budget help

[shelby]

I have been a lurker on the MSN money board for a bit, and wanted to ask the community for some much needed budgeting advice. I have a budget that looks great on paper but cannot seem to stick to this budget for my life. I am a single mother and really need help to make this work. I have heard of the envelope system but don't know much about how it works.

So here it is:
Take home from job approx. = 2300 I get incentives and bonus so could be less could be more just estimating.
Child support = 1000
monthly fixed
rent = 1200
car payment = 256
daycare = 300
CCs 3 different ones = 125 (little less than 4k total)
electric = 100
insurance = 75
cable = 90
misc. = 100

monthly expenditures
gas = 120
food = 400
eating out = 120
misc. = 200

total income 3300 - expense 3086 = 214 left over

I know you guys will do a good job of picking this budget apart and letting me know where I can cut back and what I am not being realistic about. I am getting $7965 back for tax return so will pay off CCs and put rest in EF. I was thinking about paying the remainder of my car insurance with taxe money as well. Since I just got the car it would save me 6 months of car insurance bill. Also I must admit my grocery bill is a little lower than reality I tend to stock up and buy more than I need on groceries, so I am making $100 a week as my goal. There it is have at it and any advice is welcome.

[constanz22]

If you want to learn more about the envelope system, budgeting for irregular income, and getting out of debt, I'd recommend you read The Total Money Makeover by Dave Ramsey.
Just looking quickly at your budget, the rent is pretty high...
How many kids? What are their ages?
You really should try to set your monthly budget with your lowest income and not include the bonuses, etc. You probably shouldn't even include the child support as regular income, because realistically, that can change at any time. All additional income could be "budgeted" for debt payoff.
Do you have an Emergency Fund? If so, how much? Retirement?
Can you change your tax withholding so you don't get such a big refund next year, but get more money in your paycheck throughout the year?

[shelby]

I live in a high cost area $1200 is actually cheap, to go cheaper I would have to move very far or into a 2 bd in not so great area. I have 3 kids ages 9, 6 and 2 1/2. If it wasn't for child support I would not make it unless I got every gov. assistance possible. I don't really see it changing, it is court ordered and my ex would never leave his job and losing it would be very difficult. I am planning on paying all debt with tax return, then the rest will go to my EF. I do not make enough to owe taxes so I am not getting much if any taken out. I have only been at the job for 6 months, prior I was a stay at home mom for years then a divorce so no EF or retirement. The take home is based on 8% contribution to 401k and I get 50% match. My savings and retirement is a totally different issue that I need to address after I get this budget under control.

[❤ mollymouser ❤]

I'm looking at the $300 misc and I am wondering where that money is going and what it's being spent on?

I'm thinking that $120 per month eating out may be more than your budget can handle right now.

I'm wondering if there's room to lower your $400 per month food bill?

I'd like to see you get an emergency fund started, and then regularly funded.

Are there medical copays? I don't see them in your budget?
Car registration?
Car repairs?
Maintenance?

[shelby]

I do have medical copays that I bundle in misc. along with maintanance. I have not budgeted for car repairs or registration those things I just deal with when they come up. Not the best plan but that is what I want any extra to save for, part EF and part unexpected expenses. I just honestly cannot seem to not spend any of the extra money I have, which is why I am asking for tips or advice to get this under control. Hoping someone has been in my shoes and can give advice as to what works.

[Frappuccino]

Will you be able to pay off your car with your income tax refund? That will free up a large amount of money per month.

[mtntigger]

I just honestly cannot seem to not spend any of the extra money I have, which is why I am asking for tips or advice to get this under control.

Pay yourself first, then it will not be extra money and instead your savings will be a bill. Open a separate savings account where you cannot access the money immediately and set up an automatic transfers (once a month or once every paycheck). Start with the minimum amount, (I think I started with $50/month), so you get a hang of this in the budget. Next quarter, see if you can raise it up to $75, etc. It's weird, but the automatic transfers work. Make sure it'll take a couple of days to get to this money so you don't have buyer's remorse. It's weird, but this does work.
Also, if you are getting such a large tax return back, you may want to reevaluate your holdings so you get more per paycheck instead.

