How to Have Fun and Be on a Budget
This past weekend my wife and I hiked to Havasupai Falls in the Grand Canyon with a group of about 67 people. We had mules take down our packs and sleeping bags so that we could just enjoy the hike without being physically exhausted by the time we got down there. The scenery was breathtaking and there was wildlife everywhere. We had a camp chef and others who helped in preparing the meals which allowed us to just enjoy ourselves and take in the awe-inspiring views.
How were we able to do this and still be on a budget? The secret is…we budget in FUN. We actually have a category for FUN. We put a certain amount of money aside every month to have fun in life. Then when opportunities come our way, we have the cash to pay for it. We are not running for credit cards or wishing that we had the money to go. We have it because we plan for it to happen in advance.
If you want to have more fun in life, budget it in!
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Top 5 Youtube Videos About Money
I don’t know about you, but I learn more by example. When I see a scenario played out in a video or a movie, it is much more impactful to me then reading it on a piece of paper. So here is a list of my top 5 Youtube videos about money:
1. Bill Cosby on Budgeting
It is so true, when we are young, we don’t really grasp the value of money. I think Cosby did a great job explaining to Theo how much life truly costs.
2. Two and Half Men – Charlie has Money Problems
The problem for most people when it comes to money is not that they make too little, but that they spend too much. Does you cup have one hole or one hundred?
3. Debt Limit – A Guide to American Federal Debt Made Easy
This video does a great job of breaking down the federal budget into layman’s terms. Would you loan money to this guy?
4. Don’t Buy Stuff You Cannot Afford – SNL
This video is cheesy, but the point is valid. Personal finance is simple and the basics of it could fit onto one page. If we all spent less than we made we would have an emergency fund, and would not need to borrow money as a way of living.
5. Stanley Johnson – Debt up to My Eyeballs
I am not for debt consolidation per se, but I was impressed by how this depicts the middle class guy in debt. He has a smile on his face and everything from the surface looks great. But if you look underneath it all there is a guy crying for help.
If you like these videos, you can check out more by downloading my Android App here. I will be adding more to the playlist as I come across them. Also, if you have a video that you like that relates to money just send it my way, I would love to check it out!
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Get out of Debt with a Vengeance!
Here is the thing…When I was growing up, I was taught that debt was my friend. That it was a tool to get what I wanted before I was actually able to pay for it. That way I could have the lifestyle I wanted now, instead of having to wait for it. But now that I look back, that type of thinking only did one thing for me: Get me in a pile of DEBT. Here is the way I look at things these days. If I can’t pay cash for something right now, I can’t afford it. If I want it bad enough, I will save up the cash to pay for it in full, without borrowing any money. This is the way to true financially peace. When was the last time you heard someone get their house foreclosed on who doesn’t have a mortgage? If you pay cash for something, the stress of losing that item is virtually eliminated!
Is it too late for you?
The short answer, no. You might be saying, “That’s great, but you are a little late Deacon, I already have a ton of debt.” Well, guess what? I was in the same boat as you and now I am paddling right to the shores of Debt Free Island. Here is the best way I have found to tackle your debt with a vengeance and to start living a life not controlled by it:
The Debt Snowball
Concept – List your debts off smallest to largest
Here is a brief example:
Visa – $500 Min. payment is $25/mo. Interest Rate – 6.8%
Medical Bill – $1000 Installments of $200/mo. Interest Rate – 0%
MasterCard – $2500 Min. Payments of $100/mo. Interest Rate – 9.99%
Student Loan – $15,000 Payment of $150/month Interest Rate – 4.2%
The goal is to pay off your debt smallest to largest. While doing this you will pay minimum payments on the rest. Let’s say you have an extra $250 a month to pay off debt. If you follow this system, you would pay off the Visa in 2 months. Now take that $250 you were using for the Visa and put it towards the Medical Bill. this now gives you $450 per month to put toward debt ($200 + $250). This means in another month in a half and you have paid off 2 bills! Once you paid that off, now roll that $450 + $100 you were paying toward the MasterCard. At this point you should have a balance around $2200 which you will be able to pay off in a little over 4 months. Now do the same thing to the student loan…
Conclusion: In 7.5 months you are able to pay off $4000 in debt and are on your way to be debt-free but the house in 21 months!
You might be wondering how to get some extra cash to pay down this debt, well stay tuned for my next post where I will throw out some ways that CAN help you do this.
