Inspire me with your frugality
July 8, 2008 7:57 PM   Subscribe

Total financial ruin filter: I am terrible at managing my very small amount of money. How did you learn to manage your money better than me?

I don’t buy a lot of extraneous crap and I don’t eat out much. But I don’t budget either, and I’m constantly paying for stupid crap like overdraft fees and parking tickets – stuff that has to do with poor planning, also having to borrow from friends to make rent, bouncing checks, etc. Part of the problem is that I just don’t make enough money to get by. I’m going to school to get a degree in a field that offers much better pay than what I get now. I’ve also checked out some web resources about budgeting etc, and am meeting with a financial counselor soon. But I’m worried that the next couple years in school will send me into some horrible crisis that I can’t get out of! It’s even scarier because I have kids.

In the meantime, can you tell me how you personally pulled yourself out of financial crisis? Did you marry someone with better financial skills? Did you start making more money? How did you force yourself to budget and stay within that budget? How long did it take you to change your habit – or, if you were just born with good financial management skills, what exactly do you DO that keeps things sane?

Forgive me if this comes off as chatfilter, but I don’t think it is really. Your real-life stories are a good example to help me make choices about how I can do things better. Thank you!
posted by anonymous to Work & Money (35 answers total) 61 users marked this as a favorite
A relative of mine makes over 6 figures and regularly bounces checks. You're not alone! Maybe get a quicken account to keep better track of your finances.
posted by chickaboo at 8:17 PM on July 8, 2008

I just got into the habit of being cheap as Hell. Store brand food, buy in bulk, don't buy what I don't have to, that sort of thing.

You say you're in school. How's the meal plan for you? You could bring plastic containers in and bring food out with you. You might need to make sure you have a backpack for that though since they don't always like it. But the way I figure it, it's the same as if you ate it there.
posted by theichibun at 8:24 PM on July 8, 2008

I've posted this a few times here, but the one thing that really got me on track was going to a strict cash budget almost all my spending. I figured out how much I took home a month and subtracted rent, phone, and other basic bills. I also decided to try to save a small amount a month. That left me with a concrete amount of money left. I divided that by four to get a weekly amount that I would withdraw from an atm on Fridays. (At the time I started this plan it was $60) That was money for food, going out, or whatever, but when it was gone, it was time to eat the stuff way back in the back of the cupboards and entertain myself with free things to do. It's amazing how many things you don't buy when you just don't want to break that last twenty dollar bill. It made my spending so much more concrete and it made me really see what kind of trade offs I had to make in my spending.
posted by advicepig at 8:25 PM on July 8, 2008 [13 favorites]

One thing that really helped me was keeping my checkbook balanced. I know, totally old school, but it's a necessity. You can do it on paper, or you can do it via computer, but you gotta keep track of how much money is in the account or you're going to overdraw.
posted by ThePinkSuperhero at 8:32 PM on July 8, 2008 [2 favorites]

I used to be really bad with my money. Like you, I don't buy a lot of extraneous crap, but I do usually make a lot of small purchases on a daily basis. The first thing that helped me was to start tracking my spending in an effort to figure out EXACTLY where my money was going. Once you have this data it becomes much easier to correct course and figure out how to reallocate your money. I also started using an online tracking tool called Mint which connects directly to my bank and updates with virtually zero effort on my part. I also automated a lot of my bill paying through my bank so that I could avoid late fees and such. If this is not an ideal situation for you then I would recommend placing your bill due dates on a calendar so that you know exactly when they are due. All in all, I would recommend just being aware of yourself in an effort to curtail certain problems that may hurt you in the future (i.e. not parking in areas where you can be ticketed).
posted by ISeemToBeAVerb at 8:36 PM on July 8, 2008

1) Add up your basic monthly expenses.
2) If your basic expenses add up to more than you are bringing in, get rid of something. Maybe you can use the library for Internet instead of paying $50 a month to have it at home. Maybe you can live without cable. Maybe you can live without a cell phone. You have to decide what you are willing to sacrifice.
3) Now that you have a picture of your basic monthly expenses, call and have your bills staggered with your pay period (if you get paid twice a month). Pay your bills as soon as they come in (ignoring them will not make them go away).
4) Then, with the money that is left in your account (after you deduce all your expenses...not the money that is your account that day, before all your checks clear), make a goal of how much of that you will save and NOT TOUCH.
5) With what is leftover, divide it into a weekly allowance. Withdraw the cash amount for that allowance for that week on Sunday. When that cash is gone, do not spend a penny more (until your next withdrawal...NO RATIONALIZING OR COMPROMISES). For example, if you determine you get a $25 a week allowance, and you go out to lunch on Monday and it costs you $15 after tip, you have to plan ahead and bring your lunch for the rest of the week because $10 is not going to get you through to next Sunday with that kind of spending. Following this kind of plan makes you more aware of your purchases and helps you realize how much money is spent on things you don't need.

