Money Makeover: Tip #2 - Managing Budgeted Items

When working to a budget, it helps to keep on top of it, rather than do it all at the end of the month (I started off doing this, and it quickly become very boring and tedious – not to mention a PITA for reconciliation).

So, it can pay to have something on you to help keep track of your expenses as you go. It could be anything, a notebook or for me - a phone app.

However, this in itself can become cumbersome – and after taking some time out to think about it, I realised the problem:

When we are working to a budget, there are no “surprises” with the expenses.

Which is kind of amusing, since this is precisely why we budget in the first place, right? So, the vast majority of expenses/outgoings we enter into our “thing” (app, notebook, whatever) are expected. While not as tedious and boring as doing it all in one hit, it’s still pretty fruitless doing so - I still find it “wasteful”.

Having come to this conclusion, I have just deleted all of my accounts off my phone.

Turn It On It’s Head

Now, I have added the sections in the “Cuttable Payments” (see the post on budgeting if you are unsure what this means) as accounts. Then at the start of each month, I simply “top up” the account with the amount required to bring it to the budgeted amount for that month.

I find this much more usable because:

• When we have a good budget in place, the only things that really ever change are the “cuttable” expenses.
• I can see VERY quickly how much money I have left to spend in each expense category.
• It’s obvious if I am overspending on a expense category (since it will go in the red straight away).
• It is easier to refine categories of payments within each “account”. By removing a “layer” (“Account > Category > Item” is now “Category > Item”) I get a clearer view of what is going on within the “cuttable” category.
• It’s super quick to manage my accounts, because I no longer enter 80% of the transactions on my actual accounts.

So, I certainly haven’t ditched Checkbook, I still love it – I am just actually finding it much more useful now! I still use the “budgeting” feature, except now I use it to finely track expenses.

Always remember, cutting waste is not just about cutting wasteful expenses, it’s about cutting wasteful practices. Money management is easier to stick to if you make the “management” easy!

Happy saving!

Minimalism: My 2011 Goals

I have recently started my minimalism journey, and while I have yet to blog about it (TBH, there is enough out there already), I certainly intend to pick up the pace and really lean down in 2011.

So, I thought I would quickly share my goals with you =)

I have divided my current aims into three phases, obviously these might change slightly over time, but this is what I am committing too right now. I have also started “Phase One”.

Phase One – “First Pass” and the “Big Stuff” (By End of Jan 2011)

• Obvious Clothing - Old, Worn and Rarely-Used Items
• TV Gone
• 360 Gone
• CD’s and DVD’s Gone
• Old Computer Bits and Components Gone
• First Pass of Household Items

Here I am simply getting a handle on the “wood through the trees”. Also, I want to clear the obvious distractions from the house (namely the TV and 360).

Phase Two – Getting Lean and Preparing for Downsizing (By End of Mar 2011)

• Clothing to 50 Items or Less (Likely Less =))
• 1 Lightweight Yet Powerful Laptop
  (Thinking of Going for Souped-Up Apple MBP – Suggestions?)
• Office Cleared (Bookshelf and Desk Gone)
• Kitchen Items Sorted and Refined

Here I am looking to really get my items down to the bare essentials as well as remove the need for a 2nd room, thus enabling the downsize of the apartment.

Phase Three – Downsized and Mobile! (By End of Jun 2011)

• Smaller Apartment – Down to 1 Bedroom
• 1 Suitcase for Everything I Care About
  • Not “Everything”
  • Namely: Clothing, Gadgets, Passport =)

Very simple here, I simply want to be able to go where I want, when I want. At this point I should be in much cheaper accommodation (normally making shorter leases possible too). Everything I need should be able to get into one large suitcase so I can simply pack and go!

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“Clearing and Gearing”: Looking Forward to 2011

Following my reflection on 2010, let’s get to looking forward!

Before we begin, I just want to cover a few points:

• I started with a “realistic” goal, then pushed the boat out a bit (I’d rather be unreal-istic).
• There is a heavy financial focus this year, since I want to continue my financial liberation after being consumed by debt for so long.
• Each goal has clear “success” criteria. By the end of the 2011, I should either be able to tick the box, or not. KISS.

So, let’s get on with it!

Supplement Income by 25%

Pretty simple here, I want to take my salary, then find a way to get an additional 25% on there. Whether this is by moonlighting, building and selling stuff, selling myself*, I don’t care, whatever. The 25% increase to “income” will naturally enable me to do more, but the focus is here is to actually get more creative about how I make money (as opposed to waiting for that paycheck).

* Worlds most boring and unattractive gigolo anyone?

Reduce Fixed Outgoings by 25%

Figured this would go well with the above. While I would love to earn more, I’d also love to spend less. Having started my money makeover, I was amazed at how much I spent on stuff what I wanted vs. what I actually needed. Sitting on this little gem of information and doing nothing would be stupid.

