Best Tips & Advice for Balancing the Home Budget?

Col Private RallyPoint Member — Sat, 31 May 2014 22:30:02 -0400

This is among those topics that we can't discuss enough... So, what are those tips, techniques, and tried-and-true strategies you've used over the years to: a) stay on budget, b) save on monthly expenses, c) invest/plan/save for the future, and d) live within your means. As most of us know, it can be challenging living on a military budget, particularly in the early years of our careers... so what have you learned that you can pass on; what are those helpful tidbits of wisdom you can share; what are your lessons learned; what did you do right, what did you do wrong; what did you learn from it, and if you had to do it all over again, what would you do differently? Please feel free to share any articles, quotations, excerpts, links, or anything else necessary to help illustrate your point(s). Well, this should be an interesting and thoroughly helpful discussion, so let's get things started; thank you for all that you do, and... wishing you all the best and continued success!

Response by 1SG David Niles made May 31 at 2014 10:38 PM

1SG David Niles — Sat, 31 May 2014 22:38:01 -0400

Live within your means, save for what you want.

Response by SSgt Gregory Guina made Jun 1 at 2014 2:38 AM

SSgt Gregory Guina — Sun, 01 Jun 2014 02:38:53 -0400

What I do that has helped me is to pay my bills when I get paid. All the Bills due between the 1-14th I pay on the 1st all bills from the 15th-the end of the month get paid on the 15th. This includes transferring some into savings (paying myself). I then know that the money I have left is for food gas and whatever play money I might want until I get paid again. This has worked for me and I don't have to ever worry if I have enough money because I can't remember what bill is due. I haven't balanced a checkbook in almost twenty years and I have never run out of money.

Response by Cpl Jerry Millar made Mar 24 at 2015 2:22 PM

Cpl Jerry Millar — Tue, 24 Mar 2015 14:22:44 -0400

When it comes to budgeting, KNOWLEDGE is power! Over my career I have almost seen it all... middle school teachers retiring with over a million in conservative savings; Microsoft rags-to-riches-to-slightly nicer rags than they began with; a couple in their late 60s retiring with $3.5 million after making $200k to $300k per year while working... they blew through $1 million in their first year of retirement and by the middle of the second year, the husband had to return to work.

The common theme is DO NOT estimate, know 100% what is coming in and what is going out. I encourage anyone that is establishing a budget to start with - mint dotcom. I am not affiliated in anyway and it is free.

Response by BG David Fleming III made Mar 24 at 2015 7:52 PM

BG David Fleming III — Tue, 24 Mar 2015 19:52:33 -0400

Here's a big tip, don't spend what you don't got!

Response by CPT Aaron Kletzing made Mar 25 at 2015 7:11 AM

CPT Aaron Kletzing — Wed, 25 Mar 2015 07:11:51 -0400

Great thread!

Response by SSG V. Michelle Woods made Mar 25 at 2015 7:28 AM

SSG V. Michelle Woods — Wed, 25 Mar 2015 07:28:29 -0400

I have been warned by many on Rally Point to start saving for retirement now and I took that very seriously. I opened a retirement savings account and I used the USAA tool to help add up what I will have saved over the next 15 years. I was honestly shocked that saving $100 a month for retirement didn't evolve into a million dollars.
That was a much-needed reality check because even at 30, I still occasionally expect things to magically "work out" lol. So I added $30-50 more per paycheck into that savings.

I appreciate the advice, because retirement was the last thing I was thinking about.

Response by PV2 Private RallyPoint Member made Mar 25 at 2015 8:49 AM

PV2 Private RallyPoint Member — Wed, 25 Mar 2015 08:49:15 -0400

I have been paying down my debts from smallest to the largest. I've brought up my credit rating when it was pretty bad (500s) just 3 years ago. I've since brought it up significantly in the 600s. Just keep plugging away and try to avoid paying things late. My only splurge beyond kickboxing is the occasional indulgence every so often at the Lancome counter at Macy's. lol

Response by COL Vincent Stoneking made Mar 25 at 2015 9:56 AM

COL Vincent Stoneking — Wed, 25 Mar 2015 09:56:23 -0400

Late to the party, but I will share some tips based on my personal lessons learned and the observation that a lot of people seem to spend everything that they think they have and more.

