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Close Your Budget Gap

Your Budget Gap

Don’t look now but your budget gap is showing. It’s the difference between what you think you spend and what you really spend. And it’s not a matter if you have one, just how large of one you have.

How do you close your budget gap? By becoming a spending awareness marauder. If you’ve never created a budget, or if you’re tired of your old budgeting system, the easiest way to get started is to create a minimalist money map.

A minimalist money map is a simple way to take your spending temperature and take corrective action when necessary. Here’s how to set one up.
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Lessons in Cash Money

Cash Money

Forty bucks. Forty bucks burning the proverbial hole in my pocket. I’ve been a debit card guy my entire working life. But not this week. For the first time in more than 10 years, I have a small wad of cash strapped to my wallet.

I’ve been frustrated for just as many years with my inability to sock away much of anything. I don’t have a lot of debt but not much in savings either. In fact, if it weren’t for my company’s generous retirement plan, I would have exactly zero saved.
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Business Budget Worksheets – Download

After reading and commenting on a post at BibleMoneyMatters about business income tracking, I used my caffeinated spreadsheet marauder skills to build a few more worksheets.

The following worksheets are included in the downloadable Excel workbook:

Income Replacement – Calculates what you’ll need to earn as a business owner to cover your living and business expenses. This is a biggie because it’s easy to forget that your business will also require monetary care and feeding.

Schedule C – This is a sample schedule C with an array of expenses you can write off throughout the year. This isn’t an all inclusive list. Please feel free to tailor to your needs.

Estimated Taxes – Shows you, based on net business income, what you’ll need to pay each quarter. Or, if you’re like me, how much you’ll owe at the end of the year.

Day Rate – Calculates what you’ll need to earn each day to reach an income goal. Assumes three separate billable days/cycles—160, 200, and 230.

Loan Repayment – Simple loan repayment calculator based on annual interest rate, loan length in years, and amount borrowed.

Cash Flow – Predicts yearly cash flow based on annual income and annual growth rate. Kind of a neat toy to play with. Allows for much daydreaming and good feelings.

Let me know what you think or if you have any questions.

Download files:
Business Budget Worksheets (.xls file)Excel – 97-07
Business Budget Worksheets (.xlsx)Excel – 2007+

Family Monthly Budget Spreadsheet

Download and enjoy!

Family Budget

Buy the Da*n Latte

If you haven’t already heard of the “Latte Factor”, it was popularized by David Bach in his now bestselling The Automatic Millionaire.

The basic idea is that you find an insignificant, daily expense, in this case your morning latte, and either cut it out completely or cut way back. Of course it could be the morning paper, the everyday lunch date, the salon, etc.

U.S. News recently put this statement to task, stating that “it might be based on faulty math.” Well, a penny saved is a penny earned, right? Not so fast.

His [Bach’s] so-called “Latte Factor” includes all kinds of expenses, such as manicures, massages, restaurant meals, and premium cable. In the example he uses, the total cost of these extra expenses comes to $1,100 a month. Over 30 years, he says, that money is worth almost $2.7 million. That’s true – if you can somehow find an annual interest rate of 10 percent.

Those types of returns in today’s markets are optimistic at best. The article continues arguing that you should go ahead and buy the latte and provides 5 good reasons why.

1) The Numbers. Here’s a more realistic look at the cost of buying one latte per day: If you spend $3 a day on coffee and if you could otherwise earn a 3 percent return on your money, then you could have just over $50,000 after 30 years.

Not a small amount for sure but not anywhere near millionaire status either.

3) The Tradeoffs. We make decisions about what to spend money on, and what not to spend money on, everyday. Some of us prefer to put cash into our pets but skip restaurants; others prioritize shoes over electronic gadgets or vice versa. For some people, buying fancy coffee is a priority because it brings them pleasure.

This is the argument Ramit Sethi makes in his book I Will Teach You To Be Rich. Find the one or two things that bring you real joy. Cut out everything else.

So, if you want to spend $5,000 on clothes every year, cut out $5,000 somewhere else in your budget. You’re happy and your bank account is happy. In other words, don’t spend money on junk.

Are you a “latte factor” devotee? Let me know what you think. I’d love to get feedback.

Read the other 3 reasons to splurge on your latte at U.S. News & World Report by Yahoo News

Reasons to Start a Budget

I know for myself, starting a budget really wasn’t that hard of a decision. I had lived with one in college. And once I graduated and was headed to my first job, I knew having a budget would be absolutely essential. No, it’s the sticking to the budget that I have a hard time with. But that’s another post for another day.

But what about those of us (you) who can’t fathom the thought of ever putting together a budget? What’s the final straw/accident/catastrophe that finally pushes someone to do the inevitable deed…put numbers to paper?

MoneyNing address that very question in their latest post.

The Consumer Reports Money Book says that the two most common reasons people start a budget are the birth of a child and a move to a new home. The next three catalytic events are a major medical expense, divorce, and retirement.

I can certainly see moving to a newly bought (i.e. mortgaged) home. And of course, I think many of us are one major accident away from bankruptcy. Here are a few more common reasons why someone starts a budget…

Increase in Expenses. Of the reasons listed above, the new home, having a baby, and major medical expenses would all be associated with an increase in expenses.

And then there’s the whole, “Dude, who stole my paycheck?”

Loss of Income. One would expect losing a job would offer some serious motivation to start budgeting.

I would certainly agree with this. Although it wasn’t a job loss but a business loss. And the budgeting process was fairly simple when everything final cratered—cut out everything but the honest to goodness, bottom-line essentials. To make matters worse, unknown to us at the time, we were headed into the coldest winter in nearly twenty years. If you’ve ever heated your home with propane, you know my pain.

