I Have a Love-Hate Relationship With My Budget

I have a love-hate relationship with my budget but not for the reasons you would think.

I finished up my 2017 budget yesterday–gasp, yes 11 days later than normal.  My careful readers know I typically spend New Year’s Day updating my prior year spending and net worth and finalizing my current year budget but not this year.  I started working on it in mid-November but sort of forgot that it wasn’t complete.  For me, budgeting is such a given that the lack of a budget has no impact.

I’ve been budgeting for 34 years now.  My early budgets had 4 categories–rent, car payments, gifts, spending (everything else).  I now have 21 categories–I have the various utilities dual home ownership requires and I’ve broken spending down a bit further (vehicle, boat, home improvement etc.).  Doing my budget each year takes about an hour and most of it stays the same from year to year.  My spending budget is the same as it was 10 years ago–I didn’t spend it all then and I don’t spend it all now.

What I love about my budget is it is a permission to spend plan.  If I want to do something, and the cost fits in my budget, I can do it without thinking much about it.  I don’t have to finagle, I don’t have to justify, I can just do it.  I don’t even care whether I have money in that particular line item–I can save money in one area and spend it in another.

So let’s say in June Mr. Ms. Liz and I decide to take an epic vacation.  Let’s say my $10,000 budget for vacations (yep, it’s that high–I’m retired after all!) isn’t adequate for my portion of this epic trip.  But in June, I am under budget on my spending category by $2,000. I can put that $2,000 towards the epic vacation without much thought.  It was budgeted and it wasn’t spent so it is available for whatever I want.

In a strange way, budgeting is freeing.  I don’t have to think or worry (I’m a worrier y’all!) about my money because I have a budget.  I know if I stay within my budget, I’ll meet my goals.

What I hate about my budget is it is a permission to spend plan.  Last night, I was updating my quicken with the spending I’ve done so far this month.  I looked at my income statement and noticed that I haven’t spent much money yet this month.  I then started thinking about what I “need” since I have the money to spend.

I try to time infrequent expenses so they don’t cause a budget overage so I’m thinking this might be a good month to buy a new biking helmet.  Or I could just spend less than I budgeted and finish the month with a surplus.  That’s a great way to start a new year–as long as I don’t crash on my bike . . .

A helmet is a bad example because head protection is super important but sometimes my budget encourages me to spend money on things I don’t value enough.

Each spending decision I make is an effort to balance how much I value this thing or this experience vs. how much I value having this money.  If I value what that money can create for me more, then I don’t spend it but if I value the thing or the experience more, then I spend it.

If I feel like I have extra money in my budget, it changes how I evaluate that balance.  I demand less value from spending than I should.

I signed up for the Frugalwoods Uber Frugal Month program this month.  Partially because I knew I would learn something from Mrs. Frugalwoods and partially because I find her writing and pictures so amusing I knew I would be entertained–and I have not been disappointed.

They don’t budget, because they find a budget to be a permission to spend plan and their goal is to spend $0.  I think they’re right–I think I would spend less without a budget.  But I think this only because I have budgeted for so long that balancing my spending with my other goals happens automatically.

Not long after I retired, I was chatting with my Mom’s financial planner.  He said the thing his retired clients struggle with the most is spending enough money.  Their thrifty habits served them well when working towards financial independence but work against them once they have achieved it.  They weren’t using their money to live their best life.

His advice to me was to spend more money and live my best life.  So I’ll continue to think about my budget as a permission to spend plan–and I’ll be shopping for that helmet this week.

Is your budget a permission to spend plan?

Social (in)Security is Complicated!

Many of my younger readers think they will not receive Social Security.  This is because the trust funds are predicted to be exhausted sometime around 2034.

There are many reasons the government will not allow Social Security to disappear.  Social Security payments keep about 35% of older Americans out of poverty and is the principle source of income for nearly half of this group.  It simply cannot go away without destabilizing our country.  Oh, and old people vote so it will never happen.

But things will definitely have to change. 

Continue reading “Social (in)Security is Complicated!”

The Stock Market Seems Really High . . . Should I Sell?

Election night it looked like the stock market was going to tank.  S&P 500 futures were down about 15%.  I was scared for my country and my money.  I was preparing to write an article celebrating that stocks were on sale and telling everyone to stay the course or to buy.  Rather than crashing, we saw the S&P 500 go up over 1% the day after the election and it has only continued to rise since then.  This is a very different article but the answer remains the same.

This post-election stock run up has been amazing.  Through Christmas weekend, we hit all time highs.  My invested assets grew over 3% in November and an additional 2% so far in December–the annualized return is over 30%.   I made more these months than I’m likely to spend in all of 2017.

