How to save for a shopping spree

Lately I’ve been on a kick of entering a lot of sweepstakes contests. Most of them offer some sort of cash prize, and while I’m pretty sure I’d save most of the money if I ever won, I don’t think I could help but go on a little shopping spree. The likelihood of winning such a contest is pretty slim, but there is a way for everyone to give themselves a shopping spree once in a while. I promise.

Case in point, while checking out our new outlet mall yesterday, I came across some pretty good deals in the jeans and workwear departments. Like all good marketing schemes, the savings was a limited time offer, so I decided to go for the purchases and break my strict budgeting rules. Although I had saved up about $60 from the past few weeks, it just wasn’t going to be enough.

Almost immediately after checkout, I started to panic a bit. I’d been working so hard to stay within budget, and it had been helping me so much! How could I justify spending more in one night of shopping than I typically allow myself for an entire week??

That’s when I realized: I had been saving for this all along. If you refer back to when I set up my savings plan, I set up a rainy day fund that had no particular purpose. Every two weeks, a chunk of my pay check magically disappears to this fund before I really even see it. I’ve saved up a healthy sum of money this way, so all I have to do is replace the money from my checking account with the money from the special savings account.

I cannot recommend doing this enough. It’s a blast to know you have an atypical budget for a fun day of splurging. (Though I still recommend finding good deals and making every dollar stretch.)

Christmas on a Post-grad Budget

Now that Halloween is over, radios and department stores everywhere have decided it’s Christmas time. Whether you’ve already started decorating for the holidays or you insist on waiting until the day after Thanksgiving to hang a single stocking, it’s probably a good time to plan your Christmas budget.

While I was still in school, I was definitely given a pass on the gift giving front. My parents still funded most of my presents, and I didn’t think much of it. Now that I’ve graduated and am living on my own, I’d say it’s time my Christmas gifts actually came from my money. Do you agree? Awesome. Let’s plan.

Dave Ramsey, mastermind behind the envelope system that I already adore, recently launched an online budgeting tool for the holiday season. You can insert all of your planned expenses and then record what you buy for who and how much it cost. It’s great for planning, but a plain old excel spreadsheet can do the same thing. Most importantly, I think it’s crucial to employ the cash method here as well.

Steps to Happy Holiday Budget

1. Determine your total holiday budget

This amount will definitely vary depending on your income level and personal desire to invest in holiday related things. I settled on $150 as my total budget. It’s slightly more than my total envelope budget for a week, and based on the number of people I want to give gifts to, I think this should cover things.

2. Decide what/who you’re spending money on

This includes all gift buying, but it may also include a tree, decorations, special charitable gifts, or food for the family gathering. List these items out.

• Mom
• Dad
• Brother
• Sister-in-law
• Fiancé
• Future in-laws
• Future sister-in-law
• Nephew
• Friend
• Friend

3. Divide and conquer

To make it easy, you can divide your total budget equally among all your expenses (for me, that would be $15 per person). Otherwise, go through and determine what amount you want to allocate specifically to that person/item.

4. Create a Christmas envelope

Similar to what I did for my weekly budget envelopes, I’m going to have a special envelope with dividers for each person that I will be buying a gift for. Using the low-cost method of index cards, I will distribute cash accordingly and use ONLY this money for buying gifts. The original envelope rules still apply.

Now, as far as filling the holiday envelope goes, you have a couple options:
A. Withdraw the money for your total holiday budget all at once
B. Leading up to shopping time, withdraw smaller amounts of money periodically and insert them into the envelopes – Consider withdrawing an extra $20 each week when you refill your other budget envelopes. This way it’s not such a big hit to your bank account all at once.

Ready to give it a shot? Think of how wonderful it will be to afford presents for all of your loved ones while NOT stressing about the cost! Happy Holiday Spending 🙂

First month-to-month savings comparison!

Now that October is officially over, I’m ecstatic to see the progress I’ve made with my monthly spending. From the month of September to the month of October, I saved

$417.94!

I cannot believe it. That’s more than a 30% savings!

(Get a breakdown of your spending habits at mint.com)

And the best part is, I wasn’t technically on the budget system for the whole month of October. I put the envelopes into use on the 21st. That means that just half a month of budgeting got me these results. Could not be happier! I can’t wait to see how much I save when I’m actually using the system all month!

See how I got started using the envelope system here!

Using the Envelope System: Week 1 Update

After one whole week on the budget, I must say, things are going well! Before I refilled my envelopes on Saturday, I still had cash remaining in each of them! Only $1 in the grocery envelope…but whatever.

Here are a couple of ideas to help keep your spending at bay this week:

1. Make a grocery list

This is simple, but I can’t promote this idea enough! I absolutely love food, and without a plan, I come out of the grocery store with a million snacks and nothing for lunch. Planning things out ahead of time is key to living on a budget.

