• How I FINALLY learned to budget: The long road to budgeting bliss

    How I learned to budget

    I’ve always been good with money. I got my first job – a paper round – at 13, making something like a whopping $80 a month, and saved every dollar I earned.

    I got my first real job in Year 11 at a cafe, working weekends. Then I decided I wanted to get an electric guitar, so I got another job at a call centre working weekdays after school. I worked constantly for months until I scraped together the $600 for my Ibanez and my amp, plus other paraphernalia like cords, a case, picks and the like.

    I moved out of home the following year and got by with barely $20 a week to spare, but I made it work.

    Then I – we – lost track a bit when T and I moved in together, throwing a car into the mix, along with other things. After a few months I sat down, went through our bank statements and was shocked to see what we were spending on food. (The first step to budgeting: tracking, and knowing what you’re spending.)

    Thus began some pathetic attempts at budgeting, stymied largely by variations in numbers. Income varied every week. Rent was the same every week, but all our other expenses varied. Plus of course, there are all the irregular expenses that crop up at the least opportune times. Cue head explosion.

    I would mock up beautiful budgets with colourful bars for each category. Breathless, I would log on after pay day and see how the numbers stacked up against the plan. Almost always, I would be thwarted, and give up yet again, thinking I could never make it work.

    Until one day I realised something very simple. The numbers fluctuated. And so should the budget. A budget is a living document that evolves as necessary.

    Instead of trying to make the money match my ideal budget every week, I needed to tailor the budget to that week’s numbers.

    Amazing, right?

    So simple, so obvious. Nonetheless, this was a major epiphany that cut through the fog.

    Did some overtime? That can go into savings.

    Lean week? Time to trim and eat in all weekend.

    The next step: figuring out how to handle those irregular expenses. I sat down and calculated what power, phone and internet was costing us, as well as less frequent payments like insurance, car registration and all those other bills. I added up an annual figure and divided that by 52. Every week, I put aside that amount into a subaccount, and then draw money from it as bills come due.

    Then simplify, simplify, simplify. Now that I’ve got a good system going, our expenditure in any one week is pretty predictable. Rent, groceries, petrol, bill money, and a little bit for fun – eating out, entertainment, etc. Done. It’s at the stage where I no longer budget, in fact, although I carefully track our spending every month.

    In my mind, budgeting bliss comes down to three steps:

    • Awareness – getting your head out of the sand about what you’re spending and facing up to the numbers
    • Action – doing something about it. Tackling debt, cutting back on frivolous spending, finding ways to trim your essential expenses
    • Automation – getting into a comfortable routine. Once this is second nature (I might even venture to use the term “autopilot”), you may not even feel the need to budget as such any more

    Need some more guidance? I like the 60% solution – a basic formula with suggestions for how much you should spend on various things:

    • 60% to Committed Expenses
    • 10% to Retirement.
    • 10% to Irregular Expenses
    • 10% to Long-Term Savings/Debt
    • 10% for Fun

    And if you’re after a budget spreadsheet, Budgets are Sexy has a handy list with a ton of free templates here.

    Are you a stringent budgeter, or more of a hands-off gal like me?

    This post is part of Women’s Money Week 2012. For more posts about budgeting see the Budgeting Roundup

  • The long road to financial harmony

    HOW TO FIND FINANCIAL BALANCE WITH YOUR PARTNER

    Financial nirvana. Does it it exist?

    I’m not sure, but I can tell you that no two people handle money the exact same way, and being on a different page from your partner is a recipe for teeth-gnashing and tears.

    However you handle finances – joint accounts, separate, or a mix; equally, or with one person handling the bulk of the admin – reaching some basic agreements about money management is so important. Think along the lines of:

    • how you’ll each contribute to expenses
    • how you handle debt
    • how you’ll save for big goals
    • how much is okay to spend without consulting the other person
    • how much is reasonable to spend on (fill in the blank – could be clothing, food, video games, whatever)

    T and I kind of fell in the deep end with joint finances early on in our relationship. We moved in together, he started a new job and didn’t have a bank account of his own, so organised to be paid into my account. I also started university, we bought a car, and generally had more cash than we’d ever had – but vehicle expenses, getting T set up with the basics for work and life, and letting the extra income go to our heads (mainly to food, actually) meant we struggled a lot.

