10 signs that your budget needs a makeover

Hand Holding Dollar
AJ & KJ: Here are our 10 signs that your budget needs a makeover:

1) The words “I’ve never made a budget” come out of your mouth
WHAT!? Okay, so forgive my shock and awe, but this is a no brainer. Never made a budget = never been aware of your true expenses. Get to cracking and check out a lot of the simple and free options out there for starters to see how to create a budget.

2) You say things like “I don’t know what I spend per month on [xyz]…”
If you don’t have a clue what you spend in a given month in any particular area, that’s typically an indication that your budget is a leaky faucet. Time to get out Quicken or Mint.com and run the numbers to see what you’re spending. It can be a good chance to find an area to trim where you didn’t realize you were over spending!

3) Your budget contains more categories than you can count
Simplify categories to show your primary fixed items (or relatively fixed items when it comes to insurance, utilities, etc.) and create as few categories as you can on the discretionary items so you can more easily see the total dollars you’re working with on a month-by-month basis.

4) You don’t “close out” the month
This is a must for us and should be on the list for all budgeters. Make sure you true-up your expenses for the month, so you can identify what (if anything) can hopefully be swept into your savings accounts! Don’t fall into the trap of spending right at the end of the month thinking you’ve earned it only to come apart at the last minute.

5) Your budgets are too idealistic
Yeah, that’s right. Sometimes you can create a goal that is too aggressive for even you. Create budget amounts that are both realistic and attainable.

6) You don’t pay yourself first
Priority numero uno is to pay yourself first! Have some of your savings come off the top through programs like payroll deduct or automatic monthly transfers, so you don’t have it to spend regularly.

7) You don’t have any room to save
Blasphemous! No matter how good of a budgeter you are, there are always ways to trim a little to make sure you are saving to meet your goals. If that’s not one of the highest priorities in your budget, then think again, and get back to the drawing board!

8) Roth IRAs are non-existent
Especially for you young savers out there, if your budget doesn’t include some savings to Roth accounts (via Roth IRA or Roth 401(k)), then you should reconsider and reevaluate your options. Roths can be a great tool for those young savers at heart!

9) You don’t plan for upcoming expenses
Make a list before each month and update it as irregular expenses come up. Maybe this month you need to buy dog food or pay for an insurance policy or have a lot of gifts to give. Keep track of it and plan ahead, so it doesn’t surprise you at the last minute!

10) And lastly, you don’t budget with financial goals
No. no. no. Why save if you don’t know why you are saving or what target you’re saving for? Get a plan in place so you can stick to it and know what you are aiming for!

Just starting out? Check out our budget quick start guide to learn what you can do to get on track!

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10 signs that your budget needs a makeover 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.

What does cash flow mean and how do I apply it to my life?

Stack of Bank Note and Pen Calculator On Note Book
KJ: One of the most critical concepts to managing your family’s finances is to understand cash flow. What it means, how your family receives it, and how to plan around it. We’ve dedicated a post to helping you understand this financial metric and how you can apply it to your personal situation.

Definition of cash flow
Cash flow is essentially a look at all of the monies deposited into your account from whichever sources derived less all of your expenses and cash outflows – in whatever form it may be.

Make an inventory of your cash inflows
Make a list of your income and income cash flows. It may be earned income or it may be considered “unearned.” Include specific information about the regularity of the cash flows (weekly, biweekly, semi-monthly, quarterly, yearly) as well as the level of certainty (regularly recurring, one-time payments, variable payments (commissions, bonuses), etc.). Below is a list of a few common income flows:

    Child support
    IRA distributions
    Income from bonds paid to you*
    Income from stocks paid to you*
    Income from other investments or business interests*
    Income from a savings account paid to you*
    Credit card bonuses or rewards (we save ALL of these!)

*Pay particular attention to only include these items in your household’s cash flow if there is some regularity to them and the amounts are paid to your checking account and not reinvested within the account. If the amounts are simply reinvested or paid within an account you don’t use for your expenses or cash flow, then counting them is not going to help improve your cash flow!

