Monthly Archives: March 2009

Filed 2008 Federal And State Income Taxes

I have just finished filing our 2008 income tax returns.  I managed to do a pretty good job estimating our withholding and quarterly prepayments.  We will receive a small refund from our federal return, and we only had to pay a very small amount in additional taxes to our state government.

Unlike last year, I did not make any contributions to my SEP-IRA.  I did so last year to reduce our tax liability.  This year, with an additional child in the family, and an additional child care credit, our liability was already slightly lower than the previous year, and I really do not have any “extra” cash sitting around for contributions.  Plus, with the current economic environment, I’d rather have a slightly larger cash reserve – and pay a little more tax on any interest that cash might earn – than to tie up more money in a retirement account.

As in previous year, I filed electronically, and directed the IRS to deposit my refund directly into my checking account.  For the payment to our state, I simply printed out a payment voucher (provided by my tax preparation software) and sent it, along with a check for payment amount, to our state’s department of revenue.

I printed two copies of each return, federal and state, and I also saved two digital copies.

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Reasons We Fail To Stick To Our Budget – With Twitter Input!

Do you struggle to stick to your budget?  Have you tried to live on a budget, only to throw your hands up in frustration and give up?  Think you way through the following list, and see if you can find a few solutions for your budgeting woes.  Remember, in many cases “the perfect is the enemy of the good“.  Our goal, when budgeting, is to create a realistic spending plan – one we will actually follow – and not some elaborate spending plan that will only serve to frustrate.

Problem – Too Many Categories

Let’s face it, there are only so many charts, so many calculations, so many categories, and so many money transfers that the normal human brain can keep track of.  Even with modern budgeting software, creating an overly-complicated budget can lead to stagnation – especially if you are married to a spouse who favors keeping things simple.

Solution – Eliminate Unnecessary Categories

A simple example will best illustrate this solution.  Here’s a budget outline that has too many categories:






Obviously, I’ve created an exaggerated version of the problem, but you see my point.  A budget that is too specific, too detailed, will eventually drive its user bonkers.  Instead, a single category, labeled groceries, would suffice.

Our goal is to create a budget that has just the right number of categories – enough to effectively track our spending, but not so many that we feel overwhelmed.

Problem – No Plan For Unexpected Expenses

Here’s the reality.  No matter how well you plan, during a typical month, you will have to deal with unexpected, unplanned-for, expenses.  This is simply a fact of life.  There’s is no possible way to predict the future, so your budget needs to have some room for life to happen.

Solution – Have A Miscellaneous Expenses Category

Instead of trying to predict the future, have an  I-have-no-idea-what-we-might-need-but-I-am-pretty-sure-we-are-going-to-need-a-little-extra-somewhere-category.  Of course, you want to be realistic, and the amount of money allocated to this category should be reasonable.  Remember, this category isn’t for emergencies.  That’s why you have an emergency fund.  This category is for unexpected expenses – things that just pop up in the course of life.

Problem – More Than One Person Lives Here!

For those of us who love numbers, spreadsheets, and calculations, we can easily find ourselves frustrated with our, how shall we say, less than intense spouses?  On the other hand, for those who hate talking about (or even thinking about) money, the word budget ranks right up there with root canal on the list of most hated words.  Need I even mention the struggles that two spenders will face, when trying to live on a budget?  And think of the frustration if two savers – two math-nerds– happen to live in the same house!

Solution – Agree That Budgeting Is Important

I know that it is difficult, but at some point, each spouse must agree that living on a budget is important.  Even if you can’t decide, right away, what the proper budgeting technique should be, at least agree that living on a budget does matter!  For more on this subject, read this article I wrote about how to avoid arguing when talking to your spouse about financial matters.

Problem – Poor Cash Management

Certain budget categories require cash, and many people have poor cash-management skills.  In other words, if they have cash in their pockets, they will spend it!

Solution – Try The Envelope System

I know, I know.  It’s old fashioned, it’s old school, it’s hokey.  Guess what?  It works!  When we first started to live on a budget, my wife an I both struggled with cash management.  After using the envelope system for just a few months, we were able to control our spending.  Click here to view a video I made describing how to use the envelope system to manage your cash.

