MM’s Money

September 11, 2008

Conflicting Goals, Maybe?

Filed under: Debt,Planning,Uncategorized — mmsmoney @ 12:00 pm
Tags: , , , , ,

So part of my family financial makeover is to start saving. Family Financial Makeover has a nice ring to it…Googling…No, it doesn’t appear that I am using someone else’s trademark/copyright (I get those confused). OK. It’s MINE. My Catch Phrase. Hands Off! Now how do I trademark/copyright it? Can I get people to pay me for usage?

 Ok- back to topic: Yes, I am trying to build the buffer between me & disaster (that YNAB Rule#1 one-month’s expenses discussed in the previous post – listed as Goal 1 below), but at the same time, I have equally important and compelling goals:

  1. Goal: Generate Buffer. Execution – slash & burn expenses and allocate avoided dollars to buffer.
  2. Goal: Pay down debt. Execution – begin snowballing personal loan (at the YIKES! interest rate of  18.6% !) to free up cashflow in the budget ($201.50 per month). Current Snowball Amount: $100/month
  3. Goal: Start saving for Major Emergency Fund/Baby College/Car Fund. Execution: start slowly at $10 per payperiod in 3 accounts (total per month: roughly $60).

Now why would I try to accomplish all three goals at once? Am I setting myself up for failure?

First, for psychological reasons. I have been so beaten down by financial trauma, stress and discontent that I need to start on that debt ASAP. And I feel that with the help of YNAB, I can get to my one-month’s goal within the same timeframe as paying of that personal loan. And I do buy into the Dave Ramsey small-victories build momentum approach…I need to change my behaviors and I need to get positive reinforcement through accomplishing a goal. I should note I have not read any of Dave Ramsey’s books – I’ve heard his radio show two or three times, but I have read A LOT of blog posts and comments-debates on his theory and alternative approaches! I guess I am luck that my smallest debt and the highest interest rate are the same debt so I don’t have to be “stupid” according to varying groups of blog-commenters (and I’m pretty sure they are roughly divided in half in each of these camps).

Second, it’s kinda six-of-one, 1/2 dozen of the other to me. I’ve screwed up and screwed up badly in the past and have not done the requisite learning from my mistakes (yet – I need another disaster to prove/execute on what I’ve learned). Building the buffer will implement the YNAB approach, but only if no emergencies happen in the near term (til I get that loan cleared). My credit union really takes care of its members and in conversation with my branch manager, who yes – does know me by name, she indicated that the credit union is very willing to help members get out of trouble when they proven themselves dedicated to fixing their issues which (in context that I shan’t go into) to me sounded like my clearing my loan successfully (never been late, never asked for more funds, paid extra upon occassion and more regularly lately) would be beneficial if that near-term disaster were to appear. I really think my car is going to die soon – I really do. And being eligible for a car loan from them in 6 months is more likely than my being able to save $7000 for a good used vehicle. So as awful as it sounds, I’m almost resigned to needing another loan! and need to clear the current one to ensure this future one becomes available.

Last, the savings issue – I’m oh-so optomistic here. We have to have the major emergency fund – DH’s insurance (liability) has a $10K deductible. Where we would get that money should a project he’s working on go up in flames and we’re liable…Oh I could lose sleep over that. $10 at a time sounds miserly, but babysteps, right? Next – the baby. She will get college tuition paid for and I need to let the power of compounding interest begin to work its mojo. Simple as that – it is as important as any other goal in my personal view. And last – yes that car will die sometime. Maybe its death is 6 months from now, maybe 18 months. In any case, some money will be set aside for that eventuality and to avert the total need for another loan!

So tackling them concurrently, although with differing amounts budgeted against each per month, seems like a reasonable approach to deconflict the goals. Ultimately, it’s my job to make sure we don’t screw up again and this is the plan for now. Subject to revision, subject to God’s Will!

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September 8, 2008

What We’re Doing

Filed under: Planning — mmsmoney @ 12:00 am
Tags: , , , ,

So we had a budget for many months and unsuccessfully tried to spend only what we made only when the money was available in our checking account. But that really wasn’t working for us…timing of bills, the variability of DH’s income, fixed expenses were just piling up at the wrong times. So we have been struggling, even with the help we’ve received this year. Recently – like 6 weeks ago, and I wish I could remember how I found the link/referral, I found the  http://www.youneedabudget.com/blog/ And I read a lot without even realizing the blog was in support of or accompanied a product! Duh! So I was reading about these “Rules” and thinking, yeah – that makes sense. How simplistic (and not necessarily in a good way) – I could have come up with that!

When I finally looked to the top of the page and saw the links to success stories and the history of the blog, the light came on – OH This is Selling Something! And that something is You Need A Budget software – YNAB.  The creator of the software is an accountant who started his homegrown spreadsheet budgeting solution when he and his now wife were still in school – trying to live on pennies a day and struggling to forecast what monies they would have to spend in the future. Well, we’re there, DH and I. We needed a tool and a system that allowed us to budget without knowing the variables that would impact the upcoming month. So here it was – the tool and the system – and for the bargain basement price of $39.95!

Funny the timing – August was a good month, since I actually caught up on the electricity bills for the summer ($300 June $450 July $360 August) and had about $150 to live on after the month’s first paycheck. So I spent that $39.95 and downloaded the software, the bonus excel worksheets and the YNAB way ‘book’ which is the detail of how The Rules work and how to begin integrating the budgeting and The Rules into your life.

I read the book at the gym that next day (I run on the elliptical machine for an hour every other day) and installed the software that afternoon. And we’re on our way! In a nutshell, YNAB advocates the following Rules:

1) Spend last month’s income to pay for this month’s expenses. Since you know at the end of the last month what you’ve made, you can allocate that amount and only that amount for this month’s budget.  To live under this rule, you have to save up the amount of a typical month’s expenses (including plug numbers to accumulate annual expenses across a budget item) before you can truly be worry free! So far we are $200 towards our one-month’s buffer.

2) Give every dollar a job – allocate all monies to specific budget line items to balance to zero each month. This concept is not new (see my simplistic comment above), but the execution approach is – sock any extra income into that buffer category instead of letting it be ‘unassigned’ in a savings account. That way, you know what each dollar is doing for you and this removes temptation to reallocate if things get tight in the month!

3) Prepare for circumstances – like annual bills – that you can expect, but sometimes don’t know the numbers! Setting aside money in categories within the budget to prepare for these amounts seems simple, but again, something about the methodology and software allows me (or will allow me to try) to resist the temptation to raid a category to fund a minor budget gaff.

4) Roll with the punches. Once you’ve funded the buffer and aren’t living paycheck to paycheck you can proact for #3 events and react as necessary for the stuff you can’t foresee.

So we’re 3 weeks in…and ended August with $200 ‘in the black’ on our buffer.  And we’re budgeted into the middle of September without ‘raiding’ savings. Maybe by the end of September we’ll be a week ahead in earning vs. spending!

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