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Personal Budgeting Styles & Tools

Personal budgeting can be a different process for each person.  When I talked about how personal budget tracking can save you money, I used an example of how my employer saves money by tracking each piece of paper we print.

I showed how the act of tracking each job before it’s printed and assigning it to part of the budget causes us to more careful with what we print. I ended my discussion with two questions.

  • Are you tracking your spending against your budget?
  • What system do you have in place to monitor your expenses?

Personal Budgeting Styles

The example I gave was of a very detailed tracking system and Plonkee brought up the point that such precise tracking wouldn’t work well for her:

“I don’t know – there’s a limit to how much tracking is worthwhile. I’m not very detail oriented and would struggle to keep up with anything that was in depth. I prefer to give myself allowances. I can spend whatever I like, on whatever I like, but the total budget for *frills and frippery* is limited each month.”

I definitely understand where she’s coming from, in a financial confession earlier this year I admitted that I hate budgeting.  Of course ctreit sounds like he feels the opposite when he shared how he budgets and tracks his spending:

“When we track our expenses, we are very diligent. We include every single dollar we spend. After all, even the afternoon candy bar for 75 cents adds up to 20 bucks or so in a month. There is one big benefit when we track our expenses: we become very careful about spending money because we don’t want to face the music at the end of the month if we spend money stupidly. I for one would not want my wife to reprimand me for foolish spending.”

Our Credit Card Tracking System

I think each person has their own personal budgeting style that works best for them.  For example, when I asked, “are you tracking your spending against your budget?” the answer could be that you sit down with your credit card statement at the end of every month and see where you spent your money and how it compares to what you had budgeted.

We charge everything on our credit card, our system for monitoring our expenses is to leverage the technology of American Express and Visa to track and categorize each expenditure.  Then we can can download the transactions into Quicken to categorize anything that was missed and compare it against our budget.

I don’t what makes different budgeting styles fit better with one person or another.  I suppose it’s partly your personality and partly how you were raised to manage and think about money.  So regardless of what system for tracking and monitoring your expenses you use, the important thing is that you have and use a system at all.  If you have one, great.  If not, here are some tools for tracking and monitoring you can play around with to see what fits you best.  Credit cards for spending and tracking and personal finance software for monitoring and analysis.

Credit Cards

Personal Finance Software

Written by Ben · Filed Under Budgeting, Credit Cards, Personal Finance >Comments (2) 

Personal Budget Tracking Creates Results

Does your personal budget have holes in it, where the money just oozes out without you realizing it?  Do you have a system in place to track how the money in your budget is actually spent?

If not, here’s a story that might convince you to track your money more closely. It begins several years ago at my old job, where it was open season on our office printer.

Out of Control Spending

The cost of paper, ink, and printers was part of the general office overhead budget and kept growing each year.  The creeping costs were understandable, the table next to the printer was always covered with stacks of printed pages.  Some of them were printed and forgotten, they would sit there for a week before being tossed into the recycle bin.  The table was littered with mapquest directions, personal emails, order confirmation pages from Best Buy, all sorts of random things that had been printed.

Organized Spending

Now fast forward to the printer table at my current job and guess how many sheets of printed and forgotten paper there are lying around the printer table. Zero. 

That’s because the new company outsources all of the printing so every page you print has to be billed to a project. Every time you print a document a dialog box pops up and you have to decide which part of the budget the cost of printing will come from.

Tracking Our Spending

Since there’s a system in place to track and account for each piece of paper that’s printed people don’t waste it.  We’re not discouraged in any way from printing. If we need something printed we don’t have to ask or justify it, just simply pick which part of the budget it comes out of.  Of course that act of tracking the expense and tying it to a project budget keeps us accountable and helps avoid waste.

How Do Your Track Your Spending?

So the question is, what areas of spending in your personal finances would you like to improve?  Are you tracking your spending against your budget? What system do you have in place to monitor your expenses?

Until you have one, your actual spending may be more like a scattered heap of unused and wasted paper rather than the clean and organized budget that you strive to follow.

Written by Ben · Filed Under Budgeting, Personal Finance >Comments (2) 

How to Lower the Cost of Health Care

How can we make health care more affordable?  How about cutting the cost of providing care?

My dad runs a micro-medical practice, where he’s a one man show (actually one man + one part-time woman since my mom helps out with office stuff some evenings). 

His startup costs were pretty low since he bought most of his equipment used and his overhead is low since he doesn’t have a staff. He’s automated and optimized a lot that goes on in his office, using electronic medical records and digitzing everything that he can.

