Budget Boot Camp: Hate Scrabbling to Pay for Big Expenses?

Irregular expenses are a big topic in budgeting, so to ensure it was explained clearly, I turned to my husband Bryan (a non-accountant) to explain how we budget for our non-monthly expenses (e.g. car repairs, insurance, property tax, etc.). Bryan's just a regular guy who been sucked into my budgeting madness. Here he is holding our two boys (I know--they're all pretty cute).

Note that the example below is for known expenses, but we also use it for some of our "unknown" expenses (e.g. car repairs and general savings) using estimated amounts. So when we have big car repairs, they're already saved for. We simply pull the money out of this account that has been accruing savings for months and months. It'd worked like a charm so far. So without further ado, here he is:

We have all been there, you are going along, life is good, the checking account is growing and then all of a sudden, those big expenses hit and you are scrambling to pay for everything.  Budgeting to the rescue!  A few weeks ago Lisa asked me to write about how we set our budget to accrue monthly for expenses that occur once or twice a year.  This system helps to level out the known planned expenses by saving for them every month.  

To start off, I am sure there is some accounting principle that Lisa could explain around this, but the easiest way for me to explain it is that we know some expenses happen a few times through the year (life insurance, property tax, car insurance, etc.) and we take the annual amount (say $1200 for car insurance) and then divide by 12 to get our monthly amount of $100.  At the beginning of each month, I transfer the sum of all those monthly amounts into our savings account (a separate checking account at an online bank).  See the example table below.

Expense	Annual amount	Monthly Amount
Car Insurance	$1200	$100
Homeowners Insurance	$600	$50
Life Insurance	$500	$42
Property Tax	$4000	$334

In the example above, the monthly transfer is $526.

When the bill comes to pay those expenses, we pay them out of our savings account (where the money have been accruing and collecting interest).  The true beauty of this system is that there is no worrying about how we are going to pay the property tax bill, or the car insurance bill, because we have already paid it.  The table below outlines an example of how the system would work

	Jan	Feb	Mar	Apr	May	June	July	Aug	Sept	Oct	Nov	Dec
Start	2000	2526	1052	1078	1604	1830	1756	2282	808	1334	1860	2086
Additions	526	526	526	526	526	526	526	526	526	526	526	526
Expenses	0	2000	500	0	300	600	0	2000	0	0	300	600
Ending	2526	1052	1078	1604	1830	1756	2282	808	1334	1860	2086	2012

Our budget is happy because we avoid the stress of seeing the monthly budget in the red. And we are happy because all the stress associated with trying to pay the big expenses disappears as we have already paid for them.  The key to making this system work is to move the money into a separate account.  The reason why this is important is so that you are not tempted to spend it, or think you have enough savings.

This system takes some discipline and I would strongly encourage you to set auto transfers to make it easier.  But the pay off when the expenses hit is completely worth it.

Any questions?

Budget Boot Camp: To Do #6 - Budget for "Funds"

Note: To join our once-a-month e-mail Budget Boot Camp, sign up here. Here are the lessons we've done so far:

• Calculating your net worth
• Setting financial goals
• Tracking your spending
• Budgeting for regular monthly expenses
• Budgeting for irregular expenses

I like to budget for expenses that are more flexible in terms of when you spend them, like money for dates, decorating, clothing, personal spending, etc. using "funds." Basically all this means is each month you add a specified amount to your specific fund. The unused portion rolls over to the next month. 

Why do I love budget funds? I love using funds in budgets for a lot of reasons. 

• Funds are extremely powerful tools to cap runaway spending. The types of things they are best at tracking (clothing, random fun personal purchases, home goods, etc.) are just the types of things that tend to be impulse buys.
• They make your budget more flexibility-- and that's something that really makes living with a budget more enjoyable and successful. It helps not feel so pinched if you know you can still buy the things you enjoy, you just have to save up for them. 
• They can help your marriage. Even if you and your spouse are both frugal, you're not the same person, so you're not going to value everything the same. Having a personal fund enables one spouse to buy things they enjoy without guilt (or resentment from the other spouse). Lisa gives some other good marriage money tips in this post.

How do you track funds? There are a couple of ways to track funds-- in Excel, on paper, online, or using the envelope system.

• Excel. I have a separate tab in our family budget file where I track our funds. There's a column for each different fund. You can download our free template on our Facebook page here. Or you can make your own that suits your needs. The monthly budget shows the full amount of your fund flowing out every month. But you track the balance on a separate tab. Here's what ours looks like.

• Paper. I know historically I haven't been super supportive of using paper for budgets, but here's one area where it can work pretty well. When we were first married, we tracked most of our budget in Excel, but we had a sheet of paper taped to the fridge where we tracked our fun spending money. On the first of the month, we would add $15 to our account (we've since increased it a bit). Any time we spent money for fun discretionary items, we would write the expense on the paper and update the running balance. It was kind of fun to have it up in an easy to see place (although we would usually move it if we had people over...)
• Online. Honestly, I haven't tried to do fund accounting using software because I found it a bit frustrating. But, similar to budgeting for irregular expenses, I think you could use the rollover function to make this work on Mint (or whatever you're using).
• Envelope system. This system uses cash. You deposit your monthly allotment in an envelope, jar, or other container each month and spend out of it throughout the month. The leftover stays in the envelope at the end of the month and "rollsover" to the next. Pros: You will never overspend. Cons: You have to go get the cash each month, and it doesn't work as well for online purchases. 

