Monday, February 3, 2014

Suggested Reading List Now On Amazon

Hello friends!

I wanted to draw your attention to the Amazon Store I've created for the Let's Talk Money, Honey blog.  I've added my *favorite* personal finance books to the store - I've read each of these cover to cover at least 3 times, some as many as 15!  They contain a wealth of great information, and more importantly, are easy to read and digest for those of you who aren't as comfortable with the topic of personal finance.  After all, that's what this blog is all about, right?  Making personal finance easier to understand, so we can gain control over our finances!

I highly recommend picking up at least one, but love all 4 for different reasons.  As a helpful start, I'd suggest the following:

-- Dave Ramsey for EVERYONE

-- Smart Women for EVERYONE (I was 19 the first time I read it, so don't think you have to be further along in life for the information to count!)

-- Smart Couples for the married/engaged folks in the audience (can be redundant to the Smart Women book, just an FYI)

--  The Automatic Millionaire as a secondary inspiration book for those of you who have finished Dave Ramsey and a Smart book (spoiler alert- the first chapter of Automatic Millionaire is maybe my favorite chapter of any book EVER.  So cool.)

I'll be talking about these books often as we dive into the details of our personal finance journey here, and will continue to add and discuss books I find helpful as I discover them.  If you have a personal finance you've read and highly recommend, please use the contact form at right to email me!


*Nobody likes an ugly blog! ;) Please note that all funds generated through affiliate advertising go directly to supporting this site and developing cool personal finance tools in the future. You can find our Disclaimer page here.

Budgeting Basics - Categories are Key

Hi, friends!  Happy February to you!  I hope that you've been more mindful about how you've been spending your money these last few weeks (but if you haven't been, that's ok too).  It may sound a little backwards, but I've intentionally held off on this next budgeting post.  I really wanted to make sure these first finance basics come at a slow, steady pace, so we don't burn ourselves out too quickly with the ambitious start to the new year, and give up altogether.

Before we get started on this next round, I'd like for you to go log into your account, and double-check that your account transactions are being logged correctly.  We're going to go through in detail soon, and modify some of the default settings to make the most of this great tool, but in the meantime it's important that you're building a transaction history in the program.

Ok, then!

Now that you have a better picture of what financial success would mean to you, the next step is to start working on the action plan to get you to where you want to be.

We're going to go through your general spending activity now, and start grouping together categories of where your hard earned money has been going.  In other words, the next step is to start outlining the framework for your actual monthly budget- that glorious income/expenses tracker you always think of when the word "Budget" comes to mind.

There are 3 types of categories that we're going to be building into your action plan:

--  Your typical daily/weekly/monthly/most months transactions - mortgage/rent payments, buying groceries, dinner with friends, getting your hair highlighted every 2 months

-- Categories you know you'll have to pay at some point in the year, but don't occur every month - paying your car insurance premium every 6 months, for example

--  Items you'll eventually need to pay for, you just don't know when you'll have to pay for them** -- replacing the tires on your car or needing some kind of car maintenance like a new hose/belt/gasket/thingamajigger, emergency plumbing services, a new dishwasher, a dental procedure you weren't expecting

**This last category is especially important, because these things may previously have been filed under general Murphy's Law - "Anything that can go wrong, will go wrong".  These are the expenses you weren't expecting to pay, and therefore probably hadn't been planning up for.  I mean really, if I could have predicted that the sewer system in our 50 year old rental house was going to back up and flood half our house with sewage the same weekend that both kids got a stomach bug AND our washing machine broke (true story), I probably would have spaced out these 3 catastrophes out a little bit more, right?  But that's just the way life works sometimes.

The key is to stop looking at these things as unexpected emergencies, and start looking at them as things that need to be budgeted for because they will happen eventually.  If you have a car, it IS going to need new tires eventually.  If you own a house, you WILL eventually need to repair or replace your washing machine or dishwasher.  Even if you can only save $5 in your "Eventual" cost categories for now, that will be $5, $10, maybe $50 to use that you didn't have before, right?  Baby steps here.


This leads us to what categories we're actually going to be including in our monthly budget.  When you start listing out categories of expenses to include in your budget, I want you to think about which categories you're going to eventually need and add them into your budget right now, even if you're not currently spending money on them or just cannot afford to right now.  The important thing is to start including them (even if they're just placeholders for the moment), because hopefully soon you'll be able to save/budget for them all.  By adding them into your budget now, you have a constant visual reminder of existing holes we'll be working to fill.