Price to earnings ratios are very high.  This ratio compares how much a stock costs to the earnings companies reported over the previous 12 months.  We’re paying almost $26 for $1 of earnings for S&P 500 index funds.  The historic average is under $16.

So the market looks expensive.  Does that mean this would be a good time to sell and wait for a dip in the market to buy back in? Continue reading “The Stock Market Seems Really High . . . Should I Sell?”

Happy New Year!

Happy New Year y’all and cheers to a great 2017!

Here’s a great article from Brent Esplin of The Micawber Principle to get your year started right – Separating the Essential from the Important.  This article is well worth the few minutes it will take to read it but since we’re all extra busy this time of year, here’s the summary.  How about focusing on one of these essentials each month next year? 

















Your Behavior

Your Knowledge

Your Behavior

The Stock Market’s Behavior

Big Financial Decisions

Small Financial Decisions

Brent highlights the importance of discovering your why.  If you haven’t worked on your why lately (or ever) this article can help you get started.  Knowing your why keeps you from getting derailed from your path–or helps you get back on your path after you are derailed.

Master Your Money – Build the Foundation For Your Dreams


12 Steps To A Kick A$$ Life

How should you balance your different financial goals?  Should you save for retirement before your credit cards are paid off?  How about student loans?  I thought it might help to talk about the steps to reach financial independence.

Want to accelerate your progress through these steps???  Calculate your net worth regularly and track your spending.  And to stay on track with these steps, you have to figure out your why.  Otherwise, it will be way to easy to start chasing the next shiny object rather than keeping your eye on the prize that matters most to you.

Ok here they are, Ms. Liz’s steps to a Kick A$$ Life:

  1. Establish an emergency fund of $1,000.  Stuff happens, if you’re not prepared, it will knock you off your steps.  I’d cut out all non essential spending (I’m talking to you–dining out, memberships, cable TV) until you have your emergency fund.  Put it in a separate account–or better yet, a separate bank so it is difficult to access.
  2. Pay off your credit cards and other high interest consumer debt (appliances, furniture etc.).  If the interest rate is 6% or more, pay it off.  You can do this in two ways–debt snowball or debt avalanche.  The debt avalanche pays off the highest interest rates first, debt snowball pays off the lowest balance first.  Both work–debt snowball may make it easier to stay motivated, debt avalanche results in lower total interest costs.
  3. Contribute to your retirement plan up to the company match.  Your employer’s retirement match is free money!  And it’s even better than most people realize.  So as soon as you get out from under high interest debt, you want to take advantage of it.  If you tell me you can’t afford to contribute to retirement, I’ll say you can’t afford not to.  If you tell me you’re too young, I’ll tell you it will never be easier.  Just do it, future you will be so grateful!
  4. Increase your emergency fund to at least three months of essential expenses.  Take your bare bones monthly expenses–rent, heat, light, minimum debt payments, and groceries X 3.  Add this amount to your emergency fund established in #1 above.
  5. Pay off any remaining consumer debt not paid off in #2 above.  Use the same method (debt snowball or debt avalanche) if that worked well for you or try the other method if it didn’t.
  6. Pay off car loans using either the debt snowball or debt avalanche.
  7. Increase your retirement contributions to the desired level.  If you’re contributing to a traditional retirement plan, this chart shows how many years you’ll need to work at different contribution levels.  If you’re contributing to a Roth retirement plan, this chart shows how many years you’ll need to work at different contribution levels.  These charts are a bit sobering–If you contribute 5% to a traditional account, you’ll need to work 71 years to retire or 61 years if you will receive social security–YIKES!  You’d better get started now!
  8. Save for your next car, house or other large purchase.  You’ve worked really hard to get to this step, you’re debt free other than student loans and your mortgage.  Congratulations!  But you don’t want to go backwards so must save for large purchases you want to make.  Keep this money separate from your emergency and operating funds.
  9. Pay off your student loans.  If you have student loans, work really hard to make them go away.  Use the debt snowball or debt avalanche.
  10. Save for your children’s education.  You may be surprised this is so far down the list but there’s a very good reason.  No one will loan you money for your retirement.  There are many options for students to fund their education–you have to put your future first.  As much as I bitch about wearing tough skins as a kid, I’m super grateful my parents looked after their own future so I don’t have to.
  11. Pay off your mortgage???  With current interest rates extremely low, it probably doesn’t make financial sense to pay off your mortgage.  But, if owning your home is important to you–if it will help you sleep at night, you may want to pay off your home.  Mr. Ms. Liz and I chose to do this and we are happy to really own our home.
  12. Invest, invest, invest.  If you’ve made it to this step, you’re truly kicking A$$!  Keep saving as if you were working on the earlier steps and invest.  Figure out the level of risk you are comfortable with and educate yourself on investing.  Here’s a helpful article to get you started.  Utilize tax advantaged investments (401k’s, IRA’s, HSA’s) to the extent they are available to you.

