Spring Budgeting Update

I blogged here in January about starting a real budget rather than just "curbing my spending," since that wasn't working. And guess what? Budgeting works! I adapted my budget system from the cash-only system described at Down to Earth here.

After tracking my spending for a couple months, I calculated how much I was spending outside of rent and utilities--between $450 and $500 per month. So I cut that figure down to $400 and decided that was how much I would allow myself every month for spending on food, entertainment, and of course all the random things like toilet paper and shampoo. I also wanted to keep my credit rolling, but wanted to put a limit on how much I would put on my credit card every month. I always pay off my credit card completely, but decided to spend only cash for the first month (February). So I paid off the entirety of my credit card balance and let a month go by without putting a single cent on my card. I withdrew $400 from my checking account at the beginning of the month and that's what I spent. I do not set aside certain amounts for entertainment, groceries, etc, and that works for me. Other people might need to put aside money for each of these categories, but I just evaluate as I go, and it works well for my life. I had around $5 left over at the end of February, which I deposited into my savings account (yes, the bank teller thought I was nuts). It strikes me now that starting this budget on the shortest month of the year was an interesting, if unintentional move!

I am now still operating on $400 per month, $250 in cash and $150 on my credit card. I find that setting a limit on my credit card spending also helps me spend less- it's hard to hit exactly $150 so the total usually hovers around $140!

By the way, if you are an REI member or want to be, I will put a plug in here for the REI Visa card, I don't usually promote things like that, but their customer service has been impeccable and you will receive rebates from all purchases, and these will end up in your REI dividend, which equals free stuff! My caveat to this is, if you use a credit card, please please try to pay it off as soon as possible. Credit card companies make a killing off of people who make only the minimum payment. Please pay attention to that. Happily, there are new laws in affect now that are here to help raise awareness about the treachery of credit card interest rates! If you look on your next credit card statement, you should see a warning and a calculation showing how much extra you will pay over the next couple years if you only pay the minimum payment each month. Please be aware and save yourself some grief and money. If you don't think you can pay off what you put on your card every month, than I suggest going with the cash only system until you feel like you get your spending to a manageable place. It's amazing what you can live without without your quality of life decreasing.

I was worried that budgeting like this would put a lot of constraints on me, but I don't really find myself wanting anything extra. If I know I have a big purchase coming up (e.g. buying a dress for my brother's wedding) then I stock up on groceries in advance and pay for that big purchase within my budget. I have also been helped along by the fact that Matt chips in for food costs since he's at my house so often, by the Chinook Book coupons, and Bernard at Full of Life Farm giving a free dozen eggs to any customer who filled out a survey about his products this month! We only go out to eat a couple times a month, and our fallback for dinner out is the taquería two blocks from my house, where tacos are $1.50 apiece.

The only obstacle I have run into that did not fall into my budgeted spending was taxes (once again, I screwed up my W-4 this year and did not have enough withheld, so had to pay a big chunk to the fed all at once). Also, I recently decided to begin contributing regularly to my IRA which I had set up at my previous job. I have never actually contributed to it, but that company did. Now I am planning to deposit $25 per month. It's not much, but it is what I can afford right now, it will add up, and will create larger interest. It's never too early to start saving for retirement, I suppose, and I might as well contribute while I am steadily employed! I'll put in another plug here as well, for Calvert investments. While I am no investment expert (whoa. Far from it.), I am pleased that the Calvert Group invests in socially and environmentally responsible companies.

I am very satisfied with my budgeting  and pleased that it actually works, and here's the biggest reason: I am managing to put $500 into my savings account every month now!