    Pretty early on, our wildly different money personalities became evident. I’ll be honest, it wasn’t easy. But I don’t think it would have been any easier if we’d delayed it. Heck, it might have been even worse, if he’d been left to his own devices.

    I can’t tell you when you should have the “money talk” with your partner, or what kind of financial system you should set up. Heck, some people go all their lives without knowing how much their significant other earns. Separate finances make total sense if both parties already have a good thing going individually and don’t mind splitting everything (personally I’d get fed up with all the calculations; do I really want to be keeping track of who last bought toilet paper .. or, later down the track, diapers for our little bundle of anxiety?).

    We went all out early on, but I’ve since refined it so that T has his own separate savings account and his own allowance/spending money every week: proof that joint finances can work even when one is a saver and one a spender. Whether we’ll combine savings fully once we get married remains to be seen, but I think we’ll always maintain some kind of husband fund for him to save up for toys – a bigger motorbike, a project car, etc. (Plus of course, even if both parties have access to the joint accounts, it can be nice to have a pot of your own.)

    What if it all goes pear-shaped?

    I suppose that’s a big one in favour of separate accounts. It’s true, nothing in life or love is certain. But if you have any sense (and I know my readers do) you wouldn’t be meshing funds unless you were pretty serious. Making a personal and emotional commitment to another human being is also a financial commitment, and for some couples that lends itself to joint bank accounts.

    Caveat: if I was a celebrity, I definitely wouldn’t. Nor would I fail to get a prenup and I sure as hell would not change my surname. I know every celeb thinks their marriage will be different, but the odds are heinously against you.

    Seriously though, while I would not recommend mixing finances as early as we did, I’m happy with how it turned out. We’ve settled into a semi-blissful groove, and if we ever split, it’s decided: he takes the TV, food processor, microwave, and his motorbike; I get the bed, laptop and car.

     

    This post is part of Women’s Money Week 2012. For more posts about relationships and money, see the Relationships and Money Roundup

  • Budget updates: Life in the new house

    Our rent has gone up twice in the last six months or so. First, an increase from $250 to $280 a week. That was the prompt we needed to start looking for a larger place for our money, and for $320, we now have a garage for T’s motorbike, a living room (before we were in a studio where there was barely space for me to lie on the floor by the bed and do stretches), a kitchen we can both fit into at the same time (no more bitter cursing from me every other minute while I’m cooking), and there’s also all the little things:

    • a decent laundry line
    • our own recycling bin
    • lightbulbs that don’t cost the earth to replace
    • honest-to-goodness hot water in the kitchen
    • saving on bus fare
    • and saving on petrol, being closer to T’s friends and family

    Our utilities are also going up, our internet package costs $10 more, and our electricity is also on the rise.

    When the Montreal moving brought our stuff into the new house, I overheard an off remark in French, I’m sure he was chatting to his co-worker about our heating boards and how out-dated this place is…  maybe we should of check it out more carefully. At our old house our daily spend ranged from $2.30 to $3.50 a day, or around $80 to $100 a month, with a decent on time, online discount of 22 percent. I think we were averaging around 250 kw a month in raw unit use.

    Now, our usage is closer to 400kw, although our bills have not increased significantly (to date $99 and $80) thanks to Powershop.

    But that’s a big jump in units used. Why?

    I’ve lived in larger houses than this with flatmates, and power was usually around $40-60 each when split. And while we are in a bigger place now, I didn’t see any reason why we would be using more electricity. After all, we still only have the lights or fan on in one room at a time.

    However, at our old place, the water was heated by gas, which we didn’t pay for (nor did we pay for water itself, actually. Another bill to add – usually $90 a quarter, depending how much rates have gone up in the last two years).

    To compensate, we’re downgrading our TV package. I anticipate adding on the movie channels maybe once every few months when good films are on, or buying the odd Box Office movie – but our regular monthly bill will be lower.

  • Should the student allowance be enough to live on?