Problem – Refusal To Sacrifice

Your budget will not work – it cannot work – until you are willing to make some sacrifices.  You must give up certain hobbies, certain products, certain services, and certain wants, if your budget is going to work.  Some of these sacrifices will be temporary, and some might be life-long.

Problem – It’s On The Computer

Your budget will be useless if it simply sits on your computer’s hard drive, especially if you spouse never uses said computer or looks at said budget.

Solution – Print It Out

When we first started, we printed three copies of our budget, and place them in strategic places throughout out our house.  Remember, this isn’t one person controlling the budget, and giving the spouse money.  For couples, we need two people working together, equally focused on living on a budget.  Print that sucker out so that you can see it!

Solution – Be Resolved

Determine, before the month begins, that you are going to do your very best to follow your budget.  Refuse to give in to old spending habits and thoughts of just this once.  Remember, your future depends on the choices you make today.  If your budget fails, let it fail because of a miscalculation, not because of frivolous, unnecessary spending.

Problem – One Bad Month Leads To Surrender

I’ve had one.  You’ve had one.  A bad month – a month when expenses rose, unexpectedly, or income shrank, dramatically.  We have all had to deal with a month where our budget was covered in red, and our best-laid-plans simply fell apart.

Solution – Regroup And Move Forward

Instead of giving up, dig in.  The reality is, even the best budgets fail, not because the budget is flawed, but because things just happen.  Maybe you felt frustrated and you spent more than you should have in several categories.  Maybe you just decided that you were too tired to enter a few transactions, your calculations got all our of whack, and now you just don’t feel like dealing with the darn thing.  Regroup!  There’s no better time than right now to pull yourself together and get back on track.  It’s never too late to start over.

Problem – Unrealistic Expectations

Whenever I look back at some our first budgets, I always smile.  For the first few months of our budgeting experience, we always underestimated how much we would spend on groceries, and we always overestimated how much we would have available for debt reduction.

Solution – Live, Learn, Modify

Over time, as you get the hang of it, living on a budget becomes second-nature.  After a few months, you’ll be able to dial in the correct amounts, and things will go much slower.  Remember, during those first few months, you’ll be learning to live on a budget.  If you are anything like me, it will take a while to get the hang of it.

Before publishing this post, I opened the floor up to some of my pals over at Twitter.  Here are some of the struggles that they mentioned –

MrsMicah I think part of it is because we don’t plan well enough beforehand.  We don’t include one-time things like dinner w/friends.

annmvolkIt’s because I don’t post mine or think about it after I’ve done my “ideal” (=unreal) budget; I also forget irregular expenses.

thesomedayguyWe fail to remember exact amounts we’ve budgeted–having a tracking tool like Mint would be useful!

EdenJaegerI can stick to a broad budget without trouble, but when I try to get too detailed I start to fail.  Life is too unpredictable for that.

ManVsDebtWe fail because we try to make them too complex. The more simple it is, the higher the probability that you form a habit early on.

dee_wilcoxUnexpected expenses (emergency medical, auto, etc)…if the emergency fund isn’t large enough to cover it.

msimonkeyI sometimes fail to stick to my budget when I forget to plan for special events.

tmsullivanMost people don’t see their budget. There is no visual reminder that says “Entertainment: $100” and a running tally of the expenditures.

MyMoneyMinute – I think budgets are time-intensive the first 3 or 4 months b/c you have to tinker them, and this discourages people and they quit.

SurburbanDollarIt could be that both spouses fail to work together on planning the budget so they will fail to stick to it.

tanneioWe let our emotions take over. We feel sad / hurt / deprived and want to go for an easy fix so we splurge.

freefrombrokeBudgets can be too constricting in that we don’t want them to tell us what to do.

stretchydollarIt’s hard to be consistent – sometimes laziness just takes over.

Final notes –

My wife and I use You Need A Budget software to manage our household finances. You Need A Budget is a long-time sponsor of my site, and I strongly recommend their products.

Twitter is an awesome resource.  In less than ten minutes, I received the above mentioned Tweets.  If you haven’t done so, feel free to follow me and send me a Tweet.  I want to thank all of those who replied.

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Talking With My Spouse About Money – An Interview With Mrs. NCN

I thought you guys might get a kick out of hearing from my wife – Mrs. NCN.

