Financial Wellness: Breathing room important in balanced budget

Before we married, my husband and I had idyllic dreams of what wedded bliss would look like. They were contrary to how a lot of people probably imagine early career success.

As early 20-somethings, we didn’t picture a big house or fancy cars. Instead, we were excited to live like broke college kids, despite our newfound incomes.

These meager aspirations – ramen and all – set us on a good financial foundation going forward.

In order to live a financially well life, you need to spend less than you earn. CNBC TV host Suze Orman calls this “living below your means but within your needs.” The more space you put between what you need to spend and what you earn, the more peaceful you’ll find your financial life to be.

It takes discipline to not spend every penny you make, but it’s worth it. You’re able to weather the rainy days better. It also gives you the flexibility to spend more when you have the chance to bask in the sunshine.

One easy way to do this is to automatically increase your 401(k) contribution anytime you receive a raise. You won’t miss the extra money, and will automatically start building that cushion – both in future funds and your budget.

You may also want to take a deeper look at your overall financial picture – at what you really make, really spend and where those numbers should be.

A common guideline for budgeting is 80-10-10: Spend 80 percent, save 10 percent, give 10 percent. It’s a tried-and-true principle that creates financial leeway.

One model I really like was outlined in the 2005 book “All Your Worth,” co-written by Harvard professor and now Massachusetts Sen. Elizabeth Warren. It’s called the 50-30-20 budget.

In this model, half your net income is for needs, 30 percent is for wants (including clothing, vacations, dining out, charity and gifts) and 20 percent for savings (retirement, emergency and extra debt payments).

By keeping necessary expenses like housing, insurance, transportation, groceries and loan repayment to half your income, you’d still be able to pay the essential bills if one spouse was suddenly out of work or you had to go on unemployment.

It’s long been my family’s goal to live off one income and save the other. That’s what allowed me to cut my work hours after our children were born.

Even as our salaries have gone up, we’ve worked to keep our obligatory spending low, dedicating extra money to our mortgage and retirement funds.

Instead of increasing our standard of living, we’ve increased the breathing room in our budget.

That’s worth a little ramen.

Financial Wellness: Pay attention, but don’t obsess over your pennies

A lot of my frugal ways seem to be ingrained, habits I’m not always aware I have. Recently I realized I don’t approach the store checkout lane the same way others do.

I prefer to find a lane that isn’t completely empty. I want enough time to unload all my cart’s contents onto the conveyer belt before the cashier starts ringing me up. That way I can watch the price of each item as it pops up on the register’s screen to make sure it’s correct.

It’s a learned behavior. As a child, I remember my mom doing this.

I suppose it’s not as necessary nowadays, considering the advances in bar codes, scanning and point-of-sales systems. But you’d be surprised how often something doesn’t ring up at the proper price, especially if it’s on sale.

A month or so ago, a clearance Christmas gift set that had been slashed an additional 50 percent didn’t ring up with the extra discount. The cashier was able to manually adjust it when I pointed it out. My husband bought a dress shirt a couple of weeks later that didn’t register at the promised half-price. Again, the sales clerk changed it.

Sometimes the price discrepancy is my mistake. Maybe I grabbed the wrong item or didn’t meet the purchase requirements to trigger an advertised discount.

By paying attention, I make sure I don’t spend more than I intend.

Being attentive to your money, even in these small ways, adds up big. It’s like the saying, “if you watch the pennies, the dollars take care of themselves.” But that doesn’t mean you should obsess over every penny. I don’t think that’s the way to financial health.

Instead, analyze your spending while making your saving automatic. Monthly bank transfers from checking to retirement and savings accounts ensure we’re preparing for a solid financial future. It’s called paying ourselves first.

All of our fixed expenses – the mortgage, utilities, etc. – are paid automatically, too, meaning I don’t have to worry about missing a payment. That just leaves those variable expenses – including money spent at the grocery or discount store – for me to concentrate on, one register at a time.

Money-Savin’ Mama: Be cautious when ‘saving’ equals more spending

A sale sign lured me from the mall’s wide corridors last October. Everything in the children’s clothing store was $16.99 or less, it promised.