2. Add as you go in the grocery store

Things add up really quickly in the grocery cart. In order to stay on budget, I add up prices on my phone (you could use an actual calculator if you’re old school) so I know how close I am to my limit. This prevents you having to put items back after an embarrassing interaction with the checkout clerk As I go through the store, I like to pick out something fun to buy that I’ll treat myself to if I’m under budget. Ice cream is a great incentive to spend wisely!

3. Sell some clothes

Make room in your winter wardrobe by going through your closet and selling some items to a local consignment store. Add the money you make to your shopping budget and get that new sweater you want.

 

 

 

 

Want to try the envelope system? Start Here!

How to save… Part 5

Alright everybody, this is the part where thoughts become actions. As of yesterday, I have officially put the envelope system into use. Get ready for…

5. Use the envelope system for managing variable spending

That title sounds super boring now that I’m typing it a second time… Oh well. This is the key to us saving money, which is absolutely NOT BORING at all 🙂

In my last post, I determined the following weekly budget for my variable expenses:

• Groceries = $40
• Gas = $40
• Dining = $20
• Fun (entertainment) = $15
• Shopping = $15

That totals $130 of variable spending each week (in addition to rent, utilities, etc.) and is a pretty significant reduction from my previous habits. If you have gone through the first 4 steps of this process with me, you’ve already determined your budget, and are ready to make practical use of the budget system.

Even though this is the “envelope system,” envelopes are not actually required. The whole point of doing this is for you to stick to using cash for your purchases, so find a way for you to organize the money that makes sense for your life. One option is to get an accordion folder (usually referred to as a coupon organizer) and label the dividers accordingly.

After looking at a few versions of this organizer, I felt it was too bulky for the type of purse I tend to carry. I also envisioned myself grabbing my wallet and leaving all my cash behind. No bueno. Instead, I decided that I would get a wallet with a separate side pocket that was big enough to tackle the organization. I treated myself to a Merona wallet from Target (purchased with a gift card, and not my shopping budget) and used regular 3×5 index cards for separation.

Now, to refresh everyone’s memory, let’s go over the rules of using this system. In actuality, you can decide whatever rules you want for your budget. The ones I strongly recommend following are these:

1. Pick a day of the week to “refill” your envelopes – I selected Fridays after work. That’s the best day for me to get to the bank and organize. I also like starting at the weekend, because that’s when I tend to spend the most on Fun, Shopping, and Dining. I would rather spend first and “make it work” later in the week than get to the weekend and be sad that I can’t afford anything.

2. Once an envelope is empty, you CANNOT add to it! – This is pretty straightforward. This system does absolutely nothing if you go to the ATM every time you run out of money. You might as well stick to the debit card.

3. If you do use a debit card, subtract the amount from the appropriate envelope – If you need to make an online purchase or you forget your envelopes (don’t do that!), keep track of how much you spend and in what category. Remove that amount of cash and hold it back for next week.

Exceptions and special purchases

I know what you’re thinking, “$15 a week for shopping? Am I never allowed to buy clothes again?” The answer is no. First of all, you can definitely budget more for shopping. That is a personal preference. Second, I recommend saving the budget up over a few weeks. If I decide I’m going to buy a new jacket, I’ll research what I want, find a good deal, and save my shopping budget until I can afford it. If it’s $50, I can buy it in 4 weeks. This helps you save money because you have to prioritize. It reduces impulse spending, and it shows you how much you really want that item. Tip: Print out a little picture of what you’re saving for and stick it in the front of the envelope!

In general, you can decide what your rule is for saving money you don’t spend come week’s end. You can either leave it in the envelope and add the total amount for your budget (giving you a little boost for the coming week), or just refill enough so that you’re back up to the allotted budget amount (allowing you to save even more than you planned). I intend to let my budget “roll over” from week to week so I can splurge occasionally.

Stay tuned for tips on using the cash envelope system and please submit any of your own tips or questions in a comment below. Happy saving!

How to save… Parts 3 & 4

Rolling right along here, I’ll move on to outlining parts 3 & 4 of my money saving plan. I’m getting pumped about living within my budget and I hope you are too.

3. Create a saving schedule

Before I graduated, I didn’t think about saving too much. Now that my savings account is about equal to my checking…I’m ready to take action. For the past few months, I have had two automatic sums taken from my checking account and saved elsewhere. Most banks offer this service online, so be sure to see what your options are.

I decided that I wanted a set amount to go into my general savings account every time a paycheck was direct deposited. Having this happen automatically prevents me from planning to spend that chunk. Out of sight, out of mind.

I also decided to establish a second “special” savings account called the Rainy Day Fund. This account allows me to feel free to use it for fun. I view my regular savings as the emergency pool, but the Rainy Day Fund can be for traveling, new furniture, electronics, concerts, etc. If it helps you, set a specific goal to save for, and calculate how much and when you’ll have to deposit in order to reach your goal on time. For example, if it’s January and you’re planning a vacation in July that you’d like to have $500 for, you can schedule deposits of $84 once a month, $42 twice a month, or $21 per week.

