Sunday, September 1, 2013

The great budget crisis of 2013: Update

If you will recall, Alex and I had been working on a household budget. Turns out, it's a bit more complicated than previously thought. It also takes a lot of time to stay on point. However, I think we are doing quite well right now, and I'm proud to say we are still on track. I thought I would highlight just some of the things we have done and how they're working for us.

1) Car payment: we found out that every time we made a car payment, about $25 goes to "finance fees", even though we have a 0% APR loan. We decided to double our car payments from $225 to $500 a month, effectively ending our loan in half the time. I'm proud to say that we now owe about $8400 on the car, and we are on schedule to have it paid off in about 2 years. And truthfully, we haven't even noticed that extra money being gone. In other words, it hasn't "hurt" to put more money toward the car, and we will continue to do so for as long as we can. The other nice thing about it is that we have payed so much extra that we technically don't have to pay a car payment until December (of course we will, but it's nice to have a time cushion as well).

2) We put away our $1000 emergency fund, and luckily, we haven't had to touch it. We also decided to put away a little bit extra every month, and that's quickly ballooned into an extra $1800 (meaning, we have $2800 in savings right now!). This is incredible, since it's really nice to have an extra cushion as we have no idea how much the munchkin will cost, but it also goes to show how quickly savings can grow if you're diligent about putting money away (and not touching it).

3) We stopped using credit cards except in particular situations. I've even started paying for things with my debit card online. There are a few things I have to pay for with credit, but I make a point to go in and pay the bill the minute the charges hit the card. In particular, I've used my Kohl's credit card to get discounts (I think this is totally worth it) and I've made some purchases online (like auto insurance) that have had to be put on credit cards. Other than that, I think it's been a really sucessful strategy because it forces me to have money in my checking account in order to make a purchase.

4) We have way more cash on hand than we used to. We've bought some furniture and things for the baby, classes at the hospital, and we try to use cash when eating out or hitting the grocery store for a few items. This keeps that whole psychological trick going since it's harder to pay cash for things than it is to use a card. This is not to mean that we haven't eaten out, or bought somewhat extravagant purchases or gifts. It just means that we have paid cash for them all. That way, there is not a bill looming over our heads further down the road.

5) Tracking our money and our spending. This, I think, has made a huge difference. Merely paying attention to where our money goes has allowed me to keep an eye on our money and where we tend to spend it. And, to be honest, just this "paying attention" has allowed us to really question the things we need or want when we are buying them. We are still occasionally hit with the idea that there is something we really, really want/need, but for the most part, we are happy with what we have. If we do need something, I look for Groupons, coupons, discounts, or sales at Costco or Kohl's. Most of the things for the baby are secondhand, and I think it will stay that way. The nice thing about this "paying attention" bit is that when unexpected costs do crop up, we have enough cash to cover them. For example, I found a crib and a changing table/dresser combo on Craigslist a couple weeks ago. Together, they cost $235, and we luckily had enough cash on had to buy these things outright, without struggling with being short for other expenses. Similarly, we signed up for all these baby classes at the hospital. Together, these classes cost over $300, but we had the cash to cover it. I can remember spending an extra $100 on shopping and that would put me over the edge. I'd have to transfer money from my savings, and then I had finally drained my savings and I was taking money from our joint checking account just to cover expenses. It's really amazing to me what paying attention can do!

6) Budgeting our income to have enough for the lean times. In a few short weeks, I will be on maternity leave and my salary will be cut by 40%. It's hard to face a salary cut along with a huge, looming unknown (baby), but I think we are as ready as we can be. I've looked at our budget, way overestimated taxes and expenses, and it looks like we will be OK, especially since a few expenses will go down, at least in the short term. It's also good to know that we have an emergency fund to fall back on in case baby needs something essential right away. It's also good to know that we can take a pay cut and still be OK, since daycare is going to take a huge chunk of our income when the time comes.

7) What can I make or how can I get things cheaper? I pay attention to our listservs here on campus and I always watch the ads for sales. I don't really clip coupons for the grocery store (we mostly don't eat the things coupons are for), but I have no shame using a coupon for the car wash down the street or the pizza place around the block. We shop a lot at Costco and the local farmer's market, which really tends to pay off in the long run. Having a million rolls of toilet paper or 3 gallons of shampoo will really come in handy for the few months with a new baby. I've also taken to looking up things on Pinterest for ideas on cat toys so Ducky doesn't drive us crazy, a Halloween costume for the munchkin and new uses for old things. I've got a couple projects in mind that I need help with, but they are all projects that are small, one day or less. I'm thinking some of them can keep my husband busy while the new baby's here.

In summary, I think this "Budget Crisis" has been a blessing in disguise. It's forced us to really pay attention to where our money is going, to make decisions based on our situation whether we need things or not, and it's allowed us the freedom to have cash on hand where there are expenses, needs or wants. We've not been deprived in any sense of the word, and we've even managed a couple of vacations (camping at Lassen National Park), purchases of new furniture and baby items, and the occasional dinner out. The other thing it's forced me to do is to accept things the way they are. Nope, we don't have a house, and there's no way in hell we could ever afford one in this area. Accepting this fact, and knowing that our rent is really not that bad for this area (even though it's kinda a crappy apartment) has been a real boon to my life. Also, accepting that my life is infinitely different from my peers and even from my parents when they were my age (and that's OK). I chose this life and I'm happier for it, and that's the way it is right now. Sure, I like to dream about the house Alex and I will one day own, but until then, I'm in the here and now, and it is what it is.

Of course, there are still things I need to work on. It's easy to know what I need or what Alex needs, but I have no idea what this little guy will need when he comes to us. So, we will see how our budget stacks up with another little person added to it....

1 comment:

  1. Good job, you guys! We are working on this too and it is ROUGH.