I don’t normally shop at Gymboree, its regular prices out of my wallet’s comfort zone. But beneath that sign were tulle-lined holiday dresses, regularly priced around $60 each.

The saleswoman confirmed the dresses were included in the inventory-clearing sale. I bought three – one for my daughter, Eve, and early Christmas presents for two nieces – paying less total than one would have cost.

I stayed within my gift-giving budget for the girls, and bought Eve a new outfit for not much more than I usually pay for a used dress.

And, because I spent more than $50, I received bonus “Gymbucks” for $25 off a future $50 purchase, valid from the end of January into early February.

So a few weeks ago, I wandered back into the land of kiddy chic. Happily, many of its racks were on clearance, discounted 30 percent to 60 percent.

I picked out itty-bitty shirts and pants as a gift for my newborn nephew, a skirt and top for Eve, and an adorable hat for one of my nieces.

With the clearance prices and the $25 coupon, my bill came to $32.18, a far cry from the $125 the original price tags totaled.

I celebrated my money-saving prowess, but warily.

Because, had I really saved any money at all?

It’s a dangerous trap to think you’ve saved money when in reality, you spent.

It’s an issue I struggle with as I see frugal blogs touting ways to score major discounts on tank tops, kids’ toys and toiletries.

Yes, you’re paying much less than the suggested retail price. This is great when they’re items you need or gifts you’d be buying anyway.

But did you have that money in your budget to spend for those items? Did you need those tank tops or toys or toiletries?

I found myself falling into a similar scheme a few weeks later. Several friends have had good luck purchasing items from Zulily.com, a daily deal site geared toward moms. A Facebook ad lured me into the “shopping destination.”

There, I found a discounted pair of My Little Pony pajamas, a perfect birthday present for Eve. Several pairs of shoes caught my eye, and I took a chance on a pair of black wedges, as my current go-to black flats each have a hole in the sole.

At the checkout, I hesitated, realizing the shipping costs would eat away at my savings, but after some quick calculations, clicked buy.

A congratulatory note for my first purchase popped on the screen, along with an offer of free shipping on any additional purchases made through the weekend.

Free shipping? Well, I should probably take advantage of that …

I started to scan the site for more “deals.”

And then I stopped.

None of these deals would mean more money in my bank account.

They’d just mean stuff I don’t need at my doorstep.

That’s no deal.

Sherri Richards is a thrifty mom of two and employee of The Forum. She can be reached at srichards@forumcomm.com

Money-savin’ Mama: Make sure your financial resolutions are SMART

As I think about the New Year, I picture bright blue water, white sand beaches and the green it will take to get there. This year will mark a decade of marriage to my accountant husband, and we’re planning a tropical getaway for the end of 2014.
Saving for the trip is among our financial goals for the year, along with continuing to max out retirement contributions, pay down the mortgage, and add to the kids’ college funds.
I was glad to read we’re not alone in making money-based resolutions. Fifty-four percent of Americans will consider financial resolutions for 2014, an all-time high, according to the fifth annual Fidelity New Year Financial Resolutions Study.
While long-term savings goals lead the way, more Americans are leaning toward short-term goals, the study found. And these short-term goals have become more practical (like stashing an emergency fund or paying down credit card debt) versus luxurious. (Sorry, boat salesmen.)
For the third year, the top three resolutions are to save more money, pay off debt and spend less money. While those are all worthy resolutions, stated as is they’re not “SMART.”
SMART stands for specific, measurable, attainable, relevant and time-based.
It’s not enough to resolve to “save more money” or “pay down debt.” You need to get down to the nitty-gritty of how, how much and when. That’s where the SMART acronym comes into play. It can help you make your financial resolutions a reality, regardless if they’re set Jan. 1 or mid-July.
Let’s apply SMART goal-setting to our second honeymoon:
 • Specific: The goal needs to be concrete. “We’re saving up for a vacation” is too vague. We need to say where we’re going, when and for how long.
 • Measurable: We need to have a target, in this case an actual dollar amount, so we know when we’ve reached the goal. Being specific will allow us to research travel packages and get an accurate figure, but let’s say $2,000 for now.
• Achievable: Is this goal within reach? If not, we could plan a less expensive vacation or wait another year.
• Relevant: Is this trip important to us? Should other financial goals take precedence?
• Time-based: In this case, our travel dates provide us with a timeframe. We’re looking to go in mid- November, which gives us 11 months to save up the $2,000. That’s $182 a month, or $42 a week, or $6 a day.
To accomplish this, we could set up regular automatic transfers into a savings account. When we took a trip to Jamaica in 2008, I set up a spreadsheet to track extra cash from bonuses, gifts, coin jars and even recycled cans.
Some take SMART another step, adding evaluate and re-evaluate for SMARTER goal-setting.
Either way, it’s a tool that can firm up your resolve, whether you want to make changes to your work life, waistline or wallet.
Sherri Richards is a thrifty mom of two and reporter for The Forum. She can be reached at srichards@forumcomm.com 

