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Next Month Syndrome

August 3rd, 2009

NCN

There was a time when I was infected with a terrible condition – Next Month Syndrome

When my credit card bill came in the mail, I would make a promise to myself -

Next month, I’m going to do better.

When I reached for my credit card to make ends meet, I would promise myself -

Next month, I’m going to do better.

When a friend would mention that he was living on a budget, I would promise myself -

Next month, I’m going to do better.

When I would read a story about someone saving for retirement, I would promise myself -

Next month, I’m going to do better.

Here are some common side effects of Next Month Syndrome -

A failure to regularly balance one’s checkbook

A propensity to run out of money before one runs out of month

A constant worry about higher and higher interest rates

A rolling credit card balance, which rarely goes down, but often goes up

A stack of bills, unorganized, or even, unopened, piled high on the kitchen counter

A box of abandoned budgeting software and personal finance books

A growing sense of worry and fear

If any of these symptoms sound familiar, fear not! There are cures for Next Month Syndrome!

Gather up all of your most recent bank statements, your checkbook, and a calculator. You need to find out exactly where you stand.

How much money do you have in cash?
How much money do you have in savings?
How much money do you have in checking?
How much debt do you have?

Create a budget. It doesn’t have to be overly-complicated and you will struggle for the first month. That’s okay. The purpose? You need to know exactly how much money you bring home and exactly how much money you spend. Resources -

Develop some system for organizing financial documents. For me, I use an expandable file box and I file bills alphabetically. I use one file folder for each year’s bills. At the end of each year, I simply store that year’s file box, and buy a new one.

Set aside some time, monthly and weekly, to manage finances
Encourage each member of the household to participate in the process

Consider reading the 33 Days Series here at No Credit Needed. This information-rich resource should help those who are looking to save money and get out of debt.

If you are in debt, and you are ready to get out, consider the following resources -

Now, I’ve saved the most important step for last. See, when I had Next Month Syndrome, I was in denial. I wanted to live just like everyone else and I wanted to own what everyone else owned. Then, I discovered something, a deep dark secret – all of those people – the folks that I wanted to be “just like” – THEY had Next Month Syndrome, too!

I made a decision – the most important decision I’ve ever made. I decided to do something about Next Month Syndrome. I created a plan, I set myself with determination, and I turned away from my old lifestyle. It took some time, and I still feel some of the long-term effects, but I was able to overcome Next Month Syndrome. You can, too!

Remember – All of the planning in the world is useless, unless that planning is coupled with determination. Make you plan – and then do all that you can to stick to it. Don’t wait until Next Month – do something NOW!

Posted in Debt Reduction, Guide, Money Management

6 Comments »

What Works For Me – Budget Categories

July 27th, 2009

NCN

There are dozens of budgeting products on the market. I’m partial to the You Need A Budget system, but there are other great systems available. Find a system that works with you, fine tune it to meet your needs, and then use your budget as a tool.

After selecting a budgeting system, it’s important to create specific budget categories. When I first started budgeting, I had way too many categories. I tried to be too specific. Instead of managing my money, I just ended up spending time working on my budget. If you have too many (or too few) categories, you might grow frustrated with your budget, and you might simply ditch it altogether.

What Works For Me – Budget Categories

I divide my budget into three major categories – spending, saving, and giving. (I create a budget based solely on our household take-home pay. In other words, I do not include pre-tax retirement contributions or employer deducted health insurance premiums. Also, I live in a house provided as part of my compensation.) I then divide the three major categories into the following budget categories and sub-categories.

Spending

Utilities

Electric Bill

Cellular Bill

Telephone Bill

Satellite Bill

Medical

Medical Bills

Medicine

Child Care

Daycare

Baby Sitters

Food

Grocery Store

Eating Out

Entertainment

Family Nights

Miscellaneous Spending

Clothing

Automobiles

Gasoline

Routine Maintenance

Saving

Retirement

Roth IRA 1

Roth IRA 2

Education

ESA 1

ESA 2

ESA 3

Automobiles

Automobile 1 Replacement

Automobile 2 Replacement

Automobile Repairs

Home

Furniture Replacement

Appliance Replacement

Future Home Purchase

Insurance

Automobile Insurance Premiums

Disability Insurance Premiums

Renter’s Insurance Premiums

Additional Savings

Giving

Church

Tithes

Offerings

Special Offerings

Gifts

Donations

Presents

Basically, I have 15 budget categories, with most categories broken down in to two or three sub-categories. (Once in a while, I’ll add an extra category or two, depending on circumstances. For instance, for a long time, I was saving for a new lawn mower, so there was a specific savings category labeled lawn mower.)