The thing is, you know what works already: the OPPOSITE of poor planning. Plan, plan, plan. You can do it. You really can.
posted by whimsicalnymph at 8:38 PM on July 8, 2008

Step #1 for you: calculate exactly how much you paid in late fees, overdraft charges, and related stuff last year.

If you paid $30 a month in these fees during the past month, that's an expense you can cut right now just by getting everything paid on time. I know that, without the habits in place, that's easier said than done, but seriously - won't that extra $360 (or whatever) a year help you cover some of those other expenses?

Step #2: Do a simple but complete budget. Get all your bank statements and credit card statements in one place and write down EVERYTHING you spent in the past year. (If you don't have good software for this, you could try a spreadsheet in Google Docs.) If you've got the statements handy, go back two years.

Now, take the grand total for the full year and divide by twelve. That's your month outlay. You need to do it this way so you can see all those hidden expenses that you only pay once or twice a year, like car insurance.

Write down a realistic projection of how much income you'll get in the next 12 months, then take another look at your spending. What's the difference between 12 months of income and 12 months of outlay? That's the gap you need to close.

There will be some things you can cut out to close that gap. If you've cut every last expense you can and there's still a difference, you'll either need to get a part-time job that covers that, or borrow it, ideally all from someone (family? very best friend?) who understands that it's a loan to cover you until you're established in your new career.

From what I've read on Get Rich Slowly, a lot of folks find it better to get the part-time job, even though it's exhausting, because getting deeper and deeper in debt can be even more exhausting.

Also from anecdotes over there, I've seen a lot of people talk about the debt snowball approach - basically, take your smallest credit card balance and do whatever you have to to pay it off. Then do the same with your next smallest credit card balance. It doesn't necessarily make sense from the "pay off the highest interest rate first" perspective, but it can be so exciting to get one paid off, it gives you the psychological boost you need to keep going.

Good luck!
posted by kristi at 8:43 PM on July 8, 2008

The main thing that helped me learn better financial management skills was taking a more active role in my spending. For the longest time, I always just relied on what my online bank account info said was my current balance, and then I kept spending from there. But of course, the problem was that it would sometimes take days for certain charges to appear, and before I knew it, the balance that I thought was accurate was suddenly a significant amount less than what I had believed it to be.

The first step I took to overcome my passive approach to spending was to start using Mint, a free online financial management website. I've been using it for a couple of months now and I love it because it gives me a quick way of visualizing my spending habits. For instance, with just a few mouse clicks, I can pull up a pie chart that shows me I spent, say... 40% of my previous month's income on movies. (Not true, by the way.) For me, seeing data in numbers just doesn't have the same impact as seeing it visually and using that as a way to further guide me in developing a better budgeting plan.

So I've been using Mint, but even more recently, I've decided to also use Excel to track my spending. For each month, I create a spreadsheet that has columns for the date, dollar amount spent or deposited, item description (e.g. "Dinner with John", "Paycheck deposit", "Movies (Wall-E)" etc.), category (e.g. "Restaurant", "Deposit", "Entertainment", etc.), and resulting balance. This is essentially what Mint does automatically, based on the data that comes in through my linked checking, savings, and credit card accounts, BUT! And this is critical ---- The difference is that by doing this in Excel and manually inputting the values from my receipts every single time I spend something, I'm taking a much more active role in my financial planning.

Basically, what it all comes down to is experimenting with a few different methods, finding the one that works best for you, and sticking to it. I used to see all of this as being far too time-consuming to be of any value to me, but now it's part of my regular routine and I no longer think of it as a task that I need to go out of my way to do. If the method you choose ends up feeling more like a troublesome task than something that you can commit to and that is helping you change your spending habits, then start over from the beginning and try again. It might take some trial and error to find the tools you need, but you really can do it if you keep working at it. Trust me on this.

