive).

In some ways this is an expansion of a habit we have made the last few years to avoid short trips by car. We walk to a nearby grocery store about 3/4 of a mile away, walked to the post office before it moved, and when we break down and get fast food we walk to the burger or sub shop.

Each trip is short and each only saves a tiny amount of gas. I have noticed however that since we have started doing this I am able to go a few more days between gas purchases. Avoiding short trips has probably also helped me to be able to keep driving my old car. I keep reading that short trips under a mile are much harder on your car since the engine doesn’t get a chance to fully warm up. At one time I used to do this to the car nearly every day. My poor car is over ten years old now, but the occasional visit to the mechanic is currently costing me much less than a car payment would — personally I would like to keep it at least a few more years and to be able to pay for the next car as much up front as possible.

I think one of the things that held me back in improving my financial situation the last few years has been the feeling that I needed to do something big. If I wasn’t putting at least $100 in an extra payment on a card, what was the point? Of course that meant I made few extra payments. If I was only making two trips to the vending machine at work what did that matter, that was only $1.50 (what happened to 50 cent candy bars?). Of course $1.50 per work day was $7.50 a week, and a few hundred dollars over the course of a year. Just from a daily snack or two. I didn’t stop to think how a little change like simply walking out to eat, cutting snacks, or at least buying snacks elsewhere at much better prices could add up significantly over time.

Welcome to my blog

March 1st, 2009

Hello world, and welcome to my blog.

For the last few years I have said at the beginning of the year, “This year I will pay off my credit card debts.” With each year I have had short term progress only to end up just treading water. This year I have decided that enough is enough. This year I will pay them off. This year I will both pay off the cards and get at least a minimal emergency fund put together.

Some of what I post will be old-hat to those who have gone down this path before. Some posts will be to point to those who I have been reading and found inspiration from.