[sheilaincali]

pay off the credit cards with the tax refund. Start sticking that $125 a month into savings. Even if you only start with $25 a week- you need to build it up. Because your margins are so tight right now one car repair or hospital bill will send you back to the credit card cycle.

Look to the grocery thread for ways to reduce your grocery bill- they have some great advice. Join us on the January Controlled spend thread for help from keeping the extra money you have from slipping through your fingers.

The more proactive you are with your finances the better off you will be in the long run. Join some threads, build a support system and trust in the good advice you receive. Good luck

[Deleted]

Can you cut the cable? That just seems high to me. I agree that after you pay off the CC with your tax return, set up an auto transfer of the $125. I would recommend ING for that. If you save up $250 and put that in and leave it in for 3 month you will get $25, if you get a referral. Most people can refer you, PM me if you need.
Btw, freeze or cut up your credit card, so you cannot use them. Take the $100/week out and put in an envelope that says groceries and use only that. Come on to the grocery thread and people can help you cut the groceries.

[shelby]

I did reactivate my old ING from when I was married and waiting for the password to start contributing to that and will be where my EF will go. The cable is both cable/internet, cable portion is like $35 I just downgrade and like $55 for Internet after fees. I work from home so really need a good connection was thinking of downgrading internet but won't do that. The grocery envelope system is a good option for me, i just get so carried away at the grocery store. And I am much better at doing weekly budgets so taking my gas, grocery and misc money in cash and putting in envelopes might be the answer. I really like the idea of keeping cc payments in fixed expenses but pay ING instead. Thank you for all the great ideas.

[shanendoah]

shelby:Everything that has been said is fabulous advice, but I want to go back to something you said in your first post:
I have a budget that looks great on paper but cannot seem to stick to this budget for my life.

The first thing you need to do is figure out where your money is actually going. Per your numbers, you should have $214/month to go into an EF, but you know you don't. So, back to th begining, back to the hard and uncomfortable part. You need to track your spending. For a month, you need to save every receipt, or write down every expenditure. FInd out where your money is actually going. Once you know that, compare it with the budget you want to have and figure out if its realisitic or not.

[mommax4]

You mentioned paying ahead on your car insurance if you have enough tax refund left over. This can be a great option. I know my insurance company gives me a discount for paying 6 months at a time. HOWEVER, if you do this, you then want to be saving what you would have been paying for car insurance so that in 6 months, you can do it again. That would be another good use of an ING savings account. Just my 2 cents.

[Frugal Nurse]

I would strongly encourage you to take up couponing. The amount of money you can save every week at the grocery store is unreal. You will never pay for toothpaste, soap, laundry detergent, paper towels, printer ink, etc. again if you start to really get into it. You can get name brand stuff for free or nearly free.

I would say stop eating out . With your tight budget you really can't afford it and it likely isn't very healthy stuff anyway. That right there is $120.00 extra wiggle room! It might be a pain to prepare every meal at first, but once you get into the habit, ti won't seem such a big deal.

You have $300/month dedicated to miscellaneous. Don't let your money anonymously fritter away. Get a note book. Write down every penny you spend for a week (that means EVERY penny- $1.00 to your kid for a treat, $.55 at the vending machine, all of it). At then end of the week, look at the places you wasted money. The next week, try to keep from wasting the money, and still write down every penny you spend. By really tracking where your money is going, you will get better at not letting little things blow your budget.

Do you have a phone? I don't see that listed, but I could have missed it. How much is that costing you every month?

[shelby]

I do have a phone but on someone elses plan so may need to start paying that in the future.

[dianartemis]

Don't let your money anonymously fritter away. Get a note book. Write down every penny you spend for a week (that means EVERY penny- $1.00 to your kid for a treat, $.55 at the vending machine, all of it). At then end of the week, look at the places you wasted money. The next week, try to keep from wasting the money, and still write down every penny you spend. By really tracking where your money is going, you will get better at not letting little things blow your budget.

