Personal Budget Tips

Cheap is not always a bargain

Wed, 25 Feb 2009 00:00:00

Sometimes when you're looking for the best deal, it can be tempting to buy the cheapest product on the shelf. This is not always the best bargain. Quality is something that should be considered when making a purchase decision. While product A might be $10 cheaper, it might also wear out far sooner than product B. On the flip slide, buying the most expensive item doesn't necessarily mean you're buying the highest quality. Be sure to do research, especially when making a large purchase like a car or a TV. When you want to get the best bargain, don't just look at the price tag--consider quality as well.

Freeze your credit cards

Sat, 24 Jan 2009 00:00:00

If you find yourself using your credit cards more often than you should and you can't pay off the balance at the end of each month, consider some drastic measures to keep you from using them.

One thing you can do is just stick them in a drawer and forget about them. Don't carry them around in your wallet or purse. However, if you find you still use them frequently why not freeze them? Stick them in a plastic container, fill it with water, and stick it in your freezer. They're still there if you need them, but the effort required to access them might deter you from using them on an impulse purchase.

Financial accountability

Sun, 18 Jan 2009 00:00:00

If you are having a hard time sticking to your budget, consider finding someone you trust who is willing to keep you accountable. This can be difficult and perhaps a bit embarrassing at first, but ultimately can be very valuable to your long-term financial prosperity. If you choose to have someone hold you accountable, it is imperative that you be honest with this person. It is of no use to lie to that person. They can't very well hold you accountable if they don't know your actual financial situation. If you regularly make impulse purchases, have this person ask you once a week if you've bought any items on a whim. Financial accountability with someone you trust can leverage the power of peer pressure in your favor.

Near-term vs. long-term budgeting

Mon, 12 Jan 2009 00:00:00

A good budget will contain many different types of envelopes. Some are geared toward short term spending. This would include groceries and electric. These envelopes will be allocated money from your paycheck and that money will be spent within a month. In these envelopes, it's important to set realistic expectations on what you will spend. If you don't allocate enough money, you will carry a negative balance in the envelope. Short term spending is typically the place where most people can begin to cut back on spending.

Another type of envelope is one designated for longer term savings. A good example is car insurance. You can create an envelope for car insurance, which for my family is billed every six months. I stick a portion of my paycheck into that envelope every month. When the bill comes in six months, I will have enough money to pay cash. I've been caught off guard before, and getting that bill is no fun if it wasn't expected! NeoBudget handles this nicely, and provides help in deciding how much to save from each paycheck.

Save for Christmas all year long

Tue, 06 Jan 2009 00:00:00

This year, my wife and I are saving throughout the year for next Christmas. To do this, we created an envelope in NeoBudget labeled "Gifts." Using the income editor, I set aside $15 from each paycheck into this envelope. By the time next Christmas rolls around, we will have saved $360. This way we won't need to use credit cards to pay for our Christmas spending.

Purchase generic brands

Wed, 31 Dec 2008 00:00:00

After maintaining my budget for several years, I reviewed my spending habits. I was surprised how quickly little amounts added up. Spending just a little bit less for generic brands of food or personal care items can really make a big difference. When looking at an individual purchase, it might not seem like a big deal to spend $4.00 for a name brand instead of $3.00 for a generic brand -- it's only a $1 splurge. But that is just one item and one purchase. In this example, that is a 25% savings. Imagine purchasing all generic brands and cutting 25% off your grocery budget! I budget $200 per month for groceries. In the course of a month, that would average out to about $50 in savings. In a year, that's $600.

Of course, it's not always the case that generic brands are significantly cheaper than name brands. However, most of the time this is true. And most of the time, generic brands are just as good as name brands. In these cases, making the decision to purchase generic brands can create significant savings in the long run.

Read finance blogs

Thu, 13 Nov 2008 00:00:00

There are many sources of excellent advice out on the web these days. Many people have created personal finance blogs that give practical advice for frugal living and living below your means. I have found that reading these blogs has given me great incentive and know-how to get on top (and stay on top) of my family's finances.

Some of the blogs I regularly read include:

Ignore your checking account balance

Thu, 21 Aug 2008 00:00:00

One of the major benefits of budgeting is that you know where all your money is going, and you know how much you can spend on a certain category. For example, I stick $20 per paycheck into a "Clothing" envelope. When I need a couple new shirts, I check how much I've saved in that category and that's how much I can spend.

The key to doing this though, is that you need to ignore your checking account balance. My balance may say I have over $1000 in my account, but that is deceptive. I am saving up for many bills that are due at the end of the month (like my mortgage and electric bills). It's dangerous to think that I actually have $1000 to spend because I might spend more than I should and not have enough to pay my bills. The key to successful budgeting is to check the right envelope balance, not the checking account balance.

On buying a car

Thu, 31 Jul 2008 00:00:00

A car is not an investment. It's (usually) a necessary purchase to make one's life easier. It's also one of the most expensive purchases people typically make. Since cars decrease in value so quickly, going into debt to buy a car is usually not a good idea. Paying cash for a car isn't that difficult, it just takes some planning. After you have paid off the car loan for your current vehicle, keep making that car payment, only make it to yourself. You already have your budget worked out so you can afford the car payment, so just stick it into a savings account and organize it into an envelope in NeoBudget. After four years (assuming you had a 4-year loan before), you will likely have enough to purchase a new vehicle with cash. Actually, you will have a lot more than that because you'll be keeping the interest you were paying on your previous vehicle loan.

Buying a brand new vehicle is not always the best option. The only way this could be financially the best option is if you buy a brand new vehicle and keep it until it dies (say, 15 or 20 years). Typically, a new vehicle will lose about half of its value after you drive it off the lot. Why not let someone else do that, and buy a vehicle that is three or four years old? You need to be careful when buying a used car, though. Do your research. Consumer Reports puts out a great publication (and a great online website) that reviews various cars. Carfax.com is a great place to look up the history of a vehicle before you buy. And finally, kbb.com (Kelly Blue Book) is a great website to help you find the actual value of a car, so you know you're not getting ripped off.

Get receipts for some purchases

Fri, 25 Jul 2008 00:00:00

There are two people in my family who have access to our checking account: my wife, and myself. When we first got married, I about went crazy trying to balance my budget. I could remember well enough when I bought something at Wal-mart for $12.89 that it was actually an accessory for my computer, not groceries. So I could remember to take it out of my "Gadgets" envelope. But I had no idea what my wife bought.

We now have a box in our house where we stash receipts. It took a while to get into the habit, but now whenever I buy something, I stick the receipt in my wallet. When my wife buys something, she sticks the receipt in her purse. Once in a while, I empty out the receipts from my wallet into this box, and she does the same. To be honest, we don't save receipts for every purchase. On the bank statement, it's obvious when a purchase is for gas. There's no need to save those receipts. It's more for the other places we shop where the purpose might be ambiguous.

Now when I balance the budget, it makes it much easier to track our spending. We have gotten so used to this, in fact, that we frequently write on the receipts too, just to record more details about the purchase. We will write things like "food for cook-out with family" or "present for dad's birthday." This has made balancing our budget a breeze.