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    Eavesdropping is one of my guilty pleasures. I like listening in to others’ conversations on the bus, in the office, wherever. (And most certainly on Twitter, where jumping into the stream is what it’s all about.)

    Sometimes, though, these conversations only serve to rark you up.

    Recent case in point: a discussion about the student allowance, and specifically how it’s not enough to live on.

    Right now, student allowance runs to a maximum of $167 a week, from what I can tell. If you’re in Auckland, you can get another $40 in accommodation allowance for a total of $207. (If you don’t qualify for the student allowance, you can borrow $169 a week in living costs. This is never a good idea, because your loan balance will balloon like you cannot believe. But it’s an option.) And if you’re over 24 – a personal bugbear for me; why should you get more simply for being over an arbitrary age? – you qualify for up to $201 a week.

    You can’t live on that alone, I grant you. But it’s not so hard to get a job for 10 or 15 hours a week, and with that additional income, it’s certainly more than enough to eke out a reasonable standard of living. Your income in any one week can be up to $203.13 before tax before your allowance payments are affected.

    When I was studying, I received a total of $185 a week (the maximum back then). I was making maybe another $150 between my various hustles (I’ve always worked multiple jobs, although now my second gig consists of the very occasional mystery shop or essay editing gig).

    My basic expenses were $100 rent (I was living three stages out on the bus route), $30 for transport (an unlimited monthly pass), $50 or so on groceries (a princely sum compared to the $25/30 I spent during the last year of high school in which I lived on my own) and utilities worked out to around $30 a week.

    But I don’t want to live out in the burbs!!!

    Well, you could live closer to town, or in town, and cut out transport for a corresponding gain in rent (probably $150 or more but you might find a cheap room for around $120). Still doable.

    Yes, it’s an austere existence, but we don’t pay taxes so you can live it up while at uni.

    And if you can’t find a job (or can’t work one because you’re a medical student, etc), then living at home it is. Such is life.

    Worst case scenario, you left a small town in order to attend university and your parents can’t or won’t provide any financial help. That’s rough, and kind of leaves with little choice aside from racking up more debt. But as a student, you do at least have access to cheap loans and overdrafts (and potentially cheap credit cards; I can’t remember what the banks were offering in my day).

    Let’s face it, nobody ever promised that student allowance would provide for all your needs. As a nation we simply cannot afford such a luxury. It’d be nice to have $15 minimum wage and free medical and dental care for all. But these things just aren’t realistic for this (any?) country.

    What do you reckon? Classic entitlement attitude? Something worthy of tax dollars? Something in between?

  • The cost of convenience

    We’ve been living at our current place for three months. And yet my recent visit to our local dairy, two minutes away at the corner shops, was my first.

    Here’s what I picked up – a Primo, two Time Outs and two ice blocks. Total cost: $10.20. (Paid for by T. He wanted snacks, and didn’t want to wait till we did our grocery shop.)

    There really is no quicker way to bust the budget than through frequent stops to pick up stuff at dairies and petrol stations. The markup on everything from milk to tampons is out of this world – the cost of convenience.

    We pick up treats during the weekly supermarket shop, and those have to last us the week. As you can guess, they usually get devoured in the first couple of days. T also isn’t a fan of tap water, so the shop usually includes juice and fizzy – and he spends his own money on more snacks during the week.

    In fact, the vast majority of his spending money goes on consumables. I used to pack his lunches, but while sometimes he devoured them, most of the time he didn’t eat them at all  (whether because he really didn’t feel like whatever food it was, or because he simply didn’t eat at all that day. He has a terrible lack of routine) so they went to waste. Now he’s responsible for buying his own lunches, and while the cost makes me grit my teeth a little, it’s also a relief – honestly, making my own lunches is enough of a chore.

    I’m a total cheapskate, on the other hand. I drink water when we go out to eat, and do my level best to avoid being forced into food purchases on the run. For example, I ate an early dinner before the Incubus gig last month while everybody else headed to the nearby McDonalds straight after, and if I’m out at an event after work that doesn’t feed a full dinner, rather than stopping somewhere for a bite I’ll hold on till I can get home and whip up something quick that’s both cheaper and healthier.

