Some of this knowledge/wisdom is from watching TV shows like "'Til Debt Do Us Part", and "Maxed Out". Some is from books like The Wealthy Barber. Some is from reading personal finance blogs. And some has been arrived at organically through trial and error. I can assure you that if I'd had this much sense ten years ago, I'd have a lot more wealth now. But, that's what growing up is about, huh?
Jerry Good taught me in Broadcast Management class that "if you can measure it, you can manage it." And it works the other way, too -- if you can't measure it, you can't expect to manage it. We bought Quicken Cash Manager 2007 more than a year ago, and I never really figured out how to work all the accounts and stuff. But I *did* find the budgeting section, and I love it.
We laid out our regular bills -- groceries, rent, car lease, car insurance, phone, cable/internet, power, bank fees -- and income -- mine and hers. We also considered bills that come up expectedly but not monthly -- cat food, apartment insurance, car registration. We also added some items for entertainment, gifts and dining.
Beyond that, though, we guesstimated how much a couple of vacations might cost ... and factored in a little overhead for emergencies and saving.
Quicken and a calculator broke the regularly expected expenses + savings + vacation + misc into a monthly chunk that would take care of the here and now, plus save for the future. It's those little changes that make the difference between treading water, swimming, sailing and navigating. We're no financial Copernicuseses yet, but we're well ahead of many who just hope there's money left at the end of the month.
Combine and conquer
Our incomes are different. Not a whole lot different anymore -- Amanda, a few years into her career, is about on par with me, nearly a decade and a half into mine -- but a little different. We figured out who's making what percentage of the combined household income. I think it came out to 52 vs. 48%. We applied those figures to the monthly household budget and figured out how much each of us would transfer to the shared chequing account. So, each payday, I put $x into the pot, and on her payday, Amanda puts $x-a bit into the pot. Our nut is covered, and whatever's left is ours to oversee individually.
Routine and automation
Until Amanda converted me to online banking, I paid all my bills by taking them to the bank machine, stuffing them in envelopes and putting them through the magic slot.
Now all the regular payees are set up in the online banking. As soon as a bill comes in from cable, phone, power ("hydro" to you in Ontario), it gets opened, paid, marked "paid", and filed in Scott's handy-dandy file-o-matic in the dungeon. We don't wait for a specific day to pay the bills -- the money's always there, so the peeps get their money.
Every payday, it's the same thing with our respective contributions to the household pot. We have it set up for an instant transfer, and kaboom, the household money is refreshed.
The only thing we write a cheque for is rent.
Several bills are set up for automatic payment -- car lease and car insurance are pulled out directly. And once a month, a lump sum gets transferred out of the pot and into our shared savings account, as a combination emergency fund/vacation fund. My life insurance also gets pulled directly from my main account.
Having the right accounts
Some may see this as overkill, but I have several accounts, all with the same bank, and Amanda has a set of her own as well:
- "Our" chequing
- "Our" savings
- My daily account
- My 'stash'
- My e-saving account
- Plus assorted credit cards and a bank line of credit
They each serve a purpose. Both "our" chequing and my daily account, IIRC, have unlimited or very-high-number-of free Interac transactions. That way I don't have to carry much cash. I think the monthly fee is $12. My e-saving account is a high-interest, online-only account for accumulating cash on the side. I can transfer in and out free of charge, and there's no monthly fee, but if I do something thoughtless and pay a bill straight out of the e-saving, I get nicked for $5 a shot. So, if my daily account is low, I just transfer over and pay away. The 'stash' account has been empty ever since I set up the e-saving. I just never got around to closing it.
Other Stuff I Do
I also have an automagic transfer of $50/pay from my daily account to my e-saving. It doesn't stay long, mind you, 'cuz I've been spending it faster than saving it. Hm.
I take part in the company's share purchase plan. As I see it, it's a helluva deal. The company matches 25% of my contributions in the first year, 33% in the second, and 50% thereafter. I can contribute 1-10% of my gross income, with after-tax dollars, each payday. The shares are purchased once a month at market value. I should've signed up for this years ago. I could be rich by now. But I only got on board last year. I'm pouring the maximum I can in -- 10%. It means my take-home pay has been cut noticeably, but with the company's share prices down recently, and the company kicking in 25% on top of what I put in, it's still a great deal. Really, where are you going to get a guaranteed 25% return on investment? 33%? 50%?! I think it's a great offer, and I'm going to stay in it as long as I can afford to.
I try keep my RRSP maxed out. I didn't contribute for a long time. But some inheritance money came my way, and I put it into the RRSP. I reinvested the resultant tax refund and kept going. Not too many years ago, I reached the limit. I'm sketchy on the math, but my 'pension adjustment' on my T4 is keeping my RRSP contribution limit stupidly low. I'm hoping that means my company pension plan is kicking ass. As it stands, my tax refund comes pretty close to topping up the RRSP limit.
My investments are not interesting. The bulk of my RRSP money is in what I'm told is a stable money-market fund, with the aim of using it toward a home down payment through that nifty first-time-buyer plan. The rest is in a balanced growth fund that is not growing very fast.
