Last time I looked up, it was summer time 2012, and now here it is, summertime 2013.
As I read back through my posts, it's obvious we haven't made the best financial decisions. Last summer, my hubby and I took on a huge renovation project that took all of our time, and all of our money. We didn't plan well enough and we found ourselves back in the hole with a $12 000 line of credit. Since our line of credit climbed that high, we've managed to pay it down to $6 600.
We also found ourselves in a position of owning a car that (due to an accident where we not at fault) was worth $6 000 and still owed $12 000. We decided earlier this year to trade in both of our vehicles for what would could get and buy a new(er) vehicle. At the time it seemed like a good idea, but now we have a $29 000 car loan to add onto our debt. Hubby is still glad we bought a new(er) vehicle, and I am too, but I think it could have waited. Our fuel consumption has gone down with this new vehicle, so we are at least saving money there.
We've gotten back on track and back on a budget and we will have the line of credit paid off by Halloween. We also plan to shorten our car loan to 2 years from 7 years and will hopefully have that paid off by spring 2015.
Every thing is a learning curve and while we were off track for awhile, I feel much better being on track again.
Showing posts with label Debt. Show all posts
Showing posts with label Debt. Show all posts
Saturday, 15 June 2013
Sunday, 15 January 2012
How I Budget
Over the last two years I have redone our budget about a dozen different times trying to find a practical one that works for us. In October, I found my magical budget system! For the first time we've been able to stick to our budget and make it really work for us.
Why did all the other ones not work?
Problem Budget #1: Spend Now, Save Later
From the title I'm sure you have an idea why this didn't work for us. This "budget" was the earliest theory I used, I earned an income, paid my bills, bought my food, gas and entertainment and would save what was left. Problem was, there was nothing left at the end. If the money was there, it usually got spent. Strange concept??
Problem Budget #2: The Monthly Budget
The first several times I did a budget, I did a monthly budget. It was the kind you get as a free template and you put in your income and then you put in your expenses and it tells you how much money you have left over or how much you you've spent over. Some of them, like Gail Vaz-Oxlade's Budget Template, even tell you if you are spending the "right" amount in each category. The problem for me was the numbers never added up. I finally realized that because we get paid bi-weekly and pay our car payments and mortgage also come out biweekly, it didn't add to to a monthly payment, some months we'd make 3 payments instead of 2 and some months we would get paid 3 times.
Problem Budget #3: The Cash
When I put us on a fairly strict budget, I decided to do what I had read about over and over again and I started to use a cash budget. On payday we would go to the bank and pull out our money and put it into envelopes to use for the next week. The problem with the cash really boiled down to we were too used to using debt and having a joint account. I liked to use debit, I didn't have to keep receipts because I was able to view all of my transactions online. The second thing we found was some weeks, like Thanksgiving, we spent more on food, and other weeks we spent more on things like gas for our vehicles - we were able to "steal" from other jars, but that made it even harder to keep track of what we were spending where. If you lost a receipt, you really didn't know. The third and biggest problem was that it wasn't convenient. My hubby would stop on the way home for milk or something small, would forget to take the cash or would end up stopping unexpectedly. We also could only take $20's out of the ATM so it made us have to budget our envelopes in 20's, which for some categories didn't seem to work out to well. Lastly we were missing out on the points we got with our debit and credit cards! Needless to say, the cash system only latest two or three weeks in our house.
So here is my big secret after all these attempts, my magical budget system consists of a spreadsheet. Just a spreadsheet, I didn't even use a template because none of them worked for us. I use a spreadsheet that is broken down into weeks, the first day of the week is pay day. This is an example of how it looks:
We chose to do it by week because since I started a new job in October, hubby and I get paid opposite weeks, which is really really nice to budget with! I use each week to put in my income and my bills, savings and debt repayment. Even though I "schedule" my payments all through the week, I always come home pay day and go through the weeks budget and pay anything that needs to be paid right away. I also should mention, things like our mortgage, car loan and savings are set up to come out automatically on pay day. Once a line is completed, I use strikethrough to cross it off. Once everything is paid, and savings is saved, the balance is our weekly money.
We've stopped setting weekly limits on how much to spend on fuel, food and entertainment. Our rule is if we have $100 left over, we can spend it on anything (mutually agreeable of course, I wouldn't go empty our bank account on a pair of shoes). If we spend all the money eating out, then we don't get to buy gas, if we spend the money on new clothes, then we don't get to eat for a week. This way, when the money is gone it's gone, but we don't have to worry about counting pennies. This budget plan is set up so we have all our bills paid, savings saved in 10 minutes and then we don't have to worry about it.