Make an inventory of your cash outflows
Prepare an equally detailed list of all of your expenses. Pay particular attention to the timing, amounts, and frequency of each expense that you may have in a year. Below is a list of common expenses to consider:

    Mortgage (including interest, taxes, and insurance)
    Homeowner’s Association dues (HOA)
    Insurance (life, health, auto, disability, etc.)
    Food (groceries, dining out, fast food)
    Utilities (television, internet, phone, water, gas, electricity)
    Charitable donations
    Pet (grooming, food, veterinary)
    Medicine/Doctor (medication, doctor visits)
    IRA contributions
    401(k) contributions
    HSA contributions
    Savings account contributions
    Investment account contributions
    Taxes (state and federal income tax – can be yearly, quarterly, and/or withheld from a paycheck)
    Travel (hotel, estimated food, airline)
    Credit card payments and interest (hopefully you’re not paying any and the cards are paid off!)
    Child support paid
    Alimony paid

Evaluate the net number
Add up all the income sources and subtract out all of the expense categories for each month. If you find that you come up with a negative number, then something’s gotta give – no wonder you’re having cash flow issues!

If you and your family have a complicated cash flow situation with irregular income payments, then consider projecting out all of these items throughout the course of a year.

Even if your calculation turns out positive, doesn’t mean you’re on the track that you need to be. Look closely at the savings contributions (IRA, 401(k), HSA, savings, investment account) to make sure you are putting aside the amount of money you need.

Having a comprehensive view of where all of your expenses are going will allow you better decision-making power to choose how to reallocate those scarce resources. It could allow you the knowledge to know when, where, and how to cut out certain items from the budget if something unexpected happens – like a roof repair, fallen tree, or garage breakdown!

AJ: The need to “find” money in order to cover additional expense costs in a given month is my ongoing motivation for budget tracking. What comes in is pretty consistent in our household but what goes out is always variable. We’re constantly making improvements to our home, getting involved in charitable opportunities and going out with friends and family, so variable expenses are the name of our game. Without understanding the in there’s no way to stay ahead of the out.

KJ: One reality you may be living is you could have a very positive net worth or savings targets, but your cash flow is very tight in certain periods throughout the year – particularly common for what I call “lumpy” cash inflows throughout a year. Figuring out both when and why those happen can help you single out what can be done. Maybe it’s keeping more in a readily accessible savings or emergency fund or maybe it’s switching the timing of some of your expenses (as able) to help get you on track. Try funding those irregular expenses into a specific account each month to make sure there is sufficient cash there when the expense is ready to be paid. This can be very common with life insurance premiums, quarterly taxes, or real estate taxes, but you may find you have other expenses like this.

    What tools have you used to build a cash flow statement for you and your family?
    Are you cash flow positive or negative?
    Share with us the tools you are using to get on track or to stay on track.

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What does cash flow mean and how do I apply it to my life? 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.

Finding financial faith

Success image - Stuart MilesKJ: How do you find financial faith? Those times in your life when you’re struggling with “is it enough” or “am I on the track that I need to be?” With so many unknowns – especially in your more long-term goals like financial independence, children’s education, etc. – sometimes it can be difficult to keep perspective on the here and now. It’s this moment that you’re living in now, so learning to periodically take a step back and review your progress is important.

AJ: We’re only four months into this year, and it has already been a doozy. Sometimes I get so caught up in moving forward that I forget to acknowledge where we’ve been, which is a constant theme in my life.

Do you find yourself, like me, in a perpetual state of planning for the future at the expense of the everyday? Someone please say yes :)

Kirby outpaces me beautifully when it comes to really just living in the moment, trusting that we’re doing the right things for our future and that we’re on track to achieve our goals. Me? I like to track every time we don’t put as much into savings as we planned to, every time we go over budget on any given category and every time we have an unexpected expense. Clearly I enjoy that feeling of constant panic and always feeling like I’m chasing my tail, right? Nay.

I know I’m already chalk full of New Years Resolutions and that it’s no longer the new year (hello, Q2!) but I am going to actively resolve to find more financial faith. I have no trouble believing that the money we put into our 401(k)s, IRAs and mutual funds will be whatever they’re going to be but what is it about those variable day-to-day things that bog me down? Here’s my plan for combating my lack of financial faith and trusting that it will all be okay:

1. Create a goal
- Not all goals are met, accomplished, defeated, whatever you want to call it. Sometimes goals are just a place you look at, consider and keep walking past, but they’re important to ensuring you’re paying attention to the state of your business.
- Write. It. Down. Whether your goal is to save an extra $100 a month, pay down debt, or like me, make yourself whole on areas where you feel you’ve over spent, know what that number is and keep it somewhere that you regularly will see it.

