Budget follow-up

I know this is all very tangentially related to our whole theme around here, but I just had to follow up on our budgeting discussion to say that I’ve started using mint.com and it is neat-o frito bandito, people. Thanks so much for the recommendations!

Being able to see credit card/bank transactions and categorize them as soon as they’re made is awesome (I think if I can commit to doing that, we might be able to be trusted to go back to using our credit/debit cards for everything!). It definitely caters to the all-electronic set. One downside is that not all banks are hooked up to it – some of our savings are at a rinky-dink local bank, and my retirement accounts are in a weird industry-specific fund, so I can’t hook up to either of those. It would be nice for the bigger picture but hardly critical for day-to-day budgeting. It took awhile to set up all our accounts and get the budget categories how I wanted them, but I think it was worth it.

I did also check out pear budget, after reading some reviews that it was easy-to-use and no-frills, and while it did seem to be both of those things, it was SO no-frills I’m not sure I’d pay $3 a month for it – you could accomplish the same thing with some very basic spreadsheet skillz yourself (mint.com is free, there is just some advertising on it – I haven’t found it annoying so far). Having to personally enter every receipt would be my downfall – the glory of mint.com is just logging in once a week or whatever and categorizing any transactions, many of which will automatically show up in the correct category anyway all by themselves! Oh, wonder of wonders!

OMG Daycare (Or, experiments in budgeting and cash)

While I was aware that daycare would be expensive, and having a baby would cost money and all, it really did not completely sink in until I started looking at daycare options a few months before the little mister man arrived. Realizing that there was going to be a new $700 line item in our (nonexistent in that we don’t really have a careful one) monthly budget is a major kick in the pants to get this mess under control to avoid disaster! (If your daycare costs way, way more than that, please don’t hate me. If it costs way, way less, please don’t tell me.)

As I was prattling on to Olivemom about this and what I was planning on doing, she suggested it might be a good blog topic…another tangentially related flavor of our “simple green clinical trials.” So here it is! Assuming I don’t completely crash and burn and declare it’s all hopeless, Olivemom might even come along for the ride in a few months!

Envelope System: I picked up on this from the thrifty-mommy-blog world, but apparently it is quite popular all around and a big part of this financial guru I’d never heard of before‘s plan (Handy detailed overviews here, here and here!). The idea is simple – identify your monthly budget, and use only cash (in categories where it is reasonable to do so, like groceries, gas, personal care, household items, entertainment). Put those amounts in an envelope at the beginning of the month, and that’s what you’ve got. This will be a big change for us, as for several years we have used credit cards like cash for basically everything (the points! the POINTS!!!). And while I do love my cashback bonus, I don’t love how easy this makes it to lose track of what you are spending.

Sinking Funds Strategy: The other thing I’m planning to do is start a separate account for quarterly and annual expenses.  I calculated out the monthly cost for them all and will move that set amount into a separate account every month instead of just being somewhat surprised when the bill arrives and assuming we just have enough sitting in our checking account to cover it. SimpleMom has a great description of her method for this!

General Budget Overhaul: A central part of both of the above items is just doing a general budget review and overhaul. What on earth are we spending all our money on? We have REALLY been digging into it – not just the typical big categories, but really fishing through the file cabinet to make sure we’re capturing ALL the quarterly, annual and periodic expenses and factoring those into our monthly budget. Along the way, we have even identified a couple to easily cut back on. Whee!

A warning, though – this can be a pain in the butt as you finally make yourself do things like get new quotes on car insurance for the first time in ten years and downgrade your AAA membership and call such-and-such company to claim the $3 a month discount you’ve been eligible for the past year but just never bothered to call about. I wouldn’t know anything about that, as obviously I would never procrastinate in such a fashion.

While this all seems a bit overwhelming (so far in a good, fired-up-to-dominate-this way), I am hopeful it will end up helping us commit to living more simply (nothing like having a finite amount of cash in an envelope to help us not buy crap we don’t need and think hard about purchases!) and hopefully help free up some money to even spend more on things we care about, give, and save.

Does anyone else use cash-only or the sinking funds method? Any tips’n'tricks, experiences, or inspiring tales out there? I am thinking it will probably take a few months of tinkering both on the amounts and the method.