For me, and my family, it works best if we limit our number of budget categories. I find that this makes things a bit more manageable – and more user-friendly. (If you have irregular income – and most folks do – I suggest you read this post: How To Create A Budget If You Have An Irregular Income. You’ll find information for setting up a budget, even if your month-to-month income fluctuates.)

What About You? -

I’d love to hear from you, my awesome readers. How many budget categories do you use? Have you found that you like a super-simple system, or do you prefer something much more complex? Leave comments here and / or connect with me via Twitter.

Posted in Budget, Money Management

Tags: Budget

5 Comments »

What Works For Me – Debt Reduction Mindset

July 26th, 2009

NCN

There are thousands of websites and hundreds of books about debt reduction and debt reduction techniques. Personally, I’ve written several articles about my own debt reduction journey, a comprehensive guide covering how to get out of debt, and I’ve even created my own personal debt reduction method.

Today, I thought it might be beneficial to look beyond the methods and techniques, and really think about what keeps a debt reducer motivated.

What Works For Me – Debt Reduction Mindset

I like to keep things simple, so I like to focus on one debt at a time. After listing my debts, and paying minimums to all creditors, I then spend my time trying to reduce the balance of the first account on my list. As soon as I eliminate the first account, I’m pumped to move to the second account. Focusing really helps.

I think it’s important to build community around a goal. I like for my wife and I to be on the same team, and of one mind. In fact, it would have been impossible for us to get out of debt, if my wife and I had not learned to communicate and work together. We also surrounded ourselves with positive people and friends who would not cause us to stumble.

I find that I need to set an example of restraint and frugality. It’s relatively easy to create a budget. It’s a far more difficult thing to stick to a budget. As a parent, I know that my kids are looking to me for advice, encouragement, and wisdom. The sacrifices that I make today will pay big dividends in the future.

I have learned to eliminate the noise and listen to just a few, trusted voices. Instead of trying fifteen different debt reduction techniques, or looking for a quick fix to my debt problem, I sat down, created a plan, and followed the plan. I never pay attention to gimmicks and get-out-of-debt quick schemes. Instead, I focus on paying the bills that I owe and following the plan that I have created.

I celebrate every success, big or small. My wife and I have learned to celebrate our financial successes – without spending a lot of money. We enjoy a date night or take the kids out for a day at the park. I make a big deal out of our goals – and an even bigger deal when we achieve them.

I admit that I am human. Here’s the reality. Even though thousands of people visit my site each month (which blows my mind), I’m still prone to the occasional mistake. When dealing with a setback, it’s important that I regroup, remember why I started the process in the first place, and move forward. Even when I missed my original debt reduction goal date, I kept going.

What About You? -

I’d love to hear from you, my awesome readers. What keeps you motivated? What steps have you taken to keep your mind in the game? Have you slacked off, but decided to get going as of today? Leave comments here and / or connect with me via Twitter.

Posted in Debt Reduction, Money Management

3 Comments »

What Works For Me – Checking And Savings System

July 25th, 2009

NCN

I have three checking accounts – a primary checking account at our local bank, a business checking account with the same bank, and an online interest-bearing checking account with ING Direct. I also have an online savings account, also with ING Direct.

Click here to read about how I use these four accounts to manage the flow of my money.

Right Now -

I’m pretty satisfied with my current setup. My primary checking account is a joint-account that I share with my wife. We only write a few checks each month, so we rarely have to purchase checks. The account is free and doesn’t require a minimum balance.

Transferring money to and from ING couldn’t be easier, and their customer service is second-to-none. I’ve been and ING customer for more than eight years and I’ve never had a problem. There are other online banks that offer slightly higher interest, but I’m hesitant to leave ING. I’m impressed by the fact that I can get a real person on the phone when I call them.

The business checking account is my most rarely-used account. I’ve set it up so that any business-related income is automatically deposited into my business checking account. If I need to access the money in the account, I simply initiate a transfer, from business checking to my personal checking account. I only do this four or five times a year.

Possible Future Improvements -

As I stated before, I’m actually pretty happy with my current system. That being said, I do see some room for (possible) improvement.

First, it wouldn’t be a bad idea to look for a free primary checking account, from a local bank, that would be interest bearing. (Interest bearing simply means that the bank pays interest on any money deposited in an account.) My wife and I do not have access to direct deposit from our employers. So, it’s absolutely necessary that we have access to a local bank branch. If we did have direct deposit, I would simply have our checks deposited with an online interest bearing account, and be done with it. As it is, deposits must be made manually. We live in a rural area, and the banking options are somewhat limited. I’m always on the lookout for a better primary checking account. If I see one, I just might make a switch.

Second, I might want to think about finding an online bank with higher interest rates. One of the best sites on the web for finding interest rate information is Bank Deals. I’ve visited Bank Deals dozens of time, and almost pulled the trigger and opened a new account. Right now, I’m really focused on rebuilding my emergency savings. Once I’ve fully rebuild by savings, I might consider a little rate-shopping. We shall see.