Money Savin’ Mama: Find ways to give that fit your budget

My column in today’s Forum talks about being frugally generous. What tips do you have to give and save?

When all year long you penny pinch, you run the risk of becoming a Grinch.

In the season of giving thanks and holiday giving, I have to remind myself to loosen the Scrooge-like grasp on my purse strings, before three ghosts visit me in the night.

But being generous and being frugal are not mutually exclusive. It’s all about being efficient with your money, and maximizing what you can give within the constraints of your budget.

Call it frugal generosity. It can apply to Christmas gifts and charitable giving.

One of my favorite ways to give frugally is on Giving Hearts Day. During the Feb. 14 event, hosted jointly by the Impact Foundation and Dakota Medical Foundation, online donations of $10 or more to select nonprofits are matched up to $4,000.

It’s an easy way to stretch your giving dollar, making a larger impact than you otherwise might afford. A similar event featuring Minnesota organizations, Give to the Max Day, was held Nov. 14.

For food drives, I often donate cans from my pantry, which I’ve stocked when on sale or by redeeming store deals.

For example, Cash Wise grocery stores offer a free, usually nonperishable item with a $30 purchase. If you scan the free item coupon before other coupons, you can still get the item if your out-of-pocket total is less than $30. Even if it’s an item you wouldn’t use, it can still be put to good use.

That goes for more than food. I’m an advocate of re-gifting, provided it’s done with class. That is, it’s never been used, it would be loved by the recipient, and you’re gifting well outside the social circle where you received.

When I helped pack Operation Christmas Child boxes this month, I collected uneaten Halloween candy and unopened Happy Meal toys from my house. I’ve also given away gift cards I earned for free through MyPoints.com.

When approached with fundraising catalogues, I try to do double-duty, supporting the cause by buying something I can give later as a gift. I do the same when attending home parties or vendor shows.

Gift-giving is part of our household budget. We automatically add $90 every two weeks to an online money market account designated for pet expenses, travel and gifts.

To make the most of those dollars, I try to leverage pre-Christmas sales. I combined a sale price and texted coupon code to get the doll my 5-year-old daughter wanted for half its regular price.

I also hit up post-holiday sales. One year for Christmas, I gave her a Cinderella costume I’d bought at a deep discount the week after Halloween.

The key is to not get hung up on the dollar amount. Just because you found the gift for less doesn’t mean you have to spend more. It’s about the gift – and the thought – not what you spent.

Finally, I like to think about my family’s “needs” when drafting wish lists. Clothes, art supplies and bigger bike helmets are great gifts and already part of the household budget. Both my kids’ stockings will be stuffed with kid shampoo, new toothbrushes and toothpaste.

That way their teeth, like the holidays, will be merry and bright.

May all your Christmases be in the black.

Richards is a thrifty mom of two and reporter for The Forum. She can be reached at srichards@forumcomm.com

Smartphone for a smart Mama: Upgrading frugally

This spring, I wrote about how my husband and I were debating switching to smartphones. Our cell phone contract was up, giving us a window to make the leap.

My concern, of course, was the cost. Not just of the physical phones, but the monthly data plan and the temptation to purchase apps and other downloads. As I wrote, it’s way too easy to allow your tech wants to become expensive “needs.”