For instance, I have a line item for Renter's Insurance with a $0 budget right now, because I'm in the process of researching policies and determining how much it's going to cost us each month.  I also have a $0 budget line item for Gifts/Holidays, because I'd like to start saving in advance for birthdays and Christmas but don't yet have the additional money to do so.  They serve as great placeholders until I can actually set some money aside for them in the future.

So, without further ado, here is a list of potential budget categories for you to include in your personal.  Keep in mind that this exercize is about WHAT we'll be spending our money on, and not HOW MUCH we'll be budgeting just yet.  Just start making a list of the budget categories that currently work for you (as well as the ones that you'll add in that you'll eventually need to start budgeting for).  You may have extra line items to include that aren't in the list below, like alimony payments, lottery winnings (lucky you!), or something else I haven't thought of yet.  And if you have a question about how to treat a specific cost you have, just use the e-mail contact form on the side of this blog and I'd be happy to talk through it with you!

Makin' Money
-- Job/career
--  Side jobs, like babysitting money
--  Etsy store
--  Blogging income
--  Selling your stuff at consignment stores, on Instagram, garage sales
--  Monthly inheritance payments

We're going to get into this category in much greater detail later, but want to make sure we have a placeholder for it even if you don't have any leftover money for savings right now
--  Emergency fund (every one of us should have one of these!)
--  Retirement savings
--  College savings for your kids
--  Vacation fund

The Roof Over Your Head
-- Mortgage / Rent
-- Homeowner's/Renter's Insurance
-- Homeowners Association dues (HOA)
-- Home Maintenance

Keeping The Lights On
-- Electricity
-- Gas
-- Water/Sewer
-- Trash
-- Cable/Internet
-- Cell Phones

Keeping Food In The Fridge
-- Groceries
-- Household Goods (anything you wouldn't eat but could buy at the grocery store, such as toilet paper or laundry detergent)
-- Diapers/Formula (we personally track these separately from our household, since it's an expensive category we need to keep tabs on)

Paying For Things You Couldn't Afford 
(harsh title, I know, but if you really could have afforded these things you would have paid for them in cash, right?)
-- Credit Card Debt
-- Car Loans
-- Personal Loans
--  Student Loans (this isn't a bad thing!!!  But it is debt, so it's getting lumped into the debt category)

Gettin' Around Town
-- Gas/Public Transportation Passes
-- Car Maintenance
-- Insurance

Because We Can't Be Naked In Public
--  Clothing for Adults
--  Clothing for Kids (if you've got 'em, or plan to in the near future)
-- Dry Cleaning/Repair

-- Dr. Appointments (co-pay payments if your insurance policy doesn't have 100% coverage)
-- Perscriptions
--  Insurance costs (if your insurance isn't automatically deducted out of your paycheck each month)

Personal Goodies
-- Dining Out/Entertainment (this will be separate from your Food budgets, because eating out is an 'above and beyond the basics' situation)
--  Grooming/Beauty (haircuts, makeup, manicures, etc)
--  Subscriptions (Anything you pay a monthly/quarterly/yearly fee for, such as the gym, junior League, LinkedIn Premium, magazines, alumni/professional associations, etc.)
-- Kids Activities (MyGym, Mother's Day Out, little league soccer, etc.)
-- Hobbies (blogging, sewing, underwater basket weaving)
-- Education (GMAT prep courses, photography classes, schooling for the kids, tutoring, etc.)
-- Gifts/Holidays (Christmas/Hanukkah fund, birthday presents, hostess gifts)
-- Fun Money - think of this as an allowance for yourself to use however you wish.  Even if you're struggling financially and have a long way to go until you're back on track, it's important to give yourself a tiny amount of money to have fun with.  My husband and I each get $20 a month right now- it's obviously not a lot, but it's really nice to allow myself a Starbucks or magazine splurge now and again!

PHEW!  There certainly are a lot of categories that are begging for our money to be spent on, aren't there?!

Good luck with this next big step in the process, and remember to pat yourself on the back for taking one more step in gaining control of your finances (and your life!)