Finally, it might be smart to open an account with a local credit union. At some point in the (distant) future, I might want to borrow some money to buy a home. (My current plan is to pay cash for a new home, but plans can change.) I’ve heard from several close friends that it’s a good idea to have a relationship with a local credit union. Again, it’s something about which I should think.

What About You? -

I’d love to hear from you, my awesome readers. How many checking / savings accounts do you have? What’s the perfect system? Do you and your spouse use a joint account, or do you have separate accounts? Leave comments here and / or connect with me via Twitter. Those who are reading this via RSS or Email should click this link to visit the site and leave a comment.

Posted in Money Management

Tags: checking, Savings

5 Comments »

10 Things To Do Before Creating Your Next Budget

May 11th, 2009

NCN

Before you create your next budget or monthly spending plan -

1. Track your spending for one month.

Use a spreadsheet, pen and paper, or online software, and track your spending for one month. Track all payments – including those made by check, debit card, cash, (and credit card, if you choose to use one). Remember to also include any payments that are automatically withdrawn from your checking / savings accounts. (My wife and I use the You Need A Budget software to track our expenses and manage our monthly budget.)

2. Create a detailed list of non-monthly bills / expenses.

Remember, for a budget to really work, you need to plan for non-monthly (irregular) bills and expenses. For instance, you may need to pay annual life insurance premiums, twice-yearly automobile insurance premiums, and property taxes. These bills do not arrive in your mailbox each month, but they still need to be included in your budgeting plans. Click here for several options for how to deal with annual / irregular billing cycles.

3. Open a free checking account with free online bill pay.

I could not manage my finances without a free checking account and free online bill pay. Instead of writing several checks a month, I can go online, schedule payments, and be done with paying bills in a matter of minutes. It helps to bank with an institution that integrates with your budgeting software of choice, or one that allows you to download transactions in several different file formats.

4. Open a savings account.

I use an online savings account – one that allows me to quickly transfer money, via it’s transfer system, to and from my online checking account. (If you would prefer one account, consider an interest-bearing checking account, like the ING DIRECT Electric Orange Checking Account) You need an account where you can earn interest, while temporarily saving money for non-monthly bills / annual expenses. I happen to have three accounts – a checking account at a local bank for day-to-day transactions, the Electric Orange account for online bill pay, and the online savings account for stashing cash until annual bills are due.

5. Consider a cash-management system that will work for you.

I am comfortable carrying cash, but some may not be. Find a cash-management system that you like and use it in connection with your budget. My wife and I us the envelope system. (Click here to watch a video tutorial, outlining how we use envelopes to manage our cash.) You may choose to use a debit card, or even write checks, instead of using cash, but be sure you have some sort of system set up that helps you account for how much cash you need and spend. Learning to properly handle cash, without wasting it, is one of the first steps in the life of a maturing home-finance manager. Stop using the excuse that you “spend more with cash”. If you can learn to be responsible with the $20 in your wallet, you can learn to be responsible with the $200,000 in your retirement account!

6. Establish a budget-creation routine.

Determine when you will create your monthly budget. Determine when you will discuss the monthly / weekly budget with your spouse. Be specific and write the date / time on your calendar. Instead of paying bills “whenever you have the chance”, build some time into every week for handling personal-finance related chores.

7. Balance your checkbook / reconcile savings account.

It almost goes without saying, but before you can create a budget, you need to know how much money you have on hand. Also, consider taking a look at any other accounts you might have – retirement, education savings, etc. – just to make a note of current balances.

8. Determine your next financial step / goal / plan.

If you are trying to build an emergency fund, you need to have an emergency fund category in your budget. If you are trying to get out of debt, you need a debt reduction category in your budget. If you are trying to fund your Roth IRA, you need a Roth IRA category in your budget. You get the picture. Also, remember, after you get out of debt, you can then remove that category from your budget, and replace it with some other category. The point is – Incorporate your current goal within the budget.

9. Prepare yourself to succeed (and fail).

If you have never lived on a budget, prepare to be amazed by how in control you will feel, once you start using one. Also, be prepared to fail, and feel frustrated, once your “perfectly” detailed plans fall completely apart. The truth is, none of us can tell the future, but we can make some pretty decent predictions, based on past expenses. For some, budgeting is easy, and becomes easier. For others, budgeting can be a struggle, and it takes time to find the groove. Be patient and enjoy the process!

10. Understand how to budget with irregular income.

For most people, even those with regular monthly income, it’s a good idea to learn how to budget with irregular income. For instance, most will need to know what to do with year-end bonus or a tax rebate check. For many, especially those who work on commission, it’s critical to learn how to budget when on an irregular income. Click here to read an in-depth article about how to create a budget when you have an irregular income.