Good luck!
posted by sabira at 8:49 PM on July 8, 2008 [1 favorite]

The number one enemy of financial stability is wishful thinking. Why are you bouncing checks? Is it because you don't know how much money you have but you hope you will have enough to cover it? Do you "balance your checkbook" by checking the balance at an ATM or on the phone (without verifying which of your outstanding checks and charges have cleared) and hope the figure you received is accurate? Don't write a check if you don't know how much money is in your checkbook. Once your checkbook is balanced it takes a few minutes a day to keep it up to date. Balance your damn checkbook and quit acting like it's some mystery of the finance masters why you piss your insufficient funds away on overdraft fees.

Don't park where you're not allowed to park. If paying to park is going to cost you less than parking tickets then pay to park. Either you are willfully parking where you are not allowed to park or you are being inattentive and careless. This is not rocket science: I have received 1 parking ticket in over 20 years of driving, because I didn't see a sign.

If you literally don't have enough money to cover your expenses you need to get more money. I know as well as anyone (I'm looking for a third part-time job to carry my stay-at-home-fatherhood habit) that it's not as simple as that but if the instability of your finances is causing you to fear for your family's security you need to get more money. If you can't handle more work maybe you need a school loan. Debt is never desirable but if you are working towards a substantial increase in income you might need to invest in it. But if you don't work on the simple fundamentals: always knowing the actual status of your finances, not doing things that stand to lose you money (writing bad checks, parking in no-parking zones), understanding what various financial decisions cost you and acting accordingly, this will just be more money you use inefficiently and it won't really correct the bottom line.

I don't mean to be a dick but I don't think sugarcoating it is worth much: everyone I have known with financial problems like yours got their mainly by being careless about really obvious things like balancing their checkbook even though they knew better, or else they simply had to add income to their budget, either by working more, eliminating expenses that were actually not necessary, or getting a necessary loan.
posted by nanojath at 8:50 PM on July 8, 2008

I open 2 checking accounts: in one I have direct deposited EXACTLY what I need to pay the bills. In the other, whatever is leftover is "fun money" - if I run out, I run out.

Also try to see exactly where your money is going.
posted by k8t at 8:58 PM on July 8, 2008 [2 favorites]

What they all said. I would stay away from calling yourself "cheap" as a financial planning tool- being "cheap" is an easy way to miss the forest for the trees. But frugality is a must.

A few things I do:

- I set up all my bills to come due roughly at the start of the month so I only have to do bills once a month. From my bank's online payments thing, I pay them all in about 10 minutes. I have (nearly) NO bills auto-payed or automatically deducted. It saves me almost no time, and can cause trouble if some company makes a mistake. I leave a few hundred in the checking account, and whatever is left over after paying the bills goes into savings. That few hundred is for walking around money and the like. I rarely spend that much, however.

- But limiting myself to that is important. I get paid twice a month, so when that check comes and I see all that money in the checking account, it can be tempting to think "I've got plenty of money...Drinks are on me!"

- Before I had that kind of self control, I did the bills twice a month. First check was rent, second check was everything else.

- Parking tickets? Really? Why? If you aren't paying attention, you have to change that behavior ASAP. Being careless like that just won't work.

- Always max out parking meters, or at least double your time estimates. Yeah, I'll only be 15 minutes. But who knows? That extra 50 cents or a dollar is cheap insurance on getting a massive ticket. (I'm in Chicago, where it's a minimum of like $60 if they get you. YMMV)

- In the same vein as the first two, pay your bills first. What's left after that is all you've got. Borrowing money for rent is just a bad plan.
posted by gjc at 9:00 PM on July 8, 2008


- Whatever you can do yourself, do yourself. Pack lunches. Learn as much auto maintenance as you can. Don't eat out. Learn to cook, if you don't.

- Think ahead. Dumping that cooking grease down the sink might save you the minute it would take to dump it into a jar and throw it away. Are those minutes really worth the inevitable plumber bill?
posted by gjc at 9:04 PM on July 8, 2008

Get Rich Slowly is where I learned it. That, and I finally got fed up and just started managing things better. When you start tracking things, it's easy to get depressed if you don't have someone coaching you. So that's your first step -- get a coach. Make sure it's someone you can't ignore.

The second part is making a budget and sticking to it. I use Mint to track things, and I've simply made my budget follow the categorization of expenses... it provides an easy-to-adjust total overview of your expenses and lets you add them up over periods of time.

I started last August or so to track my expenses closely. I set Mint up, and had my Mom help me make a budget. We agreed on amounts and then adjusted them. She made me stick to a weekly phone call to her and she has passwords to all of my financial resources so that I have some accountability and can stick to it. (This is mostly because they lent me some money to get out from under the nut ... I could've done it without that, though. I just needed to start watching things better.)