Definitely agree w/ this. That little thought will keep popping up: do I really need to spend this? Sometimes the answer is yes, but it's mostly no. Get your kids involved w/ this, too. Tell them you want to start be mindful w/ $$ because even though $$ isn't everything, it's still important. So, it's important to be mindful of what you do w/ it too.

[ses]

You have received some very good advice and ways to accomplish your goals. I want to emphasize the documentation of every penny spent. In writing! I have recently started detailing everything on an excel spreadsheet, it makes it so easy to see where i have been and forecast where I am going. As others have mentioned groceries and eating out will be a good place to start. Menu planning weekly or biweekly or monthly can save a bundle. You need to get your kids on board and enthusiastic about this new "family game". Soon they will call you on unnecessary spending. Having them help with the menu planning, and even preparation, will help prevent requests for eating out. Try to work in an allowance for your kids so they can begin learning good money habits with their own money and your good example. Many who have already posted here are regulars on the January controlled spend thread. It is a very good place to find support and accountability. Many of us there have conquered most, or many, of our demons but hang around for the support and friendships. This will be a long journey and you can never have too many friends along the way.

[salserabarby]

First, I would change your tax withholding. An almost $8k refund is way too much. That's $600 a month!!! This is money you could be using during the year.

I would definitely stick to the plan of paying off credit cards, and setting up a small emergency fund.

The most important part of a budget in some of budgeting for things that will come up, such as car repairs, registrations, kid's school clothes, medical copays, etc, otherwise when these things come up they will always be an emergency.

[twinmama85]

Just so you guys know, she probably doesnt have $600/mo taken out in taxes, rather shes receving Earned Income Credit since she has 3 children and only makes roughly $27,600/ year and stated she isn't getting taxed much. I myself am getting a large tax return because of that reason. Just throwing that out there in case you guys didn't think about it.

[freshnewday]

Hi Shelby!
I think you are doing an awesome job managing that amount of income with three kids. You have a great plan to pay off your CCs with the refund. It is going to be wonderful not having the CC payment any more! You have a good budget and are being careful with your money. As you build up an EF, this will help with the unexpected expenses that crop up. I have a rainy day fund for the EF. If something breaks, or we have dental needs, for example, we can take from the rainy day fund. I want to preserve the EF for emergencies like job loss or an injury. Without the rainy day fund (margins), it would be harder to come up with money for the things that are not monthly expenses, such as new tires etc. I hope this helps a little.

I also track all our purchases in Quicken. Each month I can see where every dollar went. I find it so very helpful. Good luck with your budget!

[dreamer218]

shelby: I created a budget on paper too. I have created categories of expenses I know I'll have (water, gas, electric, food, etc). Every time I get paid I split up my check into these different categories. Some categories I will get cash back (food, gas) - that's part of my envelope system.

When I grocery shop I plan ahead knowing what meals I will have, and then create my list. I use coupons & add up my items as I shop throughout the store. It may take me a little longer, but I don't overspend that way (I can't b/c I'm paying with CASH).

I use accounting/ledger paper for my categories. I have pages for checking & savings. I know down to the penny how much I have for each item. It also helps me keep track of mathematical errors I may have in my checkbook registry. When I finished posting my check to my different categories, I add up all my categories that are in my checking account. This figure should match the balance in my checkbook registry.

When I pay a bill from checking, I'll post it in the category it belongs to and then put a check mark in my checkbook registry so I'll know I've posted it to my ledger.

The first month was the hardest for me on this system. I get paid weekly so as the bills were coming due I not only had to have the full amount, but also 1/4 of the amount for the next month's bill (I adjust this accordingly - if a bill is semi-annually, annually, etc). Once I got through that first month, I had the funds for each of the categories I created fully funded. Fortunately, not all bills are due at the same time.

I definitely agree with constanz Dave Ramsey's "Total Money Makeover" is a wonderful book. I read it shortly after I started racing (I found out about him through WIRR). That's been over 2 years ago. He has you take a good look at the person in the mirror. It's very motivational. He also has a lot of other useful tools, (like Financial Peace University) but I think "Total Money Makeover" is a good place to start. Your library may have it if you don't want to buy it.