Since his costs are lower that means he doesn’t have to charge as much; which is important to him since his efforts are to provide care for underserved parts of the population. He’s a member of a group of doctors who are taking this approach to medicine. One of them recently sent out a list of ways that he keeps his cost down by using cheap or free technology across his practice.  Here are some of the ways he lowers his cost of running his practice:

Patient Records

Practice Fusion – Electronic Health Record Software; free

Accounting

Office Ally – Billing; cheap

QuickBooks Simple Start – small-business accounting software; free download

FreshBooks - invoicing, time-tracking and expense service; free basic service

Information Technology

Adrive – : 50GB of online storage and backup for all file types; free basic service

Mozy – 2GB of online, data and remote backup solutions; free basic service 

Jott – voice-to-text service for creating notes, lists, e-mails and text messages; free basic service.

LogMeIn - remotely support and access digital information; free basic service

YouSendIt – send files up to 2GB; free basic service

Security

BitDefender Online Scanner: virus scanners; free basic service

ZoneAlarm: firewall protection from hackers and threats; free basic service

Office Productivity

Google Calendar: shareable calendar and schedule organizer; free

Google Docs – collaborative word processor and spreadsheet applications; free

OpenOffice - open-source office software suite for word processing, spreadsheets; free

Project Management/Collaboration

ProjectStat.us -project management solution and updates

Dimdim – open-source web conferencing application; free basic service

Marketing / Networking

Microsoft Office Live Small Business: create a company website, domain and e-mail; free basic service

Blogger – blog publishing tool; free

Entrepreneur Connect - Entrepreneur’s social networking site; free

LinkedIn: business social networking site; free

What do you think? Would you go a doctor that used technology to run a one person practice? What if it meant better rates or better access to your doctor?

Written by Ben · Filed Under Health >Comments (4) 

Federal Income Tax Withholding Too Low This Year?

Federal income tax withholding tables were adjusted earlier in 2009 due to the “Making Work Pay” tax credit as part of the economic stimulus package.  The reduction of federal income tax withholding was intended to provide a gradual financial benefit to the economy by putting a little more money in your paycheck each month.

Federal Income Tax Credit Impact

Many employers and payroll companies automatically handled the change in tables so many workers didn’t have to fill out any paperwork to take advantage of the tax credit.  Of course, based on your financial situation, this change could potentially result in withholding less than your personal income tax liability.

As we approach the final quarter of the year it would be smart to check your tax withholding levels.  The following groups of people should pay close attention:

  • Pensioners
  • Married couples with two incomes
  • Individuals with multiple jobs
  • Workers who can be claimed as dependents by other taxpayers

Federal Income Tax Withholding Calculator

You can check out the IRS Withholding Calculator to make sure you’re withholding enough from your paycheck for 2009.  The IRS Publication 919 (How Do I Adjust My Tax Withholding) is another good resource for income tax withholding.

Remember, although your payroll department may have adjusted your withholding automatically they don’t know your personal finance situation. This means it’s up to you to submit a Federal W-4 if you need to change your amount of withholding.

Written by Ben · Filed Under Taxes >Comments (0) 

Missing a Mortgage Payment

I’ve written before about the dangers of online bill pay, one of the dangers I mention is assuming all your bills are paid automatically.  The advice I gave is to check your statements regularly, even if the payments are automated.

Well, I didn’t take my own advice and I got a call from my mortgage company today asking why I had missed my mortgage payment that had been due at the beginning of the month.  Typically that bill is paid automatically so I had to do some research to see why it wasn’t sent out.

Online Bill Pay Rules

The bill pay company is setup to automatically pay the incoming bills based on a set of criteria that I created.  The rules are different for each bill, if the bill doesn’t meet the criteria then it won’t be paid.

For example, for each bill I set a maximum amount so that it won’t send payment for anything over a specified dollar amount.  Obviously this is to protect our bank balance so that we won’t run into an overdraft in case a company sends us an enormous bill. 

Apparently the mortagage payment amount was higher than it had been in the past so the bill didn’t meet the criteria and wasn’t automatically paid.  I’ve been rather pre-occupied the last several weeks and hadn’t logged into the bill pay account to make sure everything was running smoothly.

Missed Mortgage Payment

I’m glad that the mortgage company called me up to see what was going on with my payment.  I already owe a late fee but I don’t want to have late payments reported on my credit report.  An even worse scenario would have been if the bill had gone unpaid for several months, I don’t know what the consequences of that would have been but I’m glad I didn’t have to find out.

I need to start listening to my own advice and make sure I check my online bill pay account more frequently so I don’t get any more calls about unpaid bills.