Other Ways I/we Save
- Pack a lunch. I take a lunch to work. A wrap, two or three fruits, yogurt.
- Take your coffee. Amanda brews up a pot of Tim's at home and takes it to work in a Thermos. Easily saving several dollars a week.
- Grocery shop once a week. We check the flyer, sketch out some meals for the week, make a list, and hit the store one time. Amanda gets most of the credit here, as I'm not holding up my end of the bargain when it comes to meal selection and preparation. If something is an especially good deal -- let's say a ham for less than half price -- we'll buy it, chop it up into three pieces, freeze it, and use it later. Hint for leftovers: affix a label indicating what's inside and when it was made.
- Walk, bike or take the bus. I help pay for the car, but I don't drive it. Amanda has to drive for work, so she does, which lets her earn money, so ... it all makes sense. Me, I can take the bus to work, and I usually walk home.
- I don't buy clothes. Not a recommended strategy, 'cuz I really *should* buy some clothes.
- Make do with what we've got. I'd love to have HDTV. But to do that, I'd have to get an HDTV. And digital cable. And HD service. And a digital cable HD PVR box, 'cuz my home theatre PC is fantastic for standard-def TV, but won't do HD as I understand the current technology. It's just not worth it right now. Regular TV is okay for now.
- Delay, delay, delay. If you don't need it absolutely immediately, put it off. Then put it off again. And again. Do this often enough and you might forget you needed it. You might realize you can do without it. Or at least you'll have enough time to research the hell out of whatever you're planning to buy.
- Research the hell out of whatever you're planning to buy. I've moved from 'careless' to 'cheap' to 'frugal'. I think I used to waste money. Then I think I used to buy the cheapest stuff I could find -- think Dollar Store or Bi-Way. Now I don't mind paying for something I want, but I want to make sure I'm not going to regret my purchase. It's about value, not price. There's a sign downtown that says something like "the regret of poor quality outlasts the joy of a bargain" .. something more eloquent, I'm sure.
- Buy used or refurbished. I think Kijiji and eBay are great. And I recently bought a refurbished JVC camcorder from TigerDirect.ca for about $150.
- Be a late adopter. Brand-new technology gadgets are often buggy in version 1, and also pricey. Wait a while and you'll get a bug-fixed version for less money. Need an example? Consider the ipod.
- I rent, not buy. Yeah, there's a whole debate about this on PF blogs. In theory, the money I'm not spending on home repairs, property taxes, mortgage interest and whatnot is being channeled toward other things. I don't know how much that's really doing.
- Have a partner. Buying for two, cooking for two, splitting the rent in two ... it can save you a bundle. Plus there's someone to keep you warm at night.
- Buy generic. I don't buy a lot of stuff, but if I can save a few bucks by getting the store-brand Psyllium Fibre Capsules over buying Metamucil, I'll do it.
- Be smart about ATMs. Don't hop from machine to machine. If you have the money in your account and you have the right account, go Interac at point-of-purchase. If you absolutely need cash, get some at your bank's ATM. Paying an extra $3 ($1.50 for the machine, $1.50 to your bank) to get $20 is almost as foolish as getting on the payday loan cycle.
- Use credit cards as convenience. The bank is willing to loan you money interest-free for a month if you promise to pay it off on time. That, my friends, is a good deal. Break the deal and you pay dearly.
- If you can't afford it, don't buy it. Save for it if you really want it. It'll give you more time to find a good bargain.
Where I "Waste" Money
- Cigarettes. No defense here. I'll save enough to buy a big-screen TV every year when I quit. Soon. I promise. Hell, the 5k run is a month away.
- Energy drinks and chocolate milk. I buy one of each almost every day at work. I suppose I could save a little by buying a case of energy drinks and a case of chocolate milk.
- Lottery tickets. The odd scratch ticket every few months doesn't worry me, but I've been playing the dream-home lotteries in Halifax for the past year, at $200-$250 a shot. I haven't won the house ..... yet.
Where I Could Do Better
- RRSP. I bet I could get a better mix in my portfolio. When this year's tax refund comes in, I plan on putting a chunk in an index fund or two, then making smaller biweekly contributions to take advantage of dollar-cost averaging.
- Outside investments. I have a bit of money floating around in my e-savings account that could be working harder for me. Since my RRSP is usually maxed out, I ought to find some kind of investment vehicle that'd put that cash to work. Then I could throw a few extra bucks at it when little snowflakes of cash come my way from outside work, selling on ebay, etc.
- Selling old stuff. I threw out *so much* stuff that was ebayable when I moved from Toronto to Halifax. There's unliquidated capital sitting at my parents' place in Stratford in the form of vintage TransFormers and unknown other collectibles.
- Life Insurance. My eyes glaze over when I read about life insurance. But I've read enough to suspect that I have the wrong kind of life insurance. The experts I've read suggest the whole-life plan that acts like an investment vehicle doesn't perform as well as getting cheap term insurance each year and investing the difference in an actual investment.
That's all that comes to mind right now. Any other hints?