2. Create a plan
- Create a timeline upon which you hope to achieve the goal. Whether the goal is realistic or not, give yourself check points and guardrails. Saying I want to recoup what I’ve overspent by 2018 isn’t a huge accomplishment but it keeps me from slipping into the abyss of things I MEANT to do.

3. Take action
- What’s a goal without concerted effort? Track what you spend, track what you save, track what you DON’T spend, track what you DON’T save. Awareness is key.

4. Celebrate the successes
- This is the most important step I always forget to take. Achieving wealth of any magnitude is a process, and creating a strong financial foundation is a huge accomplishment. Pat yourself on the back, say the serenity prayer and celebrate!

KJ: One of the important parts of setting goals is taking time to step back and reflect on the successes (or failures). Sometimes it’s a reflection on what you could have done differently, and other times, you get to reflect on what you did correctly. Goal setting isn’t about just setting unachievable goals and never accomplishing them, it’s about a process and what you do along the way is just as important as the end goal itself.

    What do you do to keep your goals in front of you?
    How do you track your goals progress?
    What do you do to reward your successes?

Image courtesy of Stuart Miles / FreeDigitalPhotos.net.

Finding financial faith 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.

January budget challenge: complete!

Spending challenge success checkboxKJ: We started this month with a post from Mr. & Mrs. H as they were about to lead into an entire “no-spend” month of January, and then just a couple weeks later they provided a mid-month update. Fast forward 31 days, and let’s see how they did!

Guest: Hi – Mrs. H here again, and boy – am I glad January is almost over! Just kidding…as much as it was hard to resist shopping impulses and food cravings to achieve this financial fast challenge, I’m actually appreciative of the peace of mind that it gave us. The goal was to simplify life and become intentional in consuming and buying resources, while getting a good handle on our budget.

For me, this meant:
1) sticking to a list when going grocery shopping (or any shopping),
2) reducing expenses that made sense (i.e. lowered auto insurance by $25/month by cutting out certain fringes and increasing our deductible),
3) cleaning out areas of the house (pantry, freezer, closets, attic, garage) – and use things up, donate, or throw away, and
4) be INTENTIONAL with any spending.

I think we did a pretty good job…I’d give us a B+, in fact! SOME things that were purchased we probably could have done without…but we intentionally made the plunge to make life easier (replacing the garage door, for example). However, the peace of mind this gave me in having a better organized house and using resources we already had, in welcoming friends into our home more than going out, and knowing that we CAN cut expenses – made this all worth it. I hereby declare January our official financial fasting month. I believe this will also increase our awareness to be intentional in everyday life throughout the year.

Mr H: Yes, dear.

KJ: We appreciate the “H” couple for undergoing this challenge and for sharing that with our readers! It can be budget-altering to change your perspective for a full month, and it can teach you how to differentiate between those “wants” and “needs” in your life – whatever they may be. I think we can all learn to live on just a little bit less. Every budget can stand to be a little more targeted in expenses, and putting the microscope over each item for a period of time can help you be even smarter about how you spend your hard-earned dollars!

    Did you try the no-spend month?
    Would you do this again?
    Share with us your experience!

January budget challenge: complete! 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.

Surprisingly simple budget tools to kick-start your finances

Quicken Mint Yodlee MEnvelops Personal Capital LearnVest Home Budget Sync YNAB Excel Logo ProgramsKJ: Similar to our post on Quicken or Mint.com?, we wanted to dedicate this segment to writing about some of the OTHER personal finance software tools that are available to us all for little to no cost. With all of the technology around us and the immediate access to information these days, there are NO excuses for not tracking your expenses via one of these nifty money management programs, so start using one today. If one doesn’t work, don’t get frustrated, and just try another system until you find one that works best with your lifestyle and goals. Whether it is paying down debt, learning to invest, building an emergency fund, syncing across all your devices, or any combination of those.

Mint.com – Our personal favorite. Not only is it free, but it connects to *most* accounts and institutions. Sure, there are a few that can be quirky, but no system is perfect, so don’t let that stop you from getting your finances in order. From adding tags to a transaction (particularly useful for tracking expenses of our blog as well budgeting with work related business expenses) to adding cash transactions (if you were so inclined to carry cash and use that as your primary method of payment), it has lots of features. Plus, their budgeting tool is far superior to most other programs I have seen since they let you roll unused expenses over to another month and/or work with an “Everything Else” bucket that can be your catch-all for miscellaneous items that crop up each month.