As a result of that analysis, I realized that my bank was OVER charging me for overdrafts, and charging multiple fees when it wasn't warranted. After realizing that between August and October I paid $325 in overdraft fees, I dug through old statements and realized that in 2007 I paid over $1,500 in overdraft and other associated account fees (Low balance, recurring overdraft, etc.) to my bank! You'd better bet that straightened me up... I'd never have done it though if I hadn't been tracking things. I moved my money to another bank (Bank of America) after several unsuccessful attempts to get Chase to correct errors they'd made. And you'd better bet they chased me every single second -- in fact, I overdrew my account on the day I went to close it after all checks had cleared, and ended up paying them ANOTHER $50 overdraft fee on a $6 overdraft from a recurring transaction I'd forgotten about! I had the branch manager calling my house and promising to do better, etc. etc. etc.

I've now gone seven months without an overdraft fee. I'm out of credit card debt. My credit score is up fifty points and all of my cards (which I kept, now that I can resist temptation) have tripled their limits. I managed to save enough over the past seven months to pay my six months of car insurance in advance this time, which just saved me $50 over the next six months in account management fees from State Farm ... and I get to save the NEXT six months, *AND* earn interest on it! Through frugal living, good financial decisions, and plugging all the leaks in my wallet I went from living paycheck to paycheck to having enough money in the bank to cover pretty much any catastrophic event -- in seven months.

Get a coach. Set things up so that you can track them without doing too much work. Figure out ways that work for you to track your spending and control it. Learn to resist temptation. You can do it.
posted by SpecialK at 9:05 PM on July 8, 2008 [1 favorite]

P.S. - That $1500 that I was paying in overdraft fees was one month's take-home salary for me. You read that right -- in 2007, I paid 1/12 of my yearly income in overdraft and other bank account fees. If that doesn't make you sick...
posted by SpecialK at 9:06 PM on July 8, 2008

ok, this is how I saved my broke ass:

get a pad of paper and on the first line write down how much money you make each month after taxes. Round it down to the nearest $50 or $100. On the next line, subtract however much you pay each month in rent (rounded up to the nearest $25 or $50) and see what you have left. On the next line, subtract your car payment (again, rounded up to the nearest $25 or whatever). Do that for every bill you have - write down one per line, rounding each one up a few bucks, then subtracting it from the above.

The trick here is to convince yourself that, for example, you really do pay $65 a month for power even though in the middle of summer with the AC on full blast the bill only comes to $54. If you overestimate all your bills, and underestimate your income, and can still come out with a positive number after doing all the subtraction, you're in good shape. If not, it's time to decide which necessities are really necessary and which ones you can get rid of (cell phone, expanded cable tv, etc.) then do your calculations again. If you end up with a positive number that's, say, 10% or less of your income, that's probably not a big enough cushion to protect against unexpected events like parking tickets or whatever. Cut back on a few things and try again.

The next step is to wait a month and then compare your original estimates to what actually happened. If you figured that you'd be up a hundred bucks each month but your bank account has only gone up by $20 between the 1st of last month and the 1st of this month, well, you're doing something wrong. Go back and make sure all your estimates are accurate and honest.

The first few months I did these calculations every week or so. I'd come up with much better estimates for food if I sat down and did 'em right after going grocery shopping. I'd come up with a better estimate for gasoline if I figured out how many miles I drove on a full tank then seeing how many tanks of gas a month I go through and how much each cost on average. Even with better estimates, I'd still round up my numbers. Accuracy and precision aren't the goals here; making sure you don't go into debt is.

Then when I got a feel for how much things generally cost me, I scaled it back to once every two or three weeks. Now, whenever I'm considering purchasing something large or signing up for a monthly subscription of some sort, I'll redo these calculations even if nothing has changed. Just sitting down and doing them over and over, and realizing that I didn't want to be in debt anymore, had a profound effect on how I view my spending.

Also, even if this advice is totally worthless to you, best of luck in fixing your situation.
posted by xbonesgt at 9:15 PM on July 8, 2008

I think most of us have been there! A few things that helped me when I went through this:

1. Writing down every single purchase, no matter how small, and adding them up each month.

I found out that all of my "Oh, it's just a couple of dollars" purchases were adding up significantly, and if I hadn't spent them, I might have just barely had enough to cover expenses that caused me to overdraw my account and add overdraft fees. Ouch.

2. Living as cheaply as possible for as long as I could stand it.

A month on ramen noodles, rice and beans, tap water, using as little electricity as I could so my bill would be cheaper, the worst of the generic toilet papers, shopping at Family Dollar stores for necessities, and absolutely nothing I didn't need to survive or get to work... was enough to help me get out of a rough spot and get back on the right path.