RE: Balanced budget
1. Pay yourself first, but make it invisible TO YOU. When I get a paycheck, it already has TSP taken out (and my civ employer's version from their check) as well as some other things that I can do pretax. Then, automatically - on the same day - I have deductions that go out to FOUR separate savings accounts at different institutions. I do NOT get a monthly statement from these institutions. I literally tend to forget about them unless it is tax time and I get my interest statement from them. Or an major unexpected expense hits..... Then I move a chunk into my "regular" savings.
[I also intentionally overwithold a fair bit for income tax as well, because I use it as a source of "surprise" money every year. NOT the best financial advice, but it's what I do.]

2. Pay everything automatically. If your bank has online bill pay, use it. If it can receive and pay the bill automatically, do that. If not, set up a recurring payment that is more than enough. (because it's not summer yet, I think I owe something like -$200 on my water bill) With most banks now, you can even have the bank automatically send a physical check.

With the above knowledge, what is left is "your" money. Forget about everything else. "Your" money is what you get to spend.

3. Record EVERY purchase. Yes, even that one for $0.79. You will be amazed at how much simply keeping a log will
A. Expose waste
B. Change your actions
I have fallen off the wagon on this a few times and when I got back on, one thing I noticed really quick was that morning stop at the coffee shop on the way to work translates to about $120 a month ($5 for overpriced coffee drink * 20 days, plus another 20 for the tip jar!!!). That is roughly $1,500 a year. Which is real money. After noticing that, I am always quick to notice that my kitchen has a coffee pot....and I have a travel mug.

Once or twice a month, I pull cash from the ATM, usually $200-$300. All purchases over $40 go on my Debit card or Cabela's card, which I pay off at the end of the month. All purchases under $40 come out of cash. What this does is make me think "do I need this" every time I reach for my wallet for something minor. (in addition to knowing that I will need to capture it on my expense log) No checks means that my account balance is always approximately right.

Despite the fact that I drive by my credit union a minimum of twice a day, I become very thrifty when my "wallet balance" drops below $100.

4. Lock it in. At the end of every month, I take half of what's left in checking (after paying off the Cabelas card) and either move it into savings somewhere, make an extra payment to my mortgage/auto loan/Wife's student loans, or invest it.

With the above system, if you factually make enough to pay your bills, you will actually pay your bills, grow savings, and grow (slowly!) your checking account. The trick is you basically gave yourself an allowance without calling it an allowance.

Response by COL Vincent Stoneking made Mar 25 at 2015 10:42 AM

COL Vincent Stoneking — Wed, 25 Mar 2015 10:42:06 -0400

RE: getting out of debt:

1. Record ALL of your expenses for a few months. I mentioned this in the other post, but it is powerful for this exercise as well. Take my Latte a day example. That is $1500 a year that can be redirected at debt. When I was working in the insurance industry and in debt up to my ears, I was working a lot of hours and doing a lot of driving, it was more like 3 a day, at a time when I was literally worrying about making rent....

Similarly, you may find that you have subscriptions to magazines that you never read, or online services you never use. This is REALLY common. I would suggest doing this exercise at least every six months. I just noticed I am paying extra for "payment protection" on my main vehicle, despite the fact that have NO doubts as the my ability to pay...

Found "free" money is the best money.

2. Make a budget. My prior post did not list this step, because it assumed that you make enough to cover all your bills, which is enough for living within your means. If you are not within your means, you need to make a plan to get there. This requires more discipline than just maintaining.

3. Notice if your budget bears any relationship to your monthly expenses.... This is a rude awakening for a lot of people. Here's the tricky bit -- adjust the BUDGET to match the EXPENSES first. Don't say "well, I'll spend what I'm supposed to...." Because most people are creatures of habit. Record the dirty, nasty truth AS the TRUTH. Then start - one item at a time - fixing your BUDGET. This will be hard, because you did the math and realize that you're underwater already. Making fixes that stick will take several months, however, and nothing is gained by self-deception.

This is where a lot of people will start disagreeing with me, and I'm ok with that. :-)
4. Build yourself a small cushion of CASH savings. Even if it's $500 in a coffee can. I find that there is something reassuring to knowing that you have an "emergency" stash, even if it makes no logical sense whatsoever.

5. Start paying yourself first. It doesn't have to be a lot, but start building a savings account as a regular thing. That money doesn't get touched. Not even to cover bounced check fees... Mathematically, it makes no sense as you will not be getting ANYWHERE near the interest on that money as you will be owing someone else. Psychologically, as a statement that you are in control of this sh$t, it is huge. It is also a vital habit to your eventual maintenance of good finances.