If you’re making progress through these steps and something knocks you off the step, back up to an earlier step and get started again.

If this seems daunting or scary, go back to your why.  Why do you want to improve your financial life?  What do you dream about?  Do you want more options with your work?  Are your commute, a co-worker or a customer stealing your sanity one morsel at a time?  Do you want to save for a trip of a lifetime?  Do you want to reduce the worry and stress in your life?  Whatever it is, put that why front and center.  If it is truly the most important thing to you, a few steps aren’t going to keep you from achieving it.  People without your special talents have done it and you can too!

Start small–just one step before thinking about the next one.  Make reminders of your goals.  I read about a man who kept a picture of his family in his wallet next to the cash so each time he was making a purchase, he weighed it against his goal of spending time with his family.

Let me know in the comments where you are in your steps, are there any I should add?  Any that need additional detail?  Thanks for reading!


Your Cheat Codes For Real Life

We’re in for a real treat today!  MitchTheCatSitter, a frequent and insightful commenter on Ms. Liz has written a guest post for us.

You youngins out there probably know what a cheat code is.  This old lady had to Google it.  A cheat code is a trick that gamers use to bypass the tough parts of a video game in order to win.  Mitch has laid out four cheat codes that will help you bypass the tough parts of your financial life and allow you to live your kick a$$ life.

Mitch is living a pretty kick a$$ life of his own.  He and his wife reached financial independence in their 40’s by working hard, maintaining a high savings rate and investing in real estate.  Pretty much by following the cheat codes he has laid out for us below.

But don’t you dare call him retired as he will be quick to remind you that he drives a bus . . . one day a week, in the winter.  When he’s not playing bus driver, he can be found playing with his backhoe, riding motorcycles, playing bridge, managing their real estate holdings or investing their portfolio.

So without further ado . . . MitchTheCatSitter:

Okay, you’re not in the 1% and may never be. Who cares? Wouldn’t you rather have a meaningful life anyway? Grinding away to climb the corporate ladder has no appeal. Being nimble and sampling all of what life has to offer is what is attractive. Meaning and mobility come waaaayyyyyy before money. Continue reading “Your Cheat Codes For Real Life”

Are You Ready For A Challenge?

The good folks over at Frugalwoods are hosting an Uber Frugal Challenge during the month of January.

Daily inspirational emails, a facebook group and one helpful hound will guide you through this challenge.

Seriously good folks–she’s my favorite contributor to the frugal blog world.  Her articles are very personal, entertaining and warm.  Even if you’re not that frugal (like me!), you’ll be entertained and informed.

Interested?  Get the details at Frugalwoods Uber Frugal Challenge and sign up!  It’s free and a great way to jump start your financial success in 2017!

On Finding My Retirement Balance

There are a couple balances that really matter in retirement.

We’ve talked a lot about financial balances.  How much money you have, how much you spend and how much you need.  This balance is important so you can have a retirement free from excess worry.

I’m a worrier so it’s impossible to think that I would not worry about my finances in retirement.  But I have adequate cushions and contingency plans so I don’t have to worry about money . . . much.

The other balance that I’m still trying to figure out is how to balance my time.  Continue reading “On Finding My Retirement Balance”

I Froze My Credit–Should You?

It seems like every time I turn on the TV I hear about another company getting hacked and more people’s personal information getting into the wrong hands.

I received a phone call yesterday from a former colleague and good friend.  The accounting company that does her taxes was hacked.  Her four children and her own social security, address and dates of birth are now likely being offered to the highest bidder on the internet.  With that information, someone can easily file fraudulent tax returns, apply for credit, obtain medical services and wreak other havoc with their lives.

Last year, two of my friends had their tax returns filed fraudulently.  Someone else received their tax refunds before the real people had the opportunity to file their returns.  They spent hours going to the Internal Revenue Service offices to prove that the returns were filed fraudulently and confirm their identity so they could receive their own refunds.

To combat this risk, I can spend anywhere from $100 to $329 each year to have a company monitor my credit and reimburse me for lost funds.  Or I can protect myself by spending an hour freezing my credit for free.  This only works because I am not routinely seeking new lines of credit–mortgages, credit cards etc. Continue reading “I Froze My Credit–Should You?”