3. Remembering that going without that something I reallyreally wanted was better than having that something and going without the money I needed to get by.

4. Not buying anything that wasn't planned in advance and always making lists beforehand.

You're at the grocery store, you're buying bread, and you see a new kind of coffee. Hey, that looks good! Too bad. You aren't at the store for the coffee. You're there for bread. That's it.

5. Setting up automatic monthly savings account transfers and pretending the money just doesn't exist.

6. Above all else: embarrassment.

I'm much, much, MUCH better with my finances now (and I make more money), but I still do a few things to put that extra bit of cash in my savings account. I go through my movies and CDs and books and list the things I don't really watch/listen to/read anymore on Amazon Marketplace or eBay. I make my lunches pretty much every work day. I keep my spare change in a jar, and I have a Bank of America Keep the Change account that rounds up my purchases to the nearest dollar and transfers the change to my savings account.
posted by katillathehun at 9:36 PM on July 8, 2008 [1 favorite]

Oh, and I don't have overdraft protection. I turned it off years ago when I realized it made me view my savings account as an extension of my checking account, and that wasn't helping me limit my spending.
posted by katillathehun at 9:40 PM on July 8, 2008 [1 favorite]

There are many good resources for this on the web. Two that I like are the forums affiliated with the people behind the Your Money or Your Life book empire (link), and the Get Rich Slowly blog (written by a MeFite). If you aren't turned off by the Christian elements, I also think that a lot of Dave Ramsey's advice really works for many people -- in fact, for someone in your position, who is grappling with "what do I do?" and "where do I start?", I'd suggest starting with his basic how-to's for moving towards a more sensible financial position.

There are a lot of tips and guides and mental tricks that help. But at the end of the day, it kind of comes down to living within your means, which means that things like parking tickets have to be paid for somehow -- and if your budget is limited those parking tickets can mean not eating so well this month.

For me, getting that direct connection between screwing up and my quality of life was what made me start taking this stuff seriously. And once I did start taking it seriously and devoting some mental energy to it (instead of the stress I had given it before), things started working ok.

But that means a lot of deferred gratification, and accepting limitations on my consumption and spending. It's probably a lot more fun in the short run to live off of credit cards and loans... but in the long run, that's not an approach that works so well.
posted by Forktine at 10:08 PM on July 8, 2008 [1 favorite]

I really think the bottom line is that you can't say "I don’t buy a lot of extraneous crap and I don’t eat out much" if you're not tracking your spending.

At the end of a week or two, you'll see money that left your pocket that really would have been just as happy staying there.

The other end of this equation is, as everyone has said, budgeting. Serious weekly meal planning can save you massive amounts of money. It is actually a skill with a short but steep learning curve, but if you're struggling to make ends meet, there's a lot of gain for the pain.
posted by DarlingBri at 11:09 PM on July 8, 2008 [1 favorite]

also having to borrow from friends to make rent, bouncing checks, etc. Part of the problem is that I just don’t make enough money to get by

What you need is financial discipline.

Financial discipline is hard until you've practiced it enough to be good at it. Like many difficult things, it's worth doing.

To get past the lack of rent, and the bouncing checks, and the borrowing from friends, you can use the same technique as I do: the float, or virtual zero-funds level. This involves acting as if you have even less money than you really do, which allows you to lend money to yourself in an emergency. The only way it will ever work, though, is if you're disciplined enough to make it work.

Here's what to do: give yourself a $10 per week pay cut for two years, by dumping the first $10 you make each week into a separate account. Perhaps this is a secondary account at your bank that isn't linked to your cash card, or keep it in a biscuit tin under your mattress, or if you don't currently have a bank account, open one just for this purpose. The point is to put this weekly contribution somewhere that makes it inconvenient to get at it, and then act as if you never had it.

Compensate for your lost weekly $10 by spending $1.50 less per day than you otherwise would. Get used to living with your new, reduced income. This will somewhat suck, especially since you're already struggling. Consider the suckage to be the cost of your financial education, and consider living like a total cheap-ass to be your new hobby. Embrace your inner dumpster diver.

In not too many months, you will find that those $10 contributions add up to quite a useful financial cushion. If you need to borrow $50 to make your rent until you get paid next Thursday, you can borrow that from the cushion instead of putting the hard word on a friend. But when you do this, you absolutely must pay back any borrowings as soon as you have the cash to do so. Don't piss yourself off by being that guy who still owes you $50 two weeks later.