6. Prioritize your debts. There are two basic approaches, and I am again going to propose the one with the weaker math. You can either focus on the high-interest accounts or you can focus on the accounts with the smallest balances. Paying off the highest interest accounts more quickly makes the greater dent in your debt.

IMO, the better approach is to pay off your debts from smallest to largest.
The primary reason is psychological. You get more wins more quickly. You FEEL more in control. You made progress that you can see. One LESS bill! A secondary benefit is that you increase your "baseline" cash flow. This makes it easier to maintain a monthly budget without going further into debt. If an unexpected expense comes up, you may be able to weather it by dropping to minimum payments for a few months.

7. Negotiating with creditors CAN be successful. I personally negotiated to get a 22% rate turned into 9% and an 18% turned into 10%. Just as you can often get the cable company to lower your rates for a year or two when you call to cancel. It doesn't hurt to ask. So ASK.

8. After you have made some progress on getting rid of smaller debts, look into consolidation of debts. It's best if you can do that while lowering monthly interest, which you should be able to do. Especially if you have shown some financial responsibility in paying down smaller debts.... But EVEN IF your average interest rate stays the same, it is worth doing. Again, psychologically, it is only ONE bill to worry about, not several. It also makes planning your monthly budget that much easier.

9. Judiciously cut down your available credit accounts. It is very common that when people get into financial trouble, they open more and more credit accounts, with worse and worse terms.... You should not just wholesale cancel accounts - that can devastate your credit rating. You should, however, get rid of the worst of the credit accounts you hold. Anything that has an annual or automatic fee would be the first I would cut. Additionally, just because you KEEP the account, doesn't mean you have to use it....
[I have 4 credit cards, and three charge cards - Lowes, Les Schwab, and Sears. I use one on a regular basis, and pay it off at the end of the month. The others sit in my desk drawer. I will make a purchase on one about every two years - when they send me a notice that they are about to cancel my account for lack of use.]

Other notes:
Bankruptcy. It's way down at the bottom of the list. But it's still on the list. It has serious consequences and isn't a cure-all. Moreover, debt is GENERALLY (there are legit exceptions) a spending problem. A get out of jail card without changes in behavior might see you back in the same situation several years later.

I would approach it like this, if you review all the consequences of bankruptcy and it sounds exactly like your current situation, well then you might want to consider it.... But if you do, you now need to go talk to a professional, not some dude on the internet.

Response by MAJ Ken Landgren made Aug 27 at 2015 8:57 PM

MAJ Ken Landgren — Thu, 27 Aug 2015 20:57:51 -0400

Take the savings out automatically each month, or just shoot the spouse.

Response by MAJ Ken Landgren made Sep 2 at 2015 1:34 PM

MAJ Ken Landgren — Wed, 02 Sep 2015 13:34:31 -0400

My wife liked a certain fingernail polish so she bought 200 @ $4 a piece. I had to talk to her to say we have almost a thousand dollars in inventory. She did not understand the inventory concept at first, but I think she understands now.

Response by MAJ Ken Landgren made Sep 2 at 2015 8:08 PM

MAJ Ken Landgren — Wed, 02 Sep 2015 20:08:45 -0400

Discuss needs vs. wants. Sometimes the wants are expensive.

Response by PFC Robert Falk made Sep 2 at 2015 11:55 PM

PFC Robert Falk — Wed, 02 Sep 2015 23:55:04 -0400

My house runs"not to good" on less then $1,900/month with no money left after the 5th of the month.

Response by MAJ Ken Landgren made Sep 7 at 2015 4:36 PM

MAJ Ken Landgren — Mon, 07 Sep 2015 16:36:37 -0400

Hoarders are horrible. The house is so cluttered they buy what the cant find that is in the house.

Response by MAJ Ken Landgren made Sep 9 at 2015 12:09 PM

MAJ Ken Landgren — Wed, 09 Sep 2015 12:09:55 -0400

There are 3 overarching cardinal rules for federal budgeting: PURPOSE-Is what you are purchasing a genuine need? TIME: Payments should be expeditious. AMOUNT: Is the amount excessive?

Response by SGT Private RallyPoint Member made Oct 17 at 2015 12:35 PM

SGT Private RallyPoint Member — Sat, 17 Oct 2015 12:35:06 -0400

I use Mint.com to help identify what categories I may be overspending in.