We talked with several friends and family members, compared price packages, and researched, researched, researched.

Finally, after months of debate (and years of being behind the tech curve), we recently leaped into unlimited minutes, texts and 2 GB of data each.

Best of all: Our new phone plan costs only $10 more per month total than we were paying for 700 shared minutes, 250 texts each and no data.

Of course, there are trade-offs. I’ll get to those.

In the end, we went with Straight Talk, a no-contract cell service sold through Wal-Mart. We had to buy our phones outright, and now pay $45 a month plus sales tax each for its Unlimited* plan (Note the asterisk, as the data isn’t actually limitless). You can enroll in auto pay, or buy the service cards in store or online.

Different Straight Talk phones operate on different networks. It was important to us to have service in rural eastern North Dakota, as that’s where we travel frequently, so we made sure the phones we purchased were designated CDMA-V, indicating they would use the Verizon network. (A Straight Talk CDMA-S phone would work on the Sprint network, as I understand it.) The codes are prominently displayed online, though I had trouble finding them in-store.

Because my husband loves his iPod Touch, I encouraged him to go with an iPhone. We were able to get a refurbished iPhone 4 for $300 through the Wal-Mart website. Not the latest and greatest, but that’s not what we need.

I wanted an Android, as I’m more familiar with that platform, so chose the cheap basic Galaxy Samsung Centura. The phone was $100 — a steal for a smartphone, it seems — and has so far been a good way for me to tiptoe into the smart world. I am a bit disappointed in the camera. (Because it doesn’t autofocus, barcode scanning apps don’t work well on it, and I was so looking forward to having a comparison shopping tool in my pocket. Also, there’s no flash.) Other than that can’t complain about the phone.

I can complain about the customer service. While my hubby was able to activate his phone with no problem, mine wasn’t properly scanned at the store which led to three hour-long stints on hold, conflicting advice from the customer reps and an all-around hair-pulling experience as I had to go back to the store and swap phones. But, as they say, you get what you pay for, and apparently you don’t get great customer service when you pay $45 a month for a data plan. (You also can’t tether devices on Straight Talk, which may be important to some.)

The activation headache aside, I’ve been pleased with our new cell service. We got to keep our numbers, the call quality has been good, and I’m now able to answer my inane trivial wonderings in the car.

I also haven’t paid for an app, and don’t plan on it.

Disclaimer: This post is not meant to be a recommendation for Straight Talk, simply an explanation of my experience for fellow frugalists out there looking to upgrade to a smartphone. I have not been compensated by any of the companies mentioned.

Money Savin’ Mama: Discussing finance instead of hand bags

At a garage sale this month, several of my friends were inspecting a purse, trying to determine if it was “real.”

Well, it really is a purse, I mused to myself, not a figment of our imaginations.

No surprise, I don’t own a designer bag. Nor do I want one, because I’d rather have the money to go inside a “fake” bag. (I do have a thrift store-purchased purse imprinted with the word Prada. I pronounce it Pray-day.)

Some of my friends, however, do have Coach or Louis Vuitton bags. They talked about tell-tale signs of their authenticity while inspecting the real/not real garage sale bag.

Later, I started to wonder whether, in addition to real designer bags, these women also have fully funded retirement accounts.

Of course I don’t dare ask, or tell them about my own accounts. Because while it’s fine to talk about your $300 (or $700 or $2,000) handbag, it’s impolite or awkward to talk about the money you haven’t spent.

Why is this?

As a society, we’ve seen taboo subjects become table talk.  Sex, politics and religion are all over my Facebook wall.

Money? Noooo. We don’t talk about our income, debt and savings. Even I don’t go into the specifics of what my family earns and has amassed.

But what if we started?

What if money became the new “stuff”? That instead of coveting our neighbor’s handbag, we were inspired to match her 401(k) balance? What if mutual funds were the new Marc Jacobs?

Could we create a new culture of financial freedom, where saving is admired more than spending, if we just opened up about it?

