How do you balance cost and quality? Is the more expensive option actually better for your budget?

Shopping Carts
KJ: We’ve all bought something at some point because, hey, it’s cheap! Why not spend the $1 or $5 on [insert product]? What could you possibly lose? Well, as the adage goes, you get what you pay for [sometimes]. It’s not always best to just go with the cheapest option just because it is cheaper. But, it’s also not always the best to just go with the most expensive option. It seems that products in today’s world have a more limited shelf-life than they used to, so knowing a product’s shelf life before you make a purchase can work wonders for your long-term family budget.

This is often a discussion we have in our household particularly as it relates to all of our major purchases like appliances, but it also applies to everyday items like nice clothes, paint for the walls, and household goods. Knowing the answer to the following questions for each purchase you make though – no matter how big or small – will help set you up for maximizing how far your household’s budget will go.

AJ: When Kirby and I first started dating and were shopping for college necessities he absolutely insisted that he needed only one of each of the following items: a cup, a plate, a bowl, a fork, a spoon, a knife. WHAT?! I thought he was completely crazy! The longer we’ve lived together, though, I’ve come to appreciate Kirby’s philosophy. I’m a never-run-out, come to my house in case of emergency or natural disaster kind of shopper. I own two of most every pair of pants I’ve bought in the last ten years, I never buy one of anything, and I can always find something else I want. Thus, we comparative shop. We balance Kirby’s desire for practicality with my desire not to have to run to the store multiple times a week and shop smarter.

What is the average life span for the product?
Basics, people. If a major appliance comes with a one-year warranty, think twice. Read reviews, do research, price compare. Are there significant maintenance or return experiences from other customers? Our research seldom leads us to the cheapest out-of-pocket option today, and in fact, it often leads us to one of the higher end options. For instance, if you have a product that costs $200, yet you have to replace it every 3 years, then wouldn’t you prefer to pay $500 now for a more reliable product that lasts 6 years? Not only do you get an option that is often more durable and reliable, it often coincides with a more stable brand (especially when you factor in warranties or any other product guarantees – they’re only as good as the company backing that guarantee!). While the math is seldom as simple, it’s an exercise worth calculating when making almost any purchase. Being proactive about your major purchases means building in flexibility and the power to choose. Waiting until something pricey breaks to competitive shop means you’re forced to take whatever is available, often at the expense of either quality or price.

What is the price per ounce, gallon, unit of measure?
You have to start with the most fundamental detail – is this stuff physically going to rot before I can use or consume it? This is one of the easiest to calculate when it comes to the grocery store. Most grocery store companies now let you price compare instantly as you shop the aisles and can quickly see the cost per unit. Don’t just assume though that the lowest cost per unit is the best value for you. We’ve run into this a number of times in the last several years where a product seemed like a better choice for the budget, but it ended up costing more in the long-run. If something is half the cost, but you end up throwing away more than half of it because it expired sooner, is that really any savings to your family? Surprisingly, you could have bought the more spendy product with a higher quality and more durable shelf life. We’ve run into this with sour cream where the cheaper options just don’t last as long, so we actually end up spending more each month.

Now, I’m not advocating that all higher end products are worth the cost, but it’s definitely worth considering their long-term impact on your budget and not just the “whatever is cheapest now” option.

AJ: This concept becomes especially relevant for those of us buying in bulk. Not only are products often of an entirely different level of quality at super stores, but they’re also not always cheaper by ounce. The easiest way for me to keep track of what is really a good deal versus what is really just a whole lot more is to know what I pay per pound, per ounce or per unit on average. This applies to supplements we take, paper products, meats, produce, etc. It can’t always be about cost, but tracking can make a huge difference.

Is it cheap for a reason?
Not much to say here other than some products are just cheap for a reason. They aren’t durable, they are low quality, they break instantly, etc. Hey, that’s fine for some things – like a cheap gimmick item or one-use type products, but for most everyday products, it just doesn’t make sense.

AJ: Cheap is often about as good as “light” is delicious. Unless you’re talking about birthday candles and cotton balls cheap usually isn’t worth the paper your money is printed on.

The more spendy category can be difficult at first
When you first start saving and budgeting it can be quite difficult to shell any more out of pocket than the lowest of quality and cost. I can’t even think of spending an extra $100 NOW…I don’t have that in my bank account! But once you get yourself on better financial footing, you’ll find that you may actually be able to absorb the difference in your regular monthly budget. If not, maybe you’re able to trim a little bit over a few months to make it work.

Sometimes it’s hard to see past the end of your nose
In today’s world, we’re so used to having instant gratification on almost everything that it’s difficult to truly plan for any period of time past tomorrow. Teaching yourself discipline and really thinking about the long-term for you, your family, and your cash flow, will take you far. Few goals are just a month away, so reframing how you look at a purchase can make very meaningful differences on your family’s bottom line!

    What tips do you have when evaluating a purchase for your family?
    Share with us your experiences where cheap-for-the-sake-of-cheap worked well and where other times it didn’t quite work to your favor.

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How do you balance cost and quality? Is the more expensive option actually better for your budget? 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.

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:

    Salary
    Commissions
    Bonuses
    Child support
    Alimony
    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:

    Rent
    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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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.

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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.