This includes costs like housing, utilities and transport costs. Since starting the makeover, everything is constantly under scrutiny anyways =)

Leave the UK at Least Four Times

This country sucks. Enough said.

OK, if you want some more – I have been here all my life, I have only flown away twice. This lame island is only a tiny spec on the earths surface. There are many more interesting places and people to see. Start doing it.

Downsize the Apartment

This may seem contrary to my previous post, but it is not. I love having my own place, and will continue striving to have my own place. But I know I can get by with less space (no rhyme intended). So once my lease is up, I am committed to downsizing. Besides, with the minimalism project in full swing, it’s going to look empty by then!

Launch at Least One Product that is *At Least* Self-Sustaining

I have been sat around daydreaming of running my own thing for years now. There’s been lots of talk, lots of ideas and ZERO shipping. Stop talking, start doing. I want at least one paid-for product by the end of the year. Oh, and it needs to be good enough for people to pay for it =)

The product needs to be paying for itself by the end of the year. If I can draw and additional income from it by the end of the year, I will consider it a bonus =)

In Summary…

These are pretty simple and high-level goals. Sure, nothing is set in stone, but I really, really want to get these done to get me in good stead for some of the bigger/scarier goals that I want to tackle before I get closer to my thirties =) (FYI: that’s 4 years away).

And yes, the gears are already moving on all of these =)

“Clearing and Gearing” : Looking Back at 2010

We are fast-approaching new years eve, and around this time of year I always like to look back and think forward. I tend to take a few days to really stop and think, to mentally prepare myself and get some real focus (and passion) behind what I want to do in the upcoming year.

2010 – How Did I Do?

Here is a summary of the things I have managed to get off my annual “ToDo” (loosely in order of “damn that makes me feel good!”:

The Money Makeover

Starting in June, after good times in Vegas (see below) – I realised I have (like the rest of my countrymen/women) have been spending more money than I should. The credit card was near melting point. So I decided I need to take responsibility for MY debt, and CLEAR IT. And so my “money makeover” journey began.

After 7 months (June-December), I am pleased to announce I have cleared £9,032 of debt. Which I think is totally fucking awesome!

I was hoping I would break £10K, but I think I would have had to surrender items like food and clean pants and I have to be honest, I am not sure if I am that committed =)

The Job

Like most people, I tend to reflect on how my working life is going at the end of the year. I am pleased to say last year I stopped bitching and started leaving. I am now even more pleased to say, I am in a new job, where I intend to stay in the new year =)

The Home

Not being emo, but I have always been a bit of a loner – I like my own space. So, I wanted to get back to having my own apartment. I am now happily residing in a two bedroom apartment all to myself.

The Work:Life Balance

I was working a lot last year – I totally lost the work:life balance. I was stressed, and it showed. This year, I managed to get a great holiday to Vegas sorted, cut loose and cut the crap. I am no longer doing overtime (if you are productive in your working time, you shouldn’t need it). I have also started getting into other extra-curricular’s (e.g. rock climbing) =)

I Woke Up

I am throwing this one in at the end, since it’s a bit of an odd one, but arguably the one with the potential to be the most “awesome” out of the lot.

Over the past few years, I have been working so hard on getting out of a rut, I kinda forgot why I wanted to get out of the rut in the first place. I’ll spare the details, but in short, there came a point this year when I realised I am in fact human and can in fact die (who knew?). This got me asking myself “what the fuck am I doing?”.

Then, at some point, everything fell in to place in my mind. All these books from awesome people that I have read, the things I have heard in podcasts and random nuggets of motivational goodness I came across on teh intertubez all made sense. I seemed to be ticking all the boxes, but what do I have to show for it? REALLY?

I have been rethinking, refocusing and re-aligning everything. It’s time for change. It’s time for “Rob 2.0”. I have managed to do some great stuff this year, but it’s all practice for the big dance baby. It was a long time ago that I felt I had this much passion, this much “fire in my belly”, and I have to say it feels good great.

I feel like a storm is coming, and I am the creator.

The Money Makeover: “Cut! Cut! Cut!”

So, we have our budget in place, some cash in our allocated savings and we are ticking along nicely. But how can we find some more cash, without getting another job or selling a kidney?

Simple, we need to cut back  on what we are spending.

Why?

• Cutting back allows us to create some surplus cash that we can use for better things.
• Surplus cash is great for getting the debt down quicker.
• If your debt is clear, then it is more cash to have more fun with.
• If we are spending stuff on what we can do without, why have it in the first place?

How?

So the idea is lovely – but how can we cut back?

Hunt

First off, we need to actively start hunting for ways for us to cut back. Your current expenses are there because you have convinced yourself you need them. Now we need to hunt for opportunities where we can convince ourselves to get rid of them.

The Budget

Our budget is the first port of call. This is where we can look for “tracks” that may lead us to taking down some expense-based game.