4. Establish a weekly budget for variable expenses

Some people prefer to work on a bi-weekly budget instead of a weekly one. I’m choosing to track weekly so I can plan better. It can be hard for me to know what my weekend plans are 2 weeks out, and I want to make things stretch as best as I can.

I consider planned expenses to be the things you technically have no control over. I would put rent, utilities, and any other standard monthly expenses in this category. After that, I look at all the changing expenses that I can control out of my pocket. Using the tools in this spreadsheet, you can plug in your information and play around with potential budget options.

This is what mine looks like:

The weekly or bi-weekly budget you settle on will be the amounts you put in those envelopes for the determined time period. It’s important to ease yourself into the process and think realistically about what you can handle based on your lifestyle. After a trial run, budgets can always be adjusted.

Check back in for the next post about putting the envelope method into action! Who’s with me?

How to save… Parts 1 & 2

I’m so excited to put my money saving plan into action this week. I’ve received really positive feedback about the endeavor (most enthusiastically from my parents; no surprise there). If you’re looking to try out the envelope system with me, this post will provide some tips for accomplishing the first 2 steps in the 6 part plan.

1. Define current spending habits

If you’re like me, then you know the magic (and the danger) of the debit card. Though a very convenient tool, it takes away the real impact of spending. There’s something heavier and more painful about handing over cash. In order to understand where all your money goes, I recommend analyzing your expenses from the past month or two. You can do this by looking over your bank statements or using a free budgeting tool like mint.com. Mint syncs with your bank account and pre-categorizes as many of your purchases as possible. You can manually organize the rest, and then it provides you with a handy-dandy breakdown of the situation in the “Trends” tab.

Here is the visualization of my spending for the month of September:

Now, this information would be more accurate if I averaged things out over several months, but I know this is pretty typical. The huge chunk in the “Home” category is rent and utilities, so it’s obviously not too flexible. The rest, I can do something about. Which leads me to…

2. Determine priorities and where cuts can be made

My eye immediately goes to the “Food & Dining” category where I made 21 purchases over the course of one month. Assuming I went to the grocery store 3 or 4 times, that’s a lot of going out to eat, and it’s clearly not necessary. By no means do I intend to quit eating what I like. (Are you kidding? See my previous post dedicated to cupcakes.) However, it’s important to plan ahead.

I have standing plans to meet a friend for dinner every Tuesday. Aside from that, I think I can limit the trips to just one other time each week. That still means eating at a restaurant 8 times a month, but it’s a whole lot better than 21!

When it comes time to budget in steps 4 & 5, I’ll definitely be focused on scaling back the “Shopping” category as well. Poor Target is going to take a hit.

How to save money when you aren’t really making any…

I’m assuming I’m not alone in the months-long panic attack that is “post-grad spending”. If you’re not freaking out about it, that’s great! I salute you, and I hope you’re on the path to financial success. For me, making ends meet on a weekly and monthly basis has become pretty stressful. Once I figured out how much money goes to groceries when I’m not on a campus meal plan, each look at my refrigerator became a little more nauseating. Combine that with the desire to continue socializing at the rate of my more lucratively employed friends, and I’m about to hyperventilate.

Am I over exaggerating? Absolutely. I don’t need most of what I purchase. This realization has motivated me to create a plan of attack for my spending so that I can feel confident in my budget and enjoy my life more. I would love if people would join me on this endeavor because I assume that, like weight loss, this lifestyle transition will be made easier with support and advice from others.

Here’s my plan of attack:

1. Define current spending habits
2. Determine priorities and where cuts can be made
3. Create a saving schedule
4. Establish a weekly budget for variable expenses
5. Use the envelope system for managing variable spending
6. Spend less and save more!

For those of you not familiar with the envelope system, it’s pretty simple and pretty old-school. After determining what an appropriate amount of money to spend on variable expenses is week to week, you get cash from the bank, organize the cash into labeled envelopes (groceries, entertainment, clothes, etc.), and that is the limit! If you spend all the money in an envelope before the time period is up, you’re done spending money on that. Period. No using the debit card. No going to the ATM. You gotta make it last. (Credit to Dave Ramsey on this. I’m merely chronicling the application of this method.)

Now, before you freak out, emergencies are a different story. Having to buy medicine for an unexpected illness is different from buying a latte at Starbucks. Budgeted money for those things should not come from the same envelope. If you want, establish an emergency envelope and be very very careful about what you define as an “emergency”.

So if you could stand to reign in your spending habits (be it a little or a lot), join me on this quest to save some money! I’ll be posting about each step of my “Plan of Attack” soon. It’ll be fun! Kind of.