I've been doing this as a substitute for proper budgeting for many years (my virtual zero is at $1000, which is enough that I no longer need to make regular cushion contributions) and I find it works very well for me and is much less tedious than trying to keep track of every little thing.
posted by flabdablet at 11:12 PM on July 8, 2008 [2 favorites]

I learned to be financially responsible by running up $50,000 worth of credit card debt, getting depressed about it, then getting on antidepressants and paying it all off.

I do not recommend this approach. It is rather stressful. That you are aware that you have a problem before it has become a crisis is a very good sign; you have a chance to avoid this fate. I was in denial for at least three years. And I didn't even have school as an excuse.

Living frugally can be fun if you make a game out of getting things cheap. You do need some leisure activities, a good meal now and then, etc. Your biggest single monthly expense is likely housing, and you can make a big dent in that by getting a roommate if you don't already have one, or renting a room rather than a whole apartment, or whatever. You can also, in the long run, save a lot of money on groceries by only buying things that are on sale (stock up) and becoming brand-agnostic.

But keep in mind that there is only so much you can cut your expenses. You will be lucky to save 25%. Most people who significantly improve their financial situation do it not by reducing expenses but by increasing their income. That means finding a job that pays better, or working more. The good news is that you are on the path to finishing a degree that will allow you to do just that, so keep it up.
posted by kindall at 11:15 PM on July 8, 2008 [2 favorites]

Part of the problem is that I just don’t make enough money to get by.


The number one expense, consistently, is your rent.

Reduce your rent by 10% and you will find that your monthly cushion becomes a little more tolerable. Yes, it can be a pain to get services switched over, put down more deposits, etc., but you will save money after only a couple of months in your new place.

It’s even scarier because I have kids.

Another easier tip than moving: take a recent photo of your kids and wrap it around your credit or bank card. Every time you take your card out of your wallet, your kids looking back at you will make you pause just long enough for your brain to give a second thought to, "do I really need this venti latte?" That's what you're trying to do-- cut down on the little things, which over the course of a year, add up considerably.
posted by mark242 at 11:32 PM on July 8, 2008

Financial discipline is hard until you've practiced it enough to be good at it. Like many difficult things, it's worth doing.

Just want to add to the great advise here- it is practice. You will still fuck up when you start to turn your life around. Don't let that discourage you. Dust yourself off and try again.
posted by Monday at 4:49 AM on July 9, 2008 [1 favorite]

I think the number one thing for me has been tracking my spending. I started doing this back in 5th or 6th grade, starting with a school assignment that just had us keep track in a pocket-size notebook. The habit just stuck. I also grew up watching my mother keep a ledger for household expenses - she would enter the budget for the month, then record all expenses, including attaching receipts to the ledger pages.

I don't religiously keep track of my spending these days. But this is because I did it for such a long time that now I have ballpark estimates in my head about how much to spend or allocate for various budget items, relative to other budget items. That is, if I buy new clothes this month, then it triggers cutting on other expenses, such as eating out. It's an almost unconscious balancing at this point. But, it's a result of a lifetime of keeping track of my expenses, often trying to make do with very small income.
posted by needled at 5:23 AM on July 9, 2008

advicepig said: That left me with a concrete amount of money left. I divided that by four to get a weekly amount that I would withdraw from an atm on Fridays.

This is key. In the past two years, I have become debt-free and am now saving a healthy amount every month.

My plan is close to advicepig's, with a couple of differences.

I make a withdrawal every Sunday (not Friday). That means I'm less likely to blow the week's allowance on alcohol or frivolous weekend entertainment activities. If you find yourself spending money on the weekends, make your withdrawal on Sunday.

I started competing with myself to see how much money I could end up with in my wallet when it came time to make my next withdrawal. Let's say my allowance is $200 per week. If I end up with $50 in my wallet on Sunday, I only withdraw $150, and I put the extra $50 in savings (or towards debts, when I had them).

I am paid monthly. When I started this plan, I would put everything that was left in my checking account (minus a reasonable buffer) into savings, or toward paying debt. After awhile, I learned what that amount could (should) be, and simply put it into savings as soon as I got my paycheck (rather than waiting til the end of the month). This made it less likely that I would blow money on something unnecessary, since the money was already moved to savings.

Also: no credit cards. Get rid of them. Set your bills up to be paid automatically - try to avoid all late fees (I used to get them all the time, but haven't paid one in more than 2 years).