This plan has worked well for me. I have had to make adjustments to my budget from time to time (maybe creating a new category or deleting a category no longer needed), but I still stick to the budget. It has taken a lot of discipline making sure the person in the mirror behaves & not feeling guilty about saying "no" (to your kids or yourself). In the long run I know I'll be much better off.
Your at the right site for support. Hope this helps! GOODLUCK!!!!

[haapai]

shelby, if you only worked 6 months of 2010, there's a good chance that your tax situation and EITC will be very different in 2011. Here's a link to the best explanation of the EITC that I've run across.

http://www.taxpolicycenter.org/briefing-book/key-elements/family/eitc.cfm

You may find this helpful for determining what next year's EITC will be and making choices regarding your withholding/exemptions claimed. Bear in mind that these tables are for 2010 (they won't change much in 2011) and that AGI, not gross income, is the crucial number for determining the size of the credit. You'll probably also want to look up the 2011 tax tables, standard deductions and personal deduction amounts but you can get those with a quick google search.

With four personal exemptions and head of household filing status, you can earn a surprising amount of money before any of it becomes taxable and even then it will be offset by a large EITC credit.

It's a lot to digest all at once. You may not find it immediately useful.

[Frugal Nurse]

oops- I didn't realize I'd already posted on this thread

[turbothumper]

Shelby: I have to agree with Shanendoah, the budget might not be so much of a problem as the leaks in the budget.

I know from personal experience that tracking every penny (although absolutely the best way to know where all of your money is going) can be very difficult. Start by using the envelopes for gas, groceries, etc. Write down the date that you put money into them right on the envelope. The next week if when you go to refill them there is money left, take it out and put it to savings. If you find you are running out of money, you will need to rethink how much you are allocating to that category.

I would recommend using an envelope for the misc. as well. Use the envelope itself as a tracking device for what you are spending it on. If you have the envelope to pull money out of, you just have to write a quick note of what you bought and for how much on it.

For me, it helps to make the tracking as simple as possible. Groceries:
$100 into envelope on 2/17/11
$5.36 remaining on 2/24/11 ($100.00 - 5.36 = $94.64 spent on groceries)
$100 into envelope on 2/24/11
and so on

Then if you find you are consistently having extra, adjust the amount down. Or, if you are running out, adjust it up.

A budget is wonderful in theory. USING the budget is the only way to make it help you.

[Deleted]

"I just honestly cannot seem to not spend any of the extra money I have, which is why I am asking for tips or advice to get this under control."

Shelby, I had a similar problem when I first started getting a handle on my finances. I finally had to accept that I have a problem with discipline; if I have money available, I'm going to spend it. So I needed to seperate my money.

From each paycheck, I have a direct deposit into a savings account at a credit union. That's my EF. I don't have an ATM card for that account and the CU is across town, so no quick trips to withdraw money.

I also have a set amount that is deducted from my paycheck and direct deposited into a checking account that I opened solely for household bills (mortgage, utilities, phones, internet and cable). No ATM/debit card for that account either.

Whatever is left is my 'paycheck' ie spending money and deposited into the only account that I have a debit card for. Groceries, gas, ALL daily living expenses come from that account. I also have a bi-weekly automatic transfer from this account to ING for irregular expenses like car and home repairs/maintenance, car insurance (paid quarterly) and registration, travel, etc. I'll cover these items out of my 'spending money' if I can, but if I can't, I'm still good because I can just get it out of the account it's suppose to come out of.

So I have 2 savings accounts and 2 checking. But in my head, the account with the debit card is the only one that exists. The account for household expenses exists only when it's time to pay bills. The account for irregular expenses exists only when I have to pay for one of those planned, irregular expenses. The EF is kind of a figment of my imagination. LOL If I pretend it doesn't exist, I won't want to spend the money.

I don't know if any of that is useful to you, and it probably sounds more complicated than it is. Everything is done automatically, and it keeps me from spending money I shouldn't spend. Or, even if I go crazy and blow all my spending money the day after payday, I may have to eat bologna and crackers for 2 weeks, but I've already funded my savings and I still have money to pay my bills.

