Food, food, food

AJ: We love food, and our budget (and sometimes our bodies :)) reflects that. It wouldn’t be realistic for us to set a $300 food budget for ourselves, because that isn’t at all in line with how we choose to enjoy our lives. Generally, our food budget is fairly simple: 50% is spent on groceries (which includes alcohol, toilet paper, personal care, etc), 40% is spent on restaurants, and 10% is spent on fast food. Most months those percentages shift, and a lot of months we under spend our food budget and reward ourselves with extra slush fund savings.

My tips for successfully making and sticking to a food budget:

Plan, plan, plan
KJ: The key to our food budget is in the planning and preparation steps that we (mostly Angela) take. Really knowing where you stand in terms of upcoming meals allows you to know when you have choices. My strength is in identifying the financial aspects of the budget and her key strength is in getting creative to come up with solutions to make it work for our family.

Be realistic
AJ: Don’t budget significantly below what you typically spend in a month on food unless you’re planning on really changing your habits.

KJ: Don’t lie to yourself by thinking you can stick to some uber-rigid and ridiculously cheap plan that you do not want to follow-through. Sure, you could spend $50 per month for food for two individuals (read, eat lots and lots of beans, rice, and pasta). In fact, Angela once forwarded me a blog about a family of four (yes, a FAMILY of four) that would once a year take a month and ONLY spend $100 on their food. While I am not suggesting someone go to that extreme, it just shows that it is possible if you are dedicated to the plan. My philosophy is that just like a diet, if you are too rigid and unrealistic with your expectations then you are ensuring that you will not be able to stick with the plan long-term. Saving typically is not about short-term goals (yes, occasionally there are some very short-term goals), but rather it is often about fundamentally changing your spending and savings behavior, so the more thought out and planned, the better chance you have for long-term success.

Make a menu
AJ: I make my menus 4-6 weeks in advance, which is extreme, but it works for me. It ensures I don’t repeat meals very often and prevents that last minute “we have nothing to eat” panic. I also make grocery lists at the same time I make my menu. Of course I add in any incidentals that come up as needed, but it ultimately saves me time and energy (and money).

Stay loyal
AJ: Grocery store loyalty programs and restaurant email lists provide significant rewards. I’m particularly fond of the new Tom Thumb “just for u” program. It takes a little more time to pre-load the coupons to my account through the site or app but the savings are personalized to things I regularly buy and the savings are significant.

Plan for change
AJ: If your day goes long and you don’t make it home in time to feed your starving family a homemade meal, adjust your menu and aim to make up what you spent eating out in the next week’s menu.

KJ: We make sure to build some flexibility in our plans since just like a diet, rigidity is not sustainable. Plans do change, so be realistic that plans change and work into your plan the unexpected work, family, or friends curveball. Stressing out about a sudden change of plans will only make your strategically built plan suddenly crumble.

AJ: For us, being rigid in our planning makes us more flexible when we want to enjoy ourselves. If you plan to always be under budget, just keep adjusting as you go. Don’t deny yourself everything you enjoy now in the hope of indulging for the last 25 years of your life. Find the right balance for you and your lifestyle.

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Save with a purpose

AJ: My ability to save really shines when I have a specific goal in mind over and above our everyday saving. Once you have a budget that appropriately matches what you should be spending in each category monthly, saving isn’t a pressure point anymore. If you’re just getting your saving sea legs, start with one goal in mind – a new watch, an expensive purse, a road trip to a friend’s house, or something you really need, like a car seat.

Two places I always cut from when we have a goal are our food budget and our shopping budget. We have a well-stocked freezer and pantry so when need be, I plan meals that wont require me to purchase many extras, and we eat out less. I closely track how much we need to cut weekly and often times we wind up cutting even more than I had hoped because I always over plan for the cost of groceries and under spend. Take the time to make a grocery list and look through the sale ads. I rarely go to more than one store a week unless there is something I just can’t pass up at another store, but I do pre-load coupons to my card and track when items are on sale. When I started planning my list based on exactly what we needed for that week and how much I thought it should cost, our overall grocery bills went down significantly. I still have to pre-plan for jumbo packs of toilet paper, paper towels, laundry detergent at CostCo, etc, but I just plan around that by using more of what we already have.