Don't give up. You can make a change in this area of your life.
posted by syzygy at 5:34 AM on July 9, 2008

Short Answer: The Automatic Millionaire

I automated all of my bills and savings. The money I'm allowed to spend goes into my checking account and I can spend every penny of it without messing up anything else.
posted by mincus at 6:10 AM on July 9, 2008

Here's what I do:

I have all my bills on my electronic calendar on their due dates with the min. amount due (including rent). Every pay day, I go through and pay all bills that are due in the next two weeks until the next paycheck comes in. Anything left over after that is for food, gas, etc.

I keep my checking account balanced in Numbers (the Mac version of Excel). I have a formula set up so it does the math automatically for me when I put in the amount of a check or debit.
posted by at 6:29 AM on July 9, 2008 [1 favorite]

STEP 1: Sign up for your bank's online banking - TODAY! Start checking your balance everyday - maybe even several times a day. Be sure to check the pending transactions as well as the posted ones. This should become a daily habit. After a month or two of doing this, you will have a much better idea of where your money is going and you will always know exactly how much money you have.

STEP 2: Open a savings account at the same bank and make sure you can see it when you check your checking account online. Start transferring a small amount each month/pay period from your checking account to your savings. Set a goal - like saving $1,000. This is your safety net. If you run short one month, transfer a small amount of this money to your checking account rather than use a credit card or borrow from friends. Next month, pay it back immediately in addition to your regular transfer. If you have a little extra at the end of the month, transfer it to this account. You'll be amazed at how motivated you will start to get to reach that $1,000 goal.

STEP 3: Start paying your bills online through your bank. This takes a bit of set-up and planning, which is why it's step 3. You can schedule these to go out whenever makes sense to you. I pay half my bills during the first half of the month and half at the end. Set these up as recurring payments. Check their status whenever you check your account. Call your utility companies and ask that your bill be averaged over the entire year. That way you'll pay the same amount every month and won't be surprised by a high electricity bill in the summer or gas bill in the winter. If you end the year having overpaid, they'll credit your account - if you're a little under, they'll bill you for the difference.
posted by jrichards at 6:54 AM on July 9, 2008

1. Track every expenditure.
2. ...
3. Profit!

You may actually not need to do much else. And the great thing about tracking is that you can begin with a scrap of paper and a pencil and the very next expenditure you make. This is a variety of the Hawthorne Effect: it may be that the simple act of tracking is enough. It certainly works for me immeasurably better than formal budgeting, which requires endless replenishment of willpower. Some of us just aren't built like that, so we need to tweak our environment in ways that keep spending down. Tracking is one way, and siphoning money off into a hard-to-access account right after you're paid is another.
posted by game warden to the events rhino at 7:20 AM on July 9, 2008

A lot of the advice here assumes you are making enough money to pay your bills. I got the impression from your post that your basic expenses are exceeding your income which makes extra charges like overdraft fees a bigger hit, which then snowball into you not having enough rent money. It is hard to take the time to budget when you have kids constantly interrupting so first trade off baby-sitting with someone so you can have a large chunk of time to yourself. Figure out what your monthly must-pay bills are (rent, utilities, food etc) and what your income is. If you aren't able to meet your bills on your income (and I have been there so I know what it is like) then you have to reduce your bills (move someplace cheaper, live without a utility) or increase your income (get an additional job, work for more money elsewhere). My food expenses have gone up sharply lately because of higher prices and my children are eating more, do careful meal planning (Hillbilly Housewife) to stretch it as much as possible. I found the Ramsey book mentioned up-thread to be very good.

Honestly, I lot of women I know that struggled financially moved up only when they married someone with money. If you currently have a deadbeat boyfriend that it is not able to pay 50% when you go out, drop him. He is taking food from your children's mouths. I am sure I am projecting because a good friend is losing their house to foreclosure due to supporting their (now nowhere to be found) boyfriend for years.

You can do it!
posted by saucysault at 8:27 AM on July 9, 2008 [2 favorites]

I have been in a similar hole -- I live in New York and in 2001 worked as an office temp supporting a theater career, and after 9/11 theater AND corporate work dried up and my annual income dropped 75%. I spent the year working the one part-time job I could get, collecting partial unemployment, and racking up cash advances on my credit card and just teetering on the edge of going into more debt. I spent the next 6 years re-learning money and coming back from that place.