Right now, my budget is laid out until April, which is when hubby will be going to school so it will change a bit. So far it is working really well but we may make some more changes along the way as things in our life change.
Why did all the other ones not work?
Problem Budget #1: Spend Now, Save Later
From the title I'm sure you have an idea why this didn't work for us. This "budget" was the earliest theory I used, I earned an income, paid my bills, bought my food, gas and entertainment and would save what was left. Problem was, there was nothing left at the end. If the money was there, it usually got spent. Strange concept??
Problem Budget #2: The Monthly Budget
The first several times I did a budget, I did a monthly budget. It was the kind you get as a free template and you put in your income and then you put in your expenses and it tells you how much money you have left over or how much you you've spent over. Some of them, like Gail Vaz-Oxlade's Budget Template, even tell you if you are spending the "right" amount in each category. The problem for me was the numbers never added up. I finally realized that because we get paid bi-weekly and pay our car payments and mortgage also come out biweekly, it didn't add to to a monthly payment, some months we'd make 3 payments instead of 2 and some months we would get paid 3 times.
Problem Budget #3: The Cash
When I put us on a fairly strict budget, I decided to do what I had read about over and over again and I started to use a cash budget. On payday we would go to the bank and pull out our money and put it into envelopes to use for the next week. The problem with the cash really boiled down to we were too used to using debt and having a joint account. I liked to use debit, I didn't have to keep receipts because I was able to view all of my transactions online. The second thing we found was some weeks, like Thanksgiving, we spent more on food, and other weeks we spent more on things like gas for our vehicles - we were able to "steal" from other jars, but that made it even harder to keep track of what we were spending where. If you lost a receipt, you really didn't know. The third and biggest problem was that it wasn't convenient. My hubby would stop on the way home for milk or something small, would forget to take the cash or would end up stopping unexpectedly. We also could only take $20's out of the ATM so it made us have to budget our envelopes in 20's, which for some categories didn't seem to work out to well. Lastly we were missing out on the points we got with our debit and credit cards! Needless to say, the cash system only latest two or three weeks in our house.
So here is my big secret after all these attempts, my magical budget system consists of a spreadsheet. Just a spreadsheet, I didn't even use a template because none of them worked for us. I use a spreadsheet that is broken down into weeks, the first day of the week is pay day. This is an example of how it looks:
We chose to do it by week because since I started a new job in October, hubby and I get paid opposite weeks, which is really really nice to budget with! I use each week to put in my income and my bills, savings and debt repayment. Even though I "schedule" my payments all through the week, I always come home pay day and go through the weeks budget and pay anything that needs to be paid right away. I also should mention, things like our mortgage, car loan and savings are set up to come out automatically on pay day. Once a line is completed, I use strikethrough to cross it off. Once everything is paid, and savings is saved, the balance is our weekly money.
We've stopped setting weekly limits on how much to spend on fuel, food and entertainment. Our rule is if we have $100 left over, we can spend it on anything (mutually agreeable of course, I wouldn't go empty our bank account on a pair of shoes). If we spend all the money eating out, then we don't get to buy gas, if we spend the money on new clothes, then we don't get to eat for a week. This way, when the money is gone it's gone, but we don't have to worry about counting pennies. This budget plan is set up so we have all our bills paid, savings saved in 10 minutes and then we don't have to worry about it.
Right now, my budget is laid out until April, which is when hubby will be going to school so it will change a bit. So far it is working really well but we may make some more changes along the way as things in our life change.
Thursday, 1 December 2011
Good Debt vs. Bad Debt
No one wants to be in debt - well at least I sure don't! When it comes down to it, not all debt is bad though - some is considered good debt.
Good debt is kind of an oxymoron. It's good cholesterol is something the body needs. Good debt isn't quite the same way - we don't need it, but it usually is adding permanent value to our lives.
Examples of good debt are mortgage and student loans. A mortgage is a house investment - you own an asset and usually the value of the asset is going up. Students loans for education is giving you skills that increase your value as an employee and lead you to having a bigger income. They say - an education can't be taken away from you..
Bad debt are the clothes, shoes, food/restaurants and cars. I have a harder time putting cars on this list because they really are an asset - a rapidly decreasing asset, but an asset. In my opinion, you shouldn't owe more on your car than it's worth. So if you have to get a car loan, make sure it's paid off before the car loses all of it's value!
Some debts are unavoidable, like a mortgage. There are very few people who can buy a house and never owe any money on it! I try to think of my mortgage as an investment rather than a debt!
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