Another reason people start budgeting is…

In Response to New Information. This is the reason why my wife and I started to budget. When Dave talked about budgeting in a Dave Ramsey Total Money Makeover seminar we attended, it made sense to us.

I love this reason because it means you’re making a change. Pride is gone. Arguing is (almost) gone. It’s as if everything falls in to place and a heavy burdened is lifted. This is the reason my wife and I are attending a Dave Ramsey seminar. Not that I have much love for the man but because I know it will give my wife and I some serious direction we’ve been craving.

You can read the other 5 reasons people start budgeting at MoneyNing.

Financial Freedom through Budgeting

Today’s post is from Sharon Smith. Sharon works with the fine people at Oak View Law Group in California.

Financial crisis is not only created by a lack of money. Your attitude is at least somewhat responsible. Having the right attitude about your expenses can guide you towards financial freedom.

It’s human nature to desire more than what we deserve. This habit, however, can trap us in a web of debt. Extravagance without saving will never liberate you from financial consequences—most bad.

If you are a spendthrift and eat and sleep on credit, you’re only asking for trouble. In order to restore your finances, budgeting becomes a crucial first step.

Reasons for Budgeting

A budget gives meaning to your financial decisions. It helps you see the cause and effect of your choices. A budget helps you realize that spending is a zero sum game. Spending too much in one area can make your life miserable in other areas. A budget is proof to yourself that money doesn’t rule you—you rule your money.

Setting up a Budget

1. Create a spreadsheet using Microsoft Excel or Google Docs to track your income and daily expenses: Be sure to track every expense, even the small amounts. Use a single column and include both income and expenses in the same row as a running tally. It’s basic but it allows you to see where you stand on a cumulative basis.

2. See where you can cut down: After a few weeks tracking everything, look for the large drops in your running tally. This will help you spot the bigger expenses. Now you can start asking questions. Are these expenses necessary? Can I cut them down or out completely?

3. Check your expense pattern after a month: If you still find any discrepancies, try cutting back to essentials only. Even if you think you can’t cut back, it’s not hard to tighten your belt for a month. Take a spending sabbatical. Make it a game to see how little you can spend over the course of a week.

The key to financial freedom is determination, discipline, and commitment. If you’re ready to safeguard your future, setup a realistic budget now for a less stressful life later.

Discover Your Money Pot

So, I’m cruising around WalletPop and find this short video (1 minute, 17 seconds) on how to create a budget in 15 minutes. A very straightforward and easy to implement budgeting process. I used this technique when I was in college with only a handful of fixed expenses. Let me know how it works for you.

Budget Beginnings

Tender Hearted Daisy (what a great name) wrote a nice, little post about some things she’s learning about budgeting.

What I love about this post is that 1) it’s personalized, 2) she shares from her heart, and 3) she definitely doesn’t come off like a holy rolling guru.

To summarize, Liane admits that her and her husband were “lousy at money management” over the years. As a result of being out of the work force and not having medical insurance for several decades, Liane made a commitment to get on the right financial path.

With that, she shares some tips on what helped her and her family get back to financial health.

Be joined with your spouse in your budgeting goals. Have a frank, honest, and truthful discussion about the amount of debt you have.

After eleven years of marriage, I finally had the money discussion with my wife. But it was only after major money mis-handling on my part. It was awful. And hard. But it was necessary even though it will take much more talking (and time) to heal.

Don’t leave God out of your finances. Pray with your spouse in asking God to give you wisdom and direction in the management of your finances.

This is also important for my wife and I. And, being Christian, something I wasn’t doing. My wife and I are called to be of one mind. If we’re hiding stuff and, out of guilt, not praying for fear of being found out, well…that’s probably not going to work out.

Know where your money went. Write down all of the expenditures you made in the past three months. A visual picture is worth so much.

I think this is the part many people fear the most. They either don’t want to know or think it will be too much of an inconvenience. There is software available for both PC and Mac that dang near automates most of it. Keeping and tracking receipts never worked for me. I had to find a software solution.

Read the full article at Tender Hearted Daisy.

Beat the Heat on a Budget

Summers in the south are…hot. I can take a dry heat but a hot, humid, sweltering heat is another matter altogether. Nowhere is that hottness more evident than in my utility bill (my electric bill to be precise). Crazy as it may seem, I keep my house at a balmy 78 degrees during the day and 76 degrees at night. We have lots of tile so it really doesn’t seem as hot. But it’s hot nonetheless.

So, what do you do if you can’t afford to run your A/C all day? Or, like me, you’re tired of high electric bills? As Jennifer Derrick from PF Advice explains, there are several actions you can take today to beat the heat and save money to boot.

Fans: Get as many fans as you can. Ceiling fans work great, as do box and pivoting fans. Box fans can be placed in windows where they suck in more air volume to blow around.

This is what I do at night. A quiet, oscillating fan pushes a nice breeze throughout the room. I can’t open the windows because it’s way too humid and would only make things worse. If you’ve never used fans before, it can take some getting used to. I have to warn you, though. Once you start sleeping with a fan, you’ll have a hard time falling asleep without it.

Misters: You can buy special misters, or just fill a clean squirt bottle with water. Spritz yourself with water and let it evaporate.

I see these often at outdoor venues. You can also use a sprinkler and garden hose outside. Although your water bill may increase, it won’t be as drastic as electricity.

And, my favorite tip:

Put your underwear in the fridge: Clean underwear only, please. Pulling on a cool pair of panties feels wonderful.

Or just boxers or briefs if you’re male (I hope). I’m surprised I never thought of this. But, being male, I may have been too fearful of getting frostbite on a few sensitive items.

For more heat beating tips: Beat the Heat on a Budget – Personal Finance Advice by Jennifer Derrick

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