A couple people have already suggested the "take a week/month/etc. and write down every last individual thing you spend money on, then add it all up" approach, and that's what helped me most. Trying to tackle a budget just in a vacuum didn't work so well for me, because it was one thing to blithely say, "okay, $100 a month sounds right for food", but it's another thing to be that you're ACTUALLy currently spending $100 a week. Taking this kind of "actual data" approach really makes the bigger expenses jump out at you, and helps you VERY quickly come to epiphanies like, "Holy crap, I'm spending A QUARTER OF MY INCOME on BOOKS??" (Something I actually was doing at one point.) There are some expenses you aren't going to want to change -- I know I could save money by buying Maxwell House, but dammit, I will sincerely feel deprived if I have to drink it and so I consider the extra $10 a month on the good stuff to be a worthy investment; I make up for it by getting conservative with my spending in other places. (I almost never eat out by myself -- when it's just me, I have more fun cooking for myself anyway, so there you go.)

This book also helped a lot -- it was sufficiently kitschy to keep me amused, and also had some good, plain-English, basic advice that helped me cut more corners and nudged me to actually start a savings plan.

It's not going to be blissfully easy -- there were days when I was seethingly jealous of people who were better off, I went five years without taking a vacation and got depressed days when I felt seriously deprived, and I'm still carrying a lot of credit card debt. But -- my credit rating is immaculate, I discovered all sorts of free things to do that I wouldn't have known about if I hadn't been desperate enough to look for them (things that are actually more fun than paid stuff to do, in some cases) and I've learned such good habits that I may actually be one of the few people whose financial lot will actually IMPROVE a little in this recession. (Everyone around me is getting depressed that "oh no I have to give up my weekly pedicure and dinner out with friends," but I'm cheerfully saying, "oh, right, free movies are starting up in Williamsburg again next month! I'll have to round up friends and figure out who's bringing the popcorn!") I also managed to completely pay off a student loan in the middle of all of that. So it's not easy. But it is DEFINITELY possible.
posted by EmpressCallipygos at 11:09 AM on July 9, 2008 [2 favorites]

I have a question for all you good-financial-skills people about saving money. Right now I can only afford to put about $35 dollars a month away, and I am throwing that right into an RRSP. I, however, have no "cushion." Should I be putting that money into a regular savings account instead (and making basically no interest on it?)? Half-savings, half-rrsp? All savings until I have a certain amount saved up? If I have a few extra dollars at the end of the month, should it go into savings, rrsp, or debts? What is the hierarchy?
posted by arcticwoman at 8:07 AM on July 10, 2008

Also, Mint only works in the US. Any suggestions for the rest of us?
posted by arcticwoman at 8:10 AM on July 10, 2008

There are a lot of terrific personal finance blogs. If you read them, you get good ideas, and you also get encouragement to be frugal. Advertising is everywhere, encouraging you to spend. Learning to tune it our is very helpful. I don't notice most ads on websites, don't read most of the flyers in the newspaper, and tune out most ads on teevee. You want that Starbuck$ frappa-mocha-latte-chino, but coffee from home in a thermos will give you the caffeine, without the cost, or the calories. When you do splurge on the Starbucks drink, you'll really enjoy it. You can train yourself out of a lot of miscellaneous expenditures.

Becoming frugal is only 1/2 the equation. You need to earn more. Get a 2nd job if you can. Look hard for a 2nd job that allows you to do some studying while you work.

I've stayed solvent through some difficult times by buying most of my clothes and household goods at thrift shops, making most food from scratch, eating cheap, nutritious and tasty food that's low on the food chain (beans & rice, homemade mac & cheese, soups, stews, no soda), and not spending much on entertainment. No big concerts but many free music events, no $10 movies, plenty of watching videos with friends, no cable teevee. Books from the library.
posted by theora55 at 9:39 AM on July 10, 2008 [1 favorite]

Somewhere on some AskMe somewhere, which I cannot find for the life of me find now, someone recommended You Need a Budget as a great little program to help get you on track financially - and I wish I knew where that thread was or who that poster was, because I bought it and love it and would love to thank them.

If you've got $40 to drop, it's seriously terrific for helping you to get a grip on how much money you have coming in and how much money you have going out, and what you should adjust. It's not as complicated (or overwhelming) as Quicken or MS Money, and that's why I love it.

They have (or at least did when I bought it) a $20 version that's just a bunch of Excel spreadsheets, and a $40 that's a for-real program. I jumped for the $40 version, and it might well have been the best $40 I've spent this past year.

Seriously, whoever that was - thank you.
posted by Quidam at 1:30 AM on July 12, 2008

« Older Help with saying No to drugs   |   Do I have to get a new computer to get an iPhone? Newer »
This thread is closed to new comments.