Saving for the little things doesn’t get me quite as excited as saving for the big things, though. There is something so gratifying about saving for a new car and paying for it in cash or saving for the trip of a lifetime. It’s not just a light at the end of the tunnel, it’s happiness and relief, and every drink tastes better when you know you already have enough saved up to pay for the entire trip. Dont ruin a vacation by putting everything on a credit card. If you can’t afford it, don’t take it. Scale back, plan properly, and pay it all off. Kirby and I love a fancy meal, but we’ll eat dirty water hotdogs from the street for lunch to make it all work. Life is a beautiful series of decisions, and sometimes decisions mean eating dirty water hotdogs in between five-course meals.

KJ: If you don’t know what you are saving for, then what is the point of saving? Keep your goals front of mind (whether they’re completely practical like ‘I need a new pair of running shoes because I have had this pair for five years’ or they can be less than practical). Stick to three goals or less at one time, whether it’s:

    1) Establish an emergency fund
    2) Save for college for a child
    3) Save for retirement

or

    1) Purchase a car
    2) Save for a home downpayment
    3) Save for retirement

As you accomplish your goals, you are able to add new ones, but the key to accomplishing them is to start small and focus on the end goal. If you are able to track progress toward goals within one account, then by all means do that. Mint.com has a great system to be able to set up goals and track progress over time (especially if it’s a multi-month or multi-year type of goal). Consider splitting your goals into separate ‘buckets’ for different saving accounts. That can help you keep up with how much you have for each goal, but the downside is having more accounts to track, more transfers, etc. A good old-fashioned spreadsheet can be a great tool (my personal preference) to track your ‘balances’ of different goals within an account too. I already have enough accounts with IRAs, 401(k)s, HSA, savings, etc. that I really don’t need (and my wife wouldn’t let me) get any more than absolutely necessary…

Saving for goals is hardly sacrificing. It’s honing in on what is important to you, and cutting out the fluff that’s not. I would much rather save up for a fancy trip and cut out my dining out for lunch than to overspend on lunch and miss out on that trip.

AJ: This is one area where Kirby and I really rock as a couple. When we both get behind something, we truly achieve what seem like enormous goals really quickly. I feel really proud when we accomplish a goal, help someone who needs it, or build for our future.

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Budgeting: a very good place to start

KJ: The first step toward financial security begins with one word: budget. While sometimes the word can trigger images of pulling teeth or getting mauled by bears after falling down a rocky slope, it’s truly the only way to know if you are on track. You start by figuring out your income sources (for most of us that’s pretty easy…a salary) less your expenses. If you haven’t tracked your expenses before, you will be in for a surprise! If nothing else, you will have some great ‘AHA’ moments of ‘OH, that’s where my money goes!’

The bottom line is…if you don’t know what you spend, you don’t have a clue what you can save or what you’re aiming for. Think of it like sailing across the ocean without a compass, map, or eyesight. You aren’t likely to get very far, especially not to your intended destination.

Fortunately with today’s technology, there are a lot of tools available to help track and manage a budget. My particular favorites are Mint.com and Quicken, which are owned by the parent company, Intuit. Mint.com is a very easy, user-friendly personal financial tracking system. You go to the site and input your various credentials to other financial institutions to link your bank accounts (checking, savings), brokerage/investment accounts, loans (home, auto, student), and you can setup your own values of other assets (what you own). Not only is it free, but it has a robust budgeting tool to be able to quickly and easily stay on track at any point in time during a month. After you have a steady handle on budgeting they also have functionality to track your net worth and expenses over time (checkout the “Trends” part of the site).

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My recommendation if you haven’t set up or used a tool like Mint.com before is to link your accounts to let it download any transactions it can, and then monitor it for about a month. After a month, you can get a general sense of what your main expense categories are and where to really track different categories, so they can be more realistic. The process of having a budget is a continuous cycle of updating and modifying it based on your needs, savings patterns and goals: maybe you’re saving up for a car downpayment or large gift. The more you utilize the system to track your expenses, the better you will have a grasp on what your regular and non-regular expenses are. You have the ability to be broad in your budget tracking by tagging one category for ‘everything else’ if you wanted to have a place for all discretionary monthly expenses (this would exclude payments for a house, car, student loan, insurance, etc.) or you can create specific categories for items like shopping and food & dining. In some instances (and what my wife and I did when we first started using this system), it may be useful to break out food & dining to show targets for groceries, restaurants, coffee shops, alcohol & bars, and fast food to get a good handle on your spending patterns.

