Just a little riff on personal finances.

Had the pleasure recently of reading “The Debt Free Spending Plan“. It’s very practical and pragmatic in dealing with debt and managing money. For too many of us, we’re never taught personal finance like we are other essential topics like math, reading, etc in school. As a result – and I think this is deliberate – we get stuck in these cycles with large amounts of credit card debt and spending on things we really can’t afford or even enjoy. I know in my case – when I think of my household expenses (and fishing equipment!) – I tend to think of my house as being a type of colander. I dump money into it and it just runs out the bottom!

So, time to put some thinking into managing a budget. The book is fairly long; I’ll boil it down to the essentials, and you can think about picking it up on your own.

1. Gather up all your credit cards and freeze them. (Some people literally freeze them into a block of ice in their freezer – so before they use them, they have to defrost it!)
2. Make up a monthly budget. (more on this below) Everything should be categorized, from income – to Bills and lastly Daily Needs (fuel, food, etc).
3. Total this up. What’s left over – the balance – can go into Short Term Savings (for things like car expenses that are impossible to predict), Long Term Savings (a buffer), and lastly Fun Money (vacation getaways, fishing gear, etc).
4. The basic principle is you should always be running in the black. ONce you do step #3 above you will know how much you have to live on each month. You should have money set aside even when you say things like “Oh, I never buy clothes.” Stick cash for clothing – even if just $10 – into an envelope. You can stash it or spend it – but don’t forget to save up for that category. Make sure money is left over for fun and vacation $, even if just a few dollars each month.
5. You will need to go through this budget every month on the 28^th and refactor. Add $ where it’s called for to each category, or take it away. The author recommends picking a category each month (like Gym, for example) and seeing if you can reduce it. could you go to a less snazzy gym and save a few bucks for fun money?
6. Now buy a notebook. (Or use Mint for us tech savvy types!) Each daily need should have its own tab, with the $ you have to spend on it on the title. (Fuel – $275 for example). Once each day, you will take your receipts – or your debit card expenses – and write down what you’ve spent on each category and update the running total. (2/6/2015 Chevron -$46 = $184.84, for example)
7. Have two savings accounts – a short term savings and a healthy reserves for emergencies.

There’s some other money saving tips there that she explores in more detail – avoiding bulk stores (it encourages overspending), cooking at home, getting a cheaper cell phone etc with three quotes minimum for any major purchase, using a HSA/Medical Savings Plan, etc. But in short it’s a nice and sweet little 5-step program:

1. Plan for monthly bills and daily needs.
2. Keep a running total of daily needs spending.
3. Have a bill payment plan where bills are paid each month automatically
4. Have a savings account for what you want and need
5. Keep a record of all of the above.

That’s it! Nice and simple. I’m going to give this a try – and see if it doesn’t improve some things. I really miss the days of being a DINK (double-income no-kids) kind of family. Hopefully with this program we can have the room to do more fun things guilt free- because we’ll be in the black.