Yodlee!Yodlee! is a good, free tool. They are similar to Mint.com, but I’ve found that they connect to even more institutions. And, better yet, you can use it to track all of your credit card rewards, airline miles, etc. – a very nice feature that most other personal finance tools don’t have. Their system is a bit more complex than most around since it can allow you to even send payments, make transfers, etc.

MEnvelopes – Anyone familiar with the “envelope system” of keeping track of your finances? Basically, you parse out your expenses into simple envelopes each month (food, shopping, etc.) and once you run out of money in the envelope for the month, then there’s no more to spend in that category. It can be a great eye-opening way to make sure you don’t overspend in a certain category each month. If you would prefer a more high-tech solution, check out MEnvelopes to help keep track of this on your phone and remotely. It’s the high-tech solution for the good old envelope system.

Pen & Paper – While you DO technically have to pay for pen and paper, they’re pretty cheap options, so I have included it in the “free” section. You can use a simple pad of paper or our preferred method of a Moleskine notebook to keep track. We use a combination of Mint.com and the pen and paper method of keeping track of our expenses. Mint.com helps track things electronically, and the pen & paper is where Angela really puts specifics down for grocery, dining out, and “everything else” items to make lists of upcoming items.

Excel Spreadsheet
I haven’t yet created a good Excel template to share with others to use, but I often find myself tracking our own finances periodically in a spreadsheet. There’s just so much customization and projecting you can do that is specific to your situation in Excel that you can’t quite do in a lot of other programs – paid or free. I find that a spreadsheet often gives me the flexibility to best track progress toward goals (vacation, net worth, etc.). The nice thing about Excel is you can also use it split up an existing account into portions. Instead of having three accounts with one for a vacation fund, one for an emergency fund, and a third one for a car purchase, I often keep track of these “buckets” by separating savings within an account for each goal. Then, I can project out future savings for each carved out expense to make sure we’re on track. This method is fun! Then again, I really like building spreadsheets (okay, okay…end Excel geek rant).

LearnVest – With both a free and a paid portion of the program, LearnVest equips you with the tools you need to set, manage, monitor, and track your expenses. They also have some neat goal setting functionality, and if you want to outsource some of the decision making to help you with your personal finances, they have several options to work with a real financial advisor to create your own financial plan. To get access to a financial advisor, it costs $19 per month plus a one-time setup fee (that ranges in pricing depending on which services you are most interested in).

Personal Capital – Similar to LearnVest, Personal Capital offers both a free and paid version that includes advice from an expert in the field. The free version is very similar to Mint.com – equipped with all the tools you need to make a budget and track your expenses – but their investment reporting and analysis tools are quite a bit more robust. Like LearnVest, if you would like to have one of their professionals help you out in managing your investment portfolios, they can manage your portfolio for a fee (outlined on their website, and varying based on your assets you would like them to manage).

In addition to some of the free (or nearly free) options above, we wanted to outline a few of the paid platforms available as well:

YNAB – Stands for You Need A Budget (YNAB). For $60, you can learn to take charge of your finances. The concept is simple, it gets you to live your next month on the prior month’s income. Sounds simple? It really is that simple. It also helps you better understand what you have to actually spend, so you don’t go over budget since you’re always just spending last month’s income!

Quicken – With several versions available, it’s hard to include EXACTLY what you may spend on Quicken, as your needs may warrant a more complex version. However, even in the most complicated of scenarios, I’ve found that the basic version can be a great fit for most needs. Also, once you buy the software, you can keep it for years without ever needing to upgrade (that is, unless some of the new features and tools are enticing enough to get you to purchase an upgrade). From bill pay TO tracking historical expenses (and net worth) TO creating a budget TO adding manual accounts (i.e. those pesky accounts that either (1) don’t have a login or (2) don’t seem to link to most personal finance software) TO keeping the data yourself (my preference for keeping track of historical information since the files are mine and are stored on MY hard drive versus many other systems that are in the cloud and subject to termination at any point). New to Quicken in recent versions too is the ability to sync your data across your devices, so you can have access to the data when you’re not at your computer – about time they catch up with the rest of the software choices out there!

Home Budget Sync – A neat little iPad and iPhone app that can sync your budget in the cloud. That way you and your family can stay on the same page at any point throughout the month. At only $4.99, it is quite a cheap option to try out and see if it works for your expense tracking needs.

    What cash management software do you use to track your expenses?
    Are there any personal finance programs we are leaving out that you can’t live without?
    Tell us about what methods you prefer.

Surprisingly simple budget tools to kick-start your finances 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.