NCN – So, what’s it like being married to a geek like me who likes to write about personal finance.

Mrs. NCN – It certainly makes life interesting!  It is pretty cool that you handle all of the boring day-to-day stuff and I don’t have to deal with it.

NCN – Do you feel like you are left out of the decision making?

Mrs. NCN – No.  If it’s a major decision or whatever, we talk about it, but you enjoy all the facts and figures.

NCN – How did you used to feel, back when we were in debt?

Mrs. NCN – Weighed down.  Nervous.

NCN – And now?  How does it feel to be debt free?

Mrs. NCN – Amazing.  It’s just a great feeling to know that we are debt free.

NCN – What do you think is the most important thing that a couple can do if they want to be debt free?

Mrs. NCN – Talk about it and then get in the right mindset.  Make out a budget – and then go for it!

NCN – Where do you think we could stand to improve?

Mrs. NCN – We still spend too much money on junk!  Our lives are so hectic, we still eat out more than I’d like.

NCN – Do you miss your credit cards?

Mrs. NCN – No.  I honestly never even think about them.  We have our budget, I use cash or debit.

NCN – How often do you read the site and what do you think about it?

Mrs. NCN – Every other day or so.  I enjoy seeing what you write, and I think it’s awesome when people comment and say that you have helped them.

NCN – If you had advice for couples who are tying to communicate about money, what would it be?

Mrs. NCN – Be honest with each other.  Listen to each other.  Compromise.

NCN – Would you feel comfortable taking over the day-to-day management of our finances, at this point?  Paying bills, transferring money between accounts, etc.?

Mrs. NCN – That’s a hard question.  I feel comfortable, due to the fact that our financial house is in order, but I really dislike handling those tasks.  So, yes, if push came to shove, I could do it and I know how to do, but I prefer that you do it.  We make a great team!

NCN – What is the most important financial lesson that you hope to teach our kids?

Mrs. NCN – Never spend more than you make – and value people over things.

At this point in the interview, I opened the floor for questions from Twitter

FrugalForLifeDo you feel NCN spends more time on the computer than with you?

Mrs. NCN  – He spends a LOT of time on the computer, but he loves writing.  I’m proud of his work, and he still manages to have plenty of time for his family.  Plus, he’s a bit of a geek, so if he didn’t have his computers, he’d have some other geeky hobby.

Now, I’ll go back to asking questions –

NCN – Do you ever miss our old borrow money – we can make the payments – lifestyle?

Mrs. NCN – Not really.  I guess I miss buying brand new cars and just buying whatever I might want, without thinking about the consequences.  Honestly though, having those more expensive things and going on those shopping sprees simply cannot compare to the freedom we now have.

A couple of more questions via Twitter pals –

BigHonkinHas you ever gotten frustrated with NCN over finances?

Mrs. NCN – He does tend to worry more than I do, but that’s because he cares so much.  Honestly, he’s the most laid back guy in the world, except when it comes to managing our finances or working with our kids.  Then, he’s super intense.  So, yes, it is difficult when we are out shopping, and he’s calculating, to the penny, how much each item will cost, but that’s just NCN being NCN.

FiveCentNickel – How do you feel about NCN’s No Credit Needed stance?  Agree or disagree?

Mrs. NCN – I completely agree.  It has fundamentally changed the way we manage our finances.  Now, instead of worrying about credit card payments, we save up for future purchases.  It just makes things easier.

BudgetsAreSexy – Do you get irritated hearing the words “blog” and “finances” 100 times a day?

Mrs. NCN – Haha.  Well, I didn’t even know what a “blog” was when you started, and I’m amazed that so many people are doing this now.  Let’s just say, I’ve learned to nod my head a lot when you go on and on about stats and stuff.

I hope you guys enjoyed this interview.  My wife is the greatest, as proven by the fact that she puts up with me!  It was super fun to talk to her, and get a little insight into what she thinks about the site and about our finances.  So many couples struggle – trying to figure out how to talk to each other about money.  We have learned, over time, to simply be honest, and real with each other.  We’ve also learned how to compromise, and we’ve learned how to focus on our own strengths.

Mrs. NCN – You rock!  And, I love you.

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