So to start, here’s a little bit of my truth: On a five-figure annual household income, my husband and I each automatically invest about $460 every month into our Roth IRAs. (*see note below)

When we retire 30 years from now, each one of these monthly contributions will be worth about $5,030, assuming an 8 percent rate of return.

I don’t share this to brag or boast. I’m just trying to turn the conversation away from Kate Spade and toward financial security. To show you it’s possible. To encourage you to plan for your future.

It’s a common fallacy that people who have expensive things have a lot of money. They might. Or they might have a lot of debt.

There is nothing wrong with buying designer bags (or high-tech toys or lux home furnishings), as long as you’re financially secure. That is, your debt is paid off, an emergency fund stashed, and you’re saving 10 percent to 15 percent of income or more for retirement.

But if you’re forgoing future savings for a Fendi, ask yourself: Which would I rather have when I’m 60?

And considering how hard a time people have telling “real” bags from “fake,” what’s it really worth?

*Note:  The annual maximum contribution limit for an individual retirement account (IRA) in 2013 is $5,500, $6,500 if you’re age 50 or older.

Sherri Richards is a thrifty mom of two and reporter for The Forum. She blogs at http://topmom.areavoices.com

Plastic Fast, Week Two: In over my head

It was not a good week in the land of cash.

A convergence of expenses — mainly an empty gas tank and dog dish and an impulsive grocery store outing  — left me holding the bag with not enough bills. So I wrote a check to cover my assets.

In the second week of giving up all my plastic, I spent $28 over my self-imposed $140 cash allowance.

While I didn’t use my plastic (technically a success that way), I discovered operating on cash doesn’t work well without some sort of structure, like an envelope system. I also slacked on writing down my outlays, so had to spend more time figuring out my weekly totals.

I filled up my car’s gas tank on Tuesday, earning a 3-cent-per-gallon discount by using cash. I only had one squirmy kid with me and there was no line in the convenience store, so it wasn’t as big of a headache as I’d feared.

On Wednesday, I needed to get more prescription food for our pooch. That cost $27.08. Also, I paid $13.50 in cash to the drop-in daycare, where Owen played while I visited the dentist (a check-up paid for by check).

I planned to spend about $45 when I went to the grocery store Thursday. I knew I was limited in cash, but shopped like I wasn’t. I was lured by excellent prices on produce, pop and Pop-tarts, and went off-list not considering the consequences. As I watched the total climb at the register, I quickly realized I was in over my head. My total was $60.86, more than I had in my wallet. I was too embarrassed and stubborn to put anything back, so I wrote a check.

A neighbor girl helped me out with the kids after school, so I needed to pay her. I’d promised Eve lunch at McDonald’s on Friday. And my favorite thrift store had a 49-cent sale Saturday, where I spent $3.14. That put my week’s total at $168.19 (not to mention my husband’s supermarket trip for Super Bowl snacks).

I suppose I could justify that I was $44 under budget in Week One, but my goal was to spend less than the $140 target each week. So this week, I’m penalizing myself for my extravagence. I’ll have only $112 to work with. I already spent $10.49 at the store this morning, a desperate run for toilet paper and coffee creamer.

Time to pinch my pennies.

Save 50 cents here and there to boost your family’s budget

It never failed. Every time I stopped to fill up my car with gas, I remembered the coupon for 4 cents off per gallon was still hanging on my refrigerator. Heck of a lot of good it did me there.

So I’ve started to keep those gas coupons, whether from the grocery store or a coupon mailer, in my car. That way they’ll be with me when I need them.

It may not seem like a big deal to save 50 cents on a tank of gas, but if you fill up weekly, that’s about $25 a year.

In my family, $25 is an extra contribution to one of the kids’ college savings accounts.

Now think if you could make five or 10 or 20 small changes that would save 50 cents a week. Suddenly you’ve got hundreds of extra dollars in the bank, provided you capitalize on them.

That is, transfer that extra money into a savings account to make sure it isn’t frittered away elsewhere.

It’s pretty painless to save 50 cents or more a week on groceries, entertainment and utilities. Find a 50-cent grocery coupon for something you were going to buy anyway, or switch to a generic brand. Trade a vending machine can of soda for a glass of water. Borrow books or movies from friends or the library. Turn the thermostat down a degree or two.