Written by Ben · Filed Under Personal Finance >Comments (2) 

Tips for Preventing & Treating Swine Flu

Flu season is almost here and we have to worry about the swine flu again.  It seems like the flu starts to take off once kids go back to school with all their coughing, sneezing, and not washing their hands. 

One of my co-workers already had two of his kids catch the swine flu at school.  When they got sick he took them into the doctor and the pediatrician confirmed it was the H1N1 virus. Luckily his other two kids, his wife, and he were able to avoid catching thier bug.  I asked what they did to avoid getting swine flu and he sent me the email below with some tips for prevention and treatment.

The new H1N1 virus, also referred to as the swine flu, has caused the first influenza pandemic in more than 40 years. Because many people do not have immune protection against the new virus, it is essential to take extra precautions. It’s important to note that H1N1 and the regular seasonal flu are two different strains and require separate vaccinations.

The Centers for Disease Control and Prevention urges you to take the following actions to protect yourself and others from the influenza virus:

Get a Flu Vaccine

CDC recommends a yearly seasonal flu vaccine as the first and most important step in protecting against seasonal influenza

Vaccination is especially important for people at high risk of serious flu complications, including young children, pregnant women or people with chronic health conditions, such as asthma, diabetes, heart and lung disease and people 65 years and older

A seasonal flu vaccine will not protect against the new H1N1 virus. However, individuals are still encouraged to get their seasonal flu vaccine as soon as it is available 

Everyday Preventive Actions

  • Cover your nose and mouth with a tissue when you cough or sneeze
  • Wash your hands often with soap and water, especially after you cough or sneeze
  • Avoid touching your eyes, nose or mouth which spreads germs
  • Stay home when you are sick 

Antiviral drugs (Doctor Recommendation Required)

Antiviral drugs are prescription medicines (pills, liquid or an inhaled powder) that fight against the flu by keeping viruses from reproducing in your body

Antiviral drugs can make your illness milder and make you feel better faster and may also prevent serious flu complications

For treatment, antiviral drugs work best if started within the first two days of symptoms

It is important to take action now in order to protect yourself in the future. Remember, the CDC considers getting the flu vaccine the most important step in protecting yourself from the flu this season.

Written by Ben · Filed Under Health >Comments (1) 

Life is Short: Save & Spend Wisely for Those Left Behind

Do you ever ask yourself why you’re being such a stickler with your money? We save and invest money for “the future” but how do we know when that future we’ve been preparing for becomes the present?

My Grandmother’s Apartment

My kids and I paid an evening visit to my grandmother this week, just so they could spend a few hours hanging out with her.  The memory of my grandfather, who passed away last year, still fills her relatively new apartment.  She moved into the independent living community after he died and as I walked in the front door I realized how people know when “the future” has arrived.

The place she’s living is wonderful. They have a computer room, a chapel, a game room, a workout room, a movie theatre, shuttles to drive the residents around town, a great dining facility, and most importantly… a nice community.  The people that live there congregate for meals, movies, games, worship, and just to visit.

The Future is Now

Of course all of these amenities aren’t cheap but it’s okay because “the future” that my grandfather saved for all those years has arrived.  As I mentioned in my memorial to him, my grandfather was tight with money, and proud of it.  Now all that saving and investing is paying off. Providing for his wife when he’s not there to care for her is EXACTLY what that money was meant for. 

He probably couldn’t visualize exactly how the money would be spent at the time of earning and saving it but he knew he was investing in the security of his family.  He didn’t know what the future held but he knew that it would eventually come and that he wanted to be ready when it did.

Condolences

One of the reasons I wanted to write this was because of Jason over at Frugal Dad who sadly lost his mother last Sunday. My visit to my grandma and his loss of his mom really got me thinking about where my parents and someday my wife and I will end up. 

I don’t know when that future will be. I don’t know what it will look like. But I’m glad that my parents and my wife and I are saving for the day when it arrives so that we can provide the rest of our family the security that we won’t be there to give.

Written by Ben · Filed Under Family, Investing, Retirement >Comments (1) 

Roth IRA Conversion Tips

The Roth IRA conversion rules are changing in 2010, here are a few things to consider if you’ve been thinking about converting your traditional IRA to a Roth IRA.

Roth IRA Conversion Limits

The current IRS rules only allow you to convert your traditional IRA to a Roth IRA if your modified adjusted gross income is $100,000 or under. Next year that income limitation will be removed so you can convert to a Roth IRA regardless of your income in 2010.

IRA Conversion Taxes

Converting from a traditional IRA to a Roth doesn’t allow you to skip out on the taxes you owe.  You still have to pay income tax on the amount you convert into your Roth IRA.