    That said, sometimes I’m willing to pay for convenience – packs of frozen hash browns, the occasional pack of pre-cut stir fry beef, the odd soup from the local takeaway when I’m sick and cannot face standing over the stove to make my own dinner (ahem, too many times this week).

    When do you pay for convenience?

  • Things I don’t (and won’t) pay for

    Books

    English: Cinema 4 at HOYTS, Forest Hill Shoppi...

    Image via Wikipedia

    I could not live without books. But I don’t care to own them, and even free ones are just clutter to me – they get passed on or donated. I’m a lifelong library lover, myself, and I can think of only a tiny handful of books I might actually want to possess (none of which I do).

    Movies at the cinema

    Perhaps it’s cheating, but I pretty much only go to movies on reward dollars earned from using my CC. (But I’m not *spending* anything in doing so!) I also get to go to the odd free screening through work. With regular tickets now costing something like $16, prices are just insane.

    Hair removal

    I have to admit I am lucky in that I’m pretty hairless (especially as I’m dark-haired). I use T’s cast-off razors (which sounds disgusting, I know, but he only uses them once or twice each) and plain old soap. Wouldn’t work for everyone, though.

    Conditioner

    I have the greasiest mane in the world. It really doesn’t need it. I rotate shampoos a lot and sometimes get two in one shampoo/conditioner; otherwise, if the ends really are dry, a spot of oil (coconut or olive) rubbed into the ends suffices.

    Lunchboxes and ziplock bags

    We do have a few proper tupperware type lunchboxes, but otherwise I rely on plastic takeaway containers and ice cream cartons. Ziplock bags, I wash out when we use them to get nuts or lollies from the supermarket bulk bins.

    Glass and oven cleaner

    The things you can do with vinegar and baking soda are boundless.

    Bank fees

    My account is entirely free because I no longer receive paper statements. I rarely use ATMs, and if I do, I hunt out ones that belong to my bank in particular (T does generally run on cash though, and unfortunately isn’t as nutty as I am about only sticking to own-bank ATMs). Credit card fees are a given, but more than paid for through the rebates I earn just for using it.

    Delivery charges

    It’s almost always cheaper to get in the car and drive out yourself to pick up food. (Maybe it’s different overseas.)

    And there are plenty of other things I won’t pay full price for – DVD rentals, facials/massages, skincare. There’s just no reason to, between daily deal sites, discount sales, coupons and mystery shops.

    What things do you refuse to fork out for?

  • Dreaming of cheaper credit

    Ever since I started reading personal finance blogs, I’ve come to realise that credit is never going to be as cheap in New Zealand as it is elsewhere. (As with food, cars, clothes, technology and pretty much anything else you can think of.)

    Default credit card interest rates hover around 20%. You might see balance transfer offers around 5%. Car and personal loans around 10%.

    You bloggers in the States, though (and that’s most of you)? I hear tales of 0% loans. 0% balance transfer rates. Cards without annual fees. Plus of course, you have access to so many more kinds of cards, and it’s easy to compare credit cards online.

    Interest rates don’t overly fuss me, because I’m not in debt. What would be nice, though, is if there were local cards without annual fees.

    I currently have one plain old Visa, and it’s with the bank I’ve banked with all my life. Luckily, it’s a pretty awesome bank with accounts that suit my needs and the single best online banking system available, IMO. It’s ridiculously easy to make instant payments onto it (because I like to pay off purchases right after making them) and the six-monthly fee of $12 is one of the lowest out there.

    Recently I was tempted by Air NZ offering no joining fee on its Airpoints programme. (You know travel is number one on my list.) I could sign up for a credit card linked to Airpoints, and earn points on everyday spending.

    Thing is, the fee is more than double what I currently pay – $25 every six months. And based on our annual spending, we would be lucky to rack up enough points in a year for a single domestic flight.

    Maybe it’s worth it for frequent flyers, who also earn points when they book flights, but for those who are trying to save for travel, it doesn’t sound like such a hot deal.

    Tell me, how many credit cards do you have? Anyone out there an Airpoints member?

  • Financial independence is sexy

    When T got his tax refund last year, he told me he thought about going out and buying something straight away.