They have some great mobile versions, so if you don’t have your computer around (as is true for my wife and I when we are at home), you can download the free apps for Android, iPhone, and iPad.

Budgeting: a very good place to start is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

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What am I saving for anyways?

KJ: I once heard a quote that said: if you save 50% of your income, you’ll always be rich. This particular quote stands out in my mind, not that it’s necessarily realistic for 99% of us out there (as it can obviously be much easier to save 50% of your income if you’re making $500,000+ per year, but there’s a lot to say about living well within your means and saving appropriately.

Given the decline of pension plans over time and the potential concerns with the Social Security system and what it may look like 30-40 years from now, people are having to rely on more and more of their own savings to come up with some type the retirement income.

Angela found an article the other day that was a research piece that Fidelity had put together(1). The whole article was talking about how much money and what targets you should have by 35, 45, 55, and 67, to see if you’re on track for a good retirement. The assumptions in the study are broad, but the overall content is a really good message for what types of targets a person could strive for. Given the study assumes continuous employment from young age 25 until 67, and differences in someone’s actual realized savings behaviors, inflation, return expectations, and other factors, it may be worth considering increasing several of these targets. I’m under the opinion that the numbers are actually a little bit on the low side for what you need to have set aside at the different age marks.

In my opinion, gone are the days of only having to save 10% of your income. Nowadays, with most people needing to provide more and more of their own retirement income as well as wanting to send their kids to college (where the average college cost inflation has gone up over 7% for the last 20 years and could potentially continue at a similar pace over the next 20 years), saving has become an ever increasing need.

As in any good financial plan, each person is unique in terms of what amount they would need to set aside in order to be financially secure (as defined by you personally) to accomplish all their goals. It may not be uncommon to save 20% or even 30% of your income if you had particular designs about sending your kids to private college (which in some instances can cost upwards of $60,000 per year) and funding of potential graduate school (if you’re willing to fund that for your children or not). It also depends on what retirement means to you: retiring at age 55, 65, or 70, and if it means stopping work completely or just scaling back to part-time for a while. Obviously, if you’re wanting to retire earlier, then you have to save more to achieve that goal. If you’re lucky enough to be in the camp of people who genuinely enjoy the work they do, you may actually discover a year or two out of retirement a sense of “what now”? This often leads people to go back to part-time work since many types of work can be better for someone’s long-term mental and physical well-being. What better a way to reduce your retirement needs than to generate current income!?

Not to be discouraged by the article, but the main point about the research is the earlier you save, the better off you’ll be in the future. So many studies, time and time again, discuss the importance of starting to save early.

AJ: The most interesting thing to me about the article was that no matter who you are and no matter what stage you’re at in life, you’re probably always going to feel behind. That’s part of what it means to continually set goals as an individual and a couple, you’re never quite there. I don’t plan to generate income into my 70s so it’s incredibly important to me to pay attention to the details of our spending on a day-to-day basis.

Everyone has considered what it would mean to not buy that $4 coffee each morning or pack a lunch one additional day each week, but how much closer do you get to your two week vacation if you pay closer attention for a month? It almost becomes a game. Once you increase your savings, saving less seems ridiculous and you suddenly find yourself moving closer and closer to saving 50% of your income.

AJ & KJ: And what does it mean if you haven’t started saving? Start saving now!

(1) http://moneyland.time.com/2012/09/21/what-you-should-save-by-35-45-and-55-to-be-on-target/?hpt=hp_t3

What am I saving for anyways? is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

First Post

Hello world! Here is the first post for the blog. The focus of the blog will be for tips and tricks for any topic related to personal finances. We hope you all find this site very informative, and we look forward to really building the blog to be a great resource and reference tool for the common person. The focus will include items such as how to setup and maintain a budget, other research websites, and some great tools (often free) available to us all.

The hard-working middle class has been particularly impacted by the events of the ‘Great Recession’ and our guidance in the blog is to help individuals and families get back on track as well as find new ways to get one step ahead for a better life for us and future generations. We would like to thank you in advance for your patience as this is the first blog that we (Kirby & Angela) have written together.

Happy reading!

First post is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.