Go meatless for one or more meals per week. Considering most cuts of meat cost around $3 per pound, compared to $1 or less for protein-rich beans, this move saves quite a bit of money, not to mention it’s better for your health.

One small change my family made was to switch our city-issued garbage can from the medium to the small size, a savings of $3 per month, or $36 a year.

We never seemed to fill up the 64-gallon cart, largely because we take advantage of free curbside recycling.

Also, I think when you’re focused on saving money, you produce less waste. You don’t buy as much stuff, so there’s not as much packaging to throw away. Cooking at home results in a lot less garbage than takeout or delivery food containers.

Once you’ve made easy changes to save 50 cents or a dollar a week in several areas, think bigger.

How much could you save by making your own coffee or brown-bagging your lunch just one or two extra days each week? If it doesn’t seem like a lot, take that amount times 52, to think in terms of what you could save in the course of a year.

Also, tally small inflows of cash, such as the extra dollars you get recycling cans or selling things you don’t use. Collect your spare change and add it to the savings stash.

Every time you pass up on a tempting purchase for savings sake, whether it’s a candy bar or a new pair of leather boots, put that money aside, too.

Finding the smallest ways to trim your expenses is a good way to start saving, even if it’s just 50 cents at a time.

Sherri Richards is a thrifty mom of two. She blogs at www.topmom.areavoices.com.

Money-Savin’ Mama: Pay yourself first

If you don’t tell your dollars where to go, they’ll disappear. My husband and I found this to be true long before I read it in a Dave Ramsey book. It’s the reason that when you plan to save whatever’s left at the end of the month, there’s never anything left.

For years now, we’ve “paid ourselves first,” and amazingly, there always seems to be enough to go around. Today’s online banking features make it easier than ever. Every month, automatic transfers send money into our individual retirement accounts, money market and future car fund, before we even miss it.

But where should you tell those dollars to go first? Sometimes all of the things you need to save for seems like a never-ending list: retirement, college for the kids, an emergency fund, that trip to Italy or the down payment for a house.

It’s a matter of prioritizing your savings goals.

Last October, I wrote an article for The Forum about Ramsey’s Financial Peace University course, which was being offered at churches in the community. It was the first time I’d heard about his Seven Baby Steps, which lay out his top priorities for your finances.

I realized we were following them closely, but not exactly. We’d saved up an emergency fund (steps 1 and 3), were contributing 15 percent to our retirement (step 4), putting some in Eve’s college savings account (step 5) and making additional principal payments on our home (step 6).

But out of line with the steps was Craig’s lingering student loan payment. Ramsey would want us to get rid of that in step 2, before putting money toward retirement, college savings or paying off the house. My accountant husband, thinking in terms of interest rates and tax deductions, didn’t agree.

The student loan has since been paid off, and we’re still chipping away at our savings goals, even with a new baby and me working fewer hours.

So how should you save your dollars? Different financial writers offer different advice, but all have common themes.

First and foremost, they say you should have an emergency fund that could cover several months’ expenses. Some say three months; some say 12. Keep this money safe. We stash ours in a money market account at the same bank as our checking account.

It’s often advised to pay off your high-interest debt by “snowballing” your payments – putting the same amount toward the debt each month even as your balances decrease.

Then, put that money toward your retirement – ideally 10 or 15 percent of your income or more – before your kids’ college savings. Worst-case scenario, they can take out student loans. There are no loans for retirement.

Challenge yourself to max out a Roth IRA, contributing $5,000, next year. If that sounds impossible, consider this: Trimming $96 a week in wasteful spending – perhaps on eating out or fancy coffee or your own personal vice – and putting it into an IRA could earn you $49,678.65 in interest over 30 years, assuming an 8 percent return on your investment. Not retiring for 40 years? That $5,000 will grow to $121,366.93.

Paying yourself first can really pay off.

Calculations performed at www.powerpay.org. Sherri Richards is a thrifty mom of two. She blogs at www.topmom.areavoices.com.