    But he didn’t. He could get something better later on if he saved that cash, he said.

    Hearing that? Best present ever. Bugger jewellery and don’t even think about buying me flowers. Having your finances in check? That’s hot.

    Our joint finances have taken an interesting journey of twists and turns. He didn’t have his own bank account when we first moved in together, but hastily starting a new job meant he needed to put down an account number for payroll, so mine it was. Wholly merged finances eventually evolved into a separate account for him, but all the money still flowing to me to handle. Then he started independently dealing to his own spending funds out of his account before taking over full control, giving me a set amount for household expenses every week.

    Now, we’re back to him handling his own fun money, with me taking care of the rest. And this is how it’s going to stay. He’s not one to micromanage, and doesn’t really like to think about money at all. Me, I’m happy to spend a few hours a month running numbers and shifting funds around. And let’s be honest: me pulling the purse strings can only be a good thing on the savings front.

    How long did it take you to settle into a joint financial groove (whether you have merged, separate or in-between)? Was it painful?

  • I is for investing. Also, idiocy

    T recently informed me that he can buy shares in his company. And as dorky as it sounds – that got me really amped.

    It’s been increasing revenue every year, expanding throughout the recession, and launching new brands and stores – both in Australia and New Zealand. He tells me it’s also on the brink of acquiring a pretty significant chain, so IMO, if we’re going to get in, we should get in quick.

    Meanwhile, I’m writing about Kiwi companies doing amazing things and experiencing good growth (my job, obviously – not on here), and I can’t help but want to be a part of it! A lot of them are still private, but there are certainly a few that I could invest in.

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    The questions really, then, are: Can I afford to? How much would I need to get started? How long would I expect to tie up my money for/how much would I hope to make? And of course, due diligence: are they really solid bets?

    I wouldn’t plan to put a ton of money into this – I have too many other short-term goals already vying for my pay – but I obviously want to get in to turn a bit of a profit, not lose cash. And rushing into decisions is a sure sign of foolhardiness.

    Better go get some books out on investing, then.

    Do you ever invest in individual companies? How did you go about getting started?

  • Living well on what you make

    In which I copy Serendipity’s lead!

    Cash
    Do you avoid a lot of the expenses that many of your peers spend money on, such as technology and meals out?
    I don’t spend anything, generally on alcohol. Very little on clothes and technology – I replace my phone every few years (my latest one was free through work) and I did buy a GPS last year which unfortunately got stolen and I haven’t replaced. A smartphone should suffice, I think. We do like our food and eating out is our main entertainment – but I think we spend a pretty reasonable amount on that (usually around $160 for two, plus extra that T spends out of his own money).
    What’s your typical meal?
    Oh so many! We used to eat a lot of pasta (but not so much now). Dinner could be anything from steak and salad to curry, stirfry, nachos, chili, fried rice, roast, fish … you name it.
    What about clothes?
    I usually go through sprees – I’ll go months without buying anything, then stock up on a few things and blow a couple of hundred dollars in one go. Last year T and I spent less than $1000 combined on clothes, skincare, haircuts and grooming.
    What about going on dates?
    After nearly six years together and about five cohabiting, we don’t really do ‘dates’ as such. My year of working Wednesday to Sunday was tough on us, but now that I have weekends back, those lazy weekend mornings are lovely, and I’m trying to make a regular date night once a week where we go out to eat somewhere new.
    Do you indulge in any luxuries?
    Travel? Either that or concerts. And quality food, sometimes. Mmm, cheese.

    Do you have health insurance?
    Negative, I live in New Zealand.

    Do you have any savings for emergencies?
    About $10,000.

    Do you anticipate or look forward to having a higher salary one day?
    Yes, although realistically, I can’t expect to make much more in this industry. So…we’ll see. I’m not sure I’m willing to give up work I really like in order to boost my income.

    What about retirement – do you plan on ever saving enough to retire?
    I sure hope so. Home ownership is one of my big dreams, and I’d also like to be mortgage-free when we retire (and presumably sell up to downsize once old and decrepit.) Is 4% enough? It’s going to have to be, for now, although I want to up that to 8% in time.