However, if you convert your traditional IRA in 2010 you can delay reporting of the income over a two year schedule.  The rules allow you to defer 50% of the income to 2011 and the other 50% until 2012.

If you don’t have the money to pay the taxes you’ll owe, it’s probably not worth it to convert your traditional IRA to a Roth IRA until you have the funds. If you pay the taxes with funds from your IRA you’ll be missing out on the tax-free growth of the funds you withdraw.  In addition if you’re under 59 1/2 you’ll proably also have to pay a penalty.

Retirement Tax Brackets

If you think your tax bracket will be lower in retirement than it is now then the taxes you would pay when converting to a Roth IRA next year could be higher than what you would pay when widthdrawing from a traditional IRA if you decided not to convert it.

Of course no one knows for sure what their income will be in retirement so this decision has to be made based on assumptions about your financial situation in the future.

Written by Ben · Filed Under Investing, Retirement >Comments (2) 

Tips to Improve Your Credit Score

Improving your credit score isn’t something that happens overnight but by following the suggestions below you should be able to raise your credit score over time.

Don’t Pay Your Bills Late

Your payment history is the most heavily weighted factor that goes into your credit score so make sure you’re at least making your minimum payments.  If those are more than you can afford sometimes the companies you owe money to are willing to put you on an extended payment plan.

Maintain Low Credit Card Balances

The next most important factor making up your credit score is the percentage of your available credit that you borrow.  If you’re constantly using up over 30% or 40% of your credit available you will be deemed a higher risk.

Build Credit History

The average age of your credit accounts is the next biggest component of your credit score.  If you add a bunch of new credit and cancel old cards this will drag down the average age of your credit accounts and your credit score along with it.

Use a Mix of Debt

This matters because companies look at the different types of debt that you have and weigh some more heavily than others.  For example, your credit card debt carries more weight than your mortgage or car loan.

Reduce New Credit Lines

Credit reporting agencies Experian, Equifax, and TransUnion monitor for attempts to open new lines of credit.  Each time a lender does a hard pull on your credit report that credit inquiry is noted and the more you have the worse an effect it can have on your credit score.

Written by Ben · Filed Under Credit, Credit Cards, credit report, credit score >Comments (2) 

Starting a Business & Being Smart With Your Money

Starting a successful business is not an easy task.  There’s a lot of time and/or money that goes into getting your idea organized and off the ground.  As people get farther into implementing their business they usually realize that they’ll need more money to make their idea a reality.

Last night I saw a show for the first time called Shark Tank where entrepreneurs pitch thier ideas to a group of wealthy investors, the “Sharks”, and ask for a specific amount of money in return for a stake in their company. I think they’ve been on the air funding entrepreneurs for a while, but I don’t watch that much TV so this was the first time I heard about it.

Critical Investors

I watched as several budding business owners made the case for their product and why it would be a good investment for the “Sharks”. One lady had spent 3 years and her entire life savings developing her company only to have every investor deny her any money.

Each of the “Sharks” had legitimate concerns about the feasibility of implementing her idea and competing against the businesses already existing in the industry.  One guy came out and told her that her idea was dead and she obviously took it very hard.  After the lady left, the panel of investors discussed whether he was too hard on her, whether he should have gone about telling her the same thing in a more constructive way.

The guy replied with something along the lines of, she needs to know that her business isn’t going to succeed before she plows any more time and money into it so she can move onto something else.

Protecting Your Money

Think how much easier that situation would have been for the women if she would have had that conversation with a group of knowledgeable business people three years ago.  Before putting her life savings and years of work into the product.  Now she’s totally committed to making the idea work, she can’t entertain other alternatives, she’s backed into a corner.

I think it would be a good use of any entrepreneur’s money to get a panel of experienced people to look at their idea and give them feedback when they’re first getting started.  The goal wouldn’t be to get a yes/no answer, yes you should pursue it or no you shouldn’t.  Instead the goal would be to build a list of questions that needed to be answered

To compile a set of objections that shoud be addressed early on to determine the feasibility of success and the potential return on investment.  Every entrepreneur will hear negative feedback about their idea and can’t let the negativity alone stop them from pursuing their dream. However they can make note of the issues people raise and research them early on to help prevent themselves from throwing everything they have down a money pit.

Business Research Example

I’ve enjoyed the following set of articles from Perry Marshall.  He tells a story of his role on a board of directors where he raises legitimate objections about the economic feasibility of a major business deal and the pushback he gets from the leader of the business.

 

Written by Ben · Filed Under Business >Comments (2) 


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