First, review all of the sections that are not based on “fixed costs”:

• Recurring Credit Card Charges
• Groceries
• Utilities (while they appear fixed, you may be able to get rid of them).
• Recreation and Entertainment

Now ask yourself “Do I need this?”, now ask it again. And again. And again. You need to keep asking it until you get that funny stirring of guilt come up. The first time you ask it, you will be like “sure” – but trust me, ask yourself 5 times and tell me you honestly feel the same.

If you can’t convince yourself for long, cut it.

Ignore Assumptions

I am a geek. I hack by day, I hack at night, I study, I love it.

Here are some assumptions that may be made about me, or I may have had about myself:

• I study a lot, so need access to the latest and greatest tech materials.
• I need to have a website.
• I need the biggest and best broadband connection.

So, it would be no surprise that:

• I was paying >£30 a month in hosting charges and domain names.
• I was paying ~£8 a month for an O’Reilly Safari subscription.
• My current broadband costs are £10 (ADSL) + £13 Line Rental

So I can’t do without them can I? Can I? CAN I?

Well, I CAN.

• I ditched my old site and used Github’s awesome “Pages” feature. Currently, this redirects back to this blog, but I will update to do some more interesting stuff when I have time. Total cost: £0.
• Safari subscription has been cancelled. I have instead focused on improving my signal:noise ratio in my RSS Reader. I also have got myself a library card :) Total cost: £0.
• I intend to get rid of the broadband connection once the contract is up. You can get dongles for internet (which will be fine for me, I don’t need the 15Mbps connection, 1-2 is fine). Total cost: ~£15ppm.

Total savings: ~£46.

Now, based on the fact that I am averaging £40 a week on food. That’s not too shabby. Don’t think “what can I do without”, wipe the slate clean and ask yourself “what do I need”, whatever you have and isn’t on the list, cut it.

Act

So, you have taken some time out and identified some things you can cut. Now we need to act on this. Strike while the iron is hot!

Cut It! Just cancel it! Stop buying it! Sure, you are going to miss it at first (maybe) – but the “pain” will subside. Every time you wish you had it back, make a note of it. Watch as the days and weeks pass.. Notice how you start noting it down less? Yup, that’s called “not really missing it” baby!

Challenge Yourself

When I started looking at where I could save cash (after I already thought I had cut enough) I got hit by this strange feeling of fear.. And it was not a “being chased by a lion” kind of fear, but just.. Unsettling.. It was unsettling because I was convinced without surrounding myself with this needless crap (more to follow on this in the blog) that I don’t need, I was somehow going to ruin my life.

Hat tip to the advertising industry. You have done an amazing job of engineering a consumer state.

So all I want to say here is challenge yourself – step up to the plate. Can you cut by 5%? 10%? 50%? Break down the assumptions and the mental brainwashing to get back in control of your money.

You will be fine. Us humans are more resourceful than we are led to believe :)

Ideas for Areas to Go Hunting

Recurring Credit Card Charges

• Cancel them!
• If you are unsure, then track usage for 1-2 months
• Restrain from adding! In the first place, if it helps, heed this warning from MoneySavingExpert.

Shopping

• Groceries
  • Go part vegetarian (I can’t go all the way, I love meat). But meat is costly. Also cut down on cheese! (Oh how I miss fat steaks and massive chunks of cheese!) :)
  • Student websites are packed full of great tips on how to cook pretty decent food for practically nothing.
  • Cook! It is cheaper than buying pre-made meals.
  • Cut waste. One of the best things I did was stop throwing food out. Eat the same thing twice in a row (or more!) if you need to – it’s boring, but it will save a lot! Check out sites like LoveFoodHateWaste.
• Junk
  • Stop adding to the hoard crap at home. Do you need that new bread bin? Will it not keep fresh in it’s own wrapper in the refrigerator (answer, yes it does – I haven’t thrown out stale bread in months).

Entertainment

• Cut down on video games and the like. Lets be honest, most new games suck ass anyway.
• Cut down the drinks budget (or go T-total if you are REALLY brave). I had a sad moment of realisation when I realised I am pretty much unable to have a good time without getting wasted. Serious character floor highlighted by not depression, but saving cash. Who would have guessed? Your liver with thank you also.
• Find new ways to entertain yourself, or revamp old ways to be a bit cheaper. During the summer, I ended up going to pubs and clubs less and having more BBQ’s with friends. Much better time, great food, I enjoyed the summer more and saved a ton of cash.

Good times :)

In Summary

Get serious about cutting costs. Really serious. Bring down barriers. If you are unsure if there is a barrier there, run at it and find out. I am well on my way to be in a position by next year to be saving £300 a month with no loss of quality of life. In fact, I am a lot happier.

Good Hunting :)

Updates

@annwitbrock made a good point with regards to cutting – ensure that you only cut things that are obviously wasteful. DO NOT cut things like insurance unless you are aware of the risk this brings (and willing to assume responsibility for it).