Note: If you are person with a mathematical mind, you might be saying, “Wait a minute, this doesn’t make sense. Are you saying that you should always pay off the debts smallest to largest? What about the cards with the higher interest rates?” I am glad you asked. This approach is all about changing a persons behavior. If someone is able to pay off something quickly, psychologically they feel a sense of victory. This will build up momentum to get the snowball rolling and can be all it takes to get the ball moving in the right direction!
3 Ways to Trim Your Budget without Trimming Your Lifestyle
If you’re anything like me, you are weary of people telling you how to save money. I think that is because we are all accustom to the phrase, “If it sounds to good to be true, it probably is.” That is why I am offering very simple, practical ways to save money that overtime will save you a ton. Usually the areas where people overspend is in their discretionary expenses, meaning items that are not essential to your survival. Here are a few discretionary items that if you change the way you purchase them, you can trim your budget without trimming your lifestyle:
1. Coffee
There are 2 routes which I prefer to go when buying coffee:
A – Make it at home – 25 Cents/cup
B – Take my own seal-able coffee mug to the Gas station and fill it up – 96 Cents/cup
(Compare this to 1.75 for a small cup of coffee at Starbucks)
2. Entertainment
Rental Movies – Instead of renting from Blockbuster for a New Release get it from Redbox. Redbox charges $1 per day as opposed to Blockbusters $4+ for 2-3 days. I don’t know about you but I rent a movie the same day I am going to watch it, so therefore Redbox always is the lower cost option for me.
Theater Movies – If you go to an AMC theatre before Noon to watch a movie, it will cost you $5.00. That is nearly 50% off the regular cost of $9.70.
3. Gas
Go to GasBuddy.com to find the nearest gas station to you with the lowest price per gallon.
( I understand this is not really discretionary per se, but it is a good way to save some money)
Now let’s do a quick analysis. Say in 2010 you made changes to your spending habits:
Coffee
You purchase 20 cups of coffee from Starbucks per month – $35/month = $420/year
You refilled your mug at the gas station instead – $19.20/month = $230.40/year (this is a $189.60/year savings vs Starbucks option)
You made coffee at home – $5/month = $60/year (this is a $360/year savings vs Starbucks option)
Entertainment
Theater Movies
You watch 2 movies a month in theaters as a couple – $38.80/month = $465.60/year
You go to AMC before Noon – $20/month = $240/year (This is a $225.60/year savings from initial option)
Rental Movies
You rent 3 movies a month from Blockbuster – $14.16/year = $169.92/year
You rent the same movies from Redbox – $3.00/month = $36/year (This is a $133.92/year savings)
Gas
Say you fuel up 3 times a month at a gas station close to you for 10 cents more a gallon – $4.5 more per month = $54/year
Now lets look at what that money would do for you if you invested it in an index fund that follows the S & P 500 over 30 years at a conservative 8% annual return. $133.92 +225.60 +360.00 +$54 = $773.52/year
After 3o years you would have $102,420.64! That is the beauty of compound interest and changing your daily routine.
Spend Less Than You Make
You would think that this is a common sense, however, according to a Nilson report the average household carries $10,679 in credit card debt (Nilson Report April 2009). This tells us that instead of paying cash for something, Americans are buying stuff on credit cards and paying high and unnecessary interest on those purchases. According to USCourts.gov there were over 1.4 Million Bankruptcy’s filed in 2009. According to the FDIC, one out of every 200 homeowners will face foreclosure each year. I think you get the picture.
This is how we stopped this trend and I have found this is the best way to attack this with a vengeance:
1. Create a Cash Flow Plan aka a Budget
It is of the utmost importance that you track where every dollar goes, this way you can see where you might need to cut back. Here is a link to a standard budget form I created: General Budget Form
2. Use Cash not Credit Cards
I am not as die-hard as some that say you need to cut up your credit cards, but I will tell you that interest is a killer. According to CreditCardMonitor.com the average Credit Card interest rate is 16.28%. So if you don’t pay your card off every month, you are paying much more for you purchase then if you just use cash every month.
So you pay your Credit Card off every month, right? Well, A Dunn & Bradstreet study found that people spend 12-18% more when using credit cards than when using cash. It is Psychological, if you use cash to make purchases, you have a visible metric that when it is gone you have no choice but to stop spending. Credit Cards portray a bottomless pool to draw from at anytime, so a different spending pattern is developed.
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