[shelby]

Thank you for all the advice. I have set up my ING account and just transferred $3200 to that for EF, and will add any additional money at the end of the month. This account is not easily accessible takes days to transfer and have funds available. I started the envelope system and using only cash which I find helps a lot, I can easily stay within this budget for regular expenditures. I have gone way over the budget though due to having so much extra cash on things like a carpet cleaner (yes a frivolous expense, but anyone with children knows it can be a god send saves on rental or professional cleaning), clothes for kids (needed) things for the house (frames nick knacks not so much needed) and underwear pair of jeans for me (partially needed). Then OMG my rent as of April 1st is increasing by $200 a month if I sign a lease again if month to month 10% on top of that. I can move and spend a thousand or so in the process, but nothing better or cheaper in the area without going very small like 2 bd. Since I work from home smaller would not be an option need space for my work area as to not feel cramped and claustrophobic. I could move somewhere cheaper since I do work from home and can live anywhere really, but want to stay close to relatives as they help with childcare and my ex helps in the mornings getting kids off to school and so baby does not spend so much time in daycare. I have moved so many times in the past and promised kids they would spend more time in 1 school and we would not be moving for awhile. I want to save as much as possible and buy a forever home which will be in a more affordable area. So need to stay put for now and make an aggressive savings plan. Have found town homes same floor plan as I have now but further out so more affordable for 150k range all said and done about same as rent including dues taxes pmi and such. But that is a ways off and hoping even cheaper in a year from now with ll the foreclosures soon to hit. So that is where I am at hope I can make this work will keep posting and coming here for advice.

[shelby]

Will put CC payments in savings and work on cutting down misc. items and eating out. I did lower cable and have netflix probably should just cut cable out. I am going to try to refi the car thru my credit union to lower interest. I also asked to negotiate rent down $90 a month, will find out monday. Also just to add my income above is take home and the lowest average of the last 4 months also calculated on a 2 paycheck month so will have 2 extra checks a year.

[shelby]

I honestly do not see moving as an option not only expensive but like I said nothing cheaper. I would have to find a new daycare and school plus add a day to babies daycare (ex's parents watch him on Mondays). Time off work to move the hassle and time to pack. The damage to the kids going to new school adjusting making new friends my oldest has apergers and change sets off a wide range of negative reactions. I really really really don't want to move again.

[shelby]

I have a couple states I could live in and keep my job, WA TX FL OH and HI. All are cheaper accept HI, seattle area is so friggin expensive to live in I am seriously thinking of relocating to TX (the only one I think I would want to live). Also I could ditch the 40 degree drizzle for 7 months a year weather that I cannot stand but trade for hot and dry. I don't know anyone familiar with any of these areas can you advise?

[gsbrq]

Shelby,

I noticed you have "misc." in your budget twice, for a total of $300; that plus the $214 that you "should" have left over is more than $500 in unaccounted spending. I think the main issue is that you're just not budgeting for all your expenses, so it's easy to slip a lot of unnecessary spending in with the "needed" items.

What works for me is creating an annual budget that includes every expense I'll have over the course of the year, then use that to determine how much of each paycheck I must deposit to savings. For example, if I budget $520 for clothes each year, then I have to save $20 each paycheck for that purpose. Once you do this, you'll quickly see that your disposable income is much less than the $514 in misc/extra that your current budget specifies.

With an annualized budget, the majority of my paycheck is immediately allocated for bills and savings. With the small amount remaining, I give myself a cash allowance for groceries and spending money--when it's gone, I have to stop spending. If I don't use this method, I tend to fritter away $5 here and $10 there, which can add up very quickly to real money.

Good luck!

[gsbrq]

Shelby,

What part of Texas are you considering? Some areas are very affordable, but if you have a special needs kid I'm not sure if the school system here would be adequate, especially with current efforts to decrease funding for public schools in our state.

Also, summers can be hideously hot, with very high electric bills. It regularly hits 100 and above several times during the summer here.

On the other hand, Texas has no state income tax.