To Do #6: Set up your funds

1. Decide what types of funds you want to have (date, individual spending, etc.)
2. Decide what amount to allocate to each fund monthly.
3. Set up your system (Excel, paper, online, or envelope).

And here are the products I'm loving: Mr. Clean Magic Erasers (gets crayon off walls, need I say more?) and these leather earrings. My baby always rubs her face up against my cheek, but these are nice and soft and don't scratch her. 

Money Hip Mamas is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Money Hip Chats: Vacations

It’s time for another Money Hip Chat. I tried to think of things that are annoying to budget for, and I’m going with vacations. Lisa, what comes to mind first when thinking about vacationing on a budget?

Lisa: I think the foundation of vacationing on a budget is to adjust your expectations. I think a lot of young couples and families run into trouble because they’re trying to keep up the kinds of vacations they had prior to getting married, when it was on their parent’s dime. That’s simply not possible (or wise) when your income is significantly less. Another related issue is when extended families want to do grand vacations that may fit within their budget, but simply don’t fit your budget. It’s a tricky business because turning them down can be a source of family drama. I think that’s why having a budget is so important--it sets a clear expectation. An example conversation you might have to have with older siblings or parents: “Our annual vacation budget for the whole year is $500. That’s simply not enough to join you on a cruise and have enough money left over to visit at Christmas. We’d love to spend time with together--what if we did something else?”

Lauren: That is such a good point. I think it’s important to remember that the point of vacations is creating memories with people you love, and that can be done without spending a ton of money. I’m not knocking great vacations. If you can fit it in your budget, then go ahead. But if it just doesn’t make sense financially, then don’t stress about missing out, because you can still create those memories doing something less expensive-- like camping, a road trip, sharing a beach house/cabin with friends or family, etc. One of the expenses that really seems to add up on vacations (especially with kids) is food. How do you save money on food on vacations?

Lisa: We definitely do a lot of shopping beforehand to make sure we’re stocked up on fruit, water, and snacks for the car (gas stations snacks are crazy overpriced). We also take advantage of whatever food the hotel is offering for free. In addition to breakfast, the hotel we just vacationed at offered a “Manager’s Reception” with a full dinner Monday through Thursday evenings. For eating out in general, rather than buying overpriced combo meals, we buy individual items (I don’t like soda anyway). What do you do?

Lauren: Mostly we’ve just visited family, and our moms have cooked for us :) But Aaron’s taking a month off of work before school starts and we’re going to try and fit in a few day trips. In general, I definitely think eating local food on vacation can be a wonderful source of memories-- but that doesn’t mean you have to go all out for breakfast, lunch, and dinner every day. I basically snack all the time, so when I’ve traveled in the past, I brought a box of Clif bars that I could eat on the go. It was a Costco sized box, and packing it was fine because it freed up some weight/volume for souvenirs on the trip. I still enjoyed eating in restaurants and at street vendors, but having food I brought myself meant I didn’t have to buy food on the go for every single meal, which saved money. 

Another thing we've done to save money is pooled our frequent flyer miles on JetBlue as a family. Don't forget that even small children can earn miles, so being able to consolidate can really help. If you or your spouse travel frequently for work, those miles can be especially helpful as well. Pooling all of our miles got us 3.5 round-trip cross-country tickets for a family reunion this summer. We ended up spending only $300 out of pocket to get all four of us from Boston to Oregon and back again.

Share-- How do you save money on vacations? We'd love to hear from you in the comments below!

How to Create a Killer Running Playlist

Pin this for later-->  http://www.pinterest.com/pin/195765915027290042/


Okay, so when it comes to the writing staff here at MHM, Lauren is actually the true runner. I've never ran any races longer than a 5k (lame, I know) and Lauren has run every race from a marathon on down.

So why would I be audacious enough to give running advice? Because I feel like running is easy enough when you enjoy it and/or are athletic. But to come home with a medal when you kind of hate running and have no natural ability? Bragging rights.

(Disclaimer: There were only 14 runners in my particular category--so really not impressive, but that hasn't stopped me from being extremely proud of myself and posting this picture to Instagram).

Create a Killer Running Playlist

What's the secret to getting a lazy runner like me to move at a decent speed? Create the perfect running playlist! No joke, when I decided to revise my playlist for the first time in ten years (using a bit of science), I quickly dropped my mile times from 10-11 minute miles to 8-9 minute miles (I ran a 6:43 minute mile on the treadmill, but I'm pretty sure treadmill PRs don't count).

The Trick--BPM

It's all about the Beats Per Minute (and running to the beat). Back when I bought my fabulous zero-drop Altra running shoes, I carefully read the guidelines provided by the professional super-runners who developed the shoes. The advice that stuck out to me (especially because I've had serious knee problems in the past) was to "run softer" using shorter, quicker strides. No matter how slow you are, your should aim for a cadence of 170-180 strides per minute. So I decided to re-evaluate my running playlist. Turns out most of the songs I thought were great, fast-paced running songs were only about 120 BPM and (since I run to the beat) were therefore slowing me down. 

My Secret Weapon -- jog.fm

Jog.fm is an awesome tool. You can search for songs by title, BPM, and mile time. I had to work my way up to 170-180 BPM (I started at 150 BPM), so I used it to find songs along the way. I highly recommend using it to build your playlist.

My Running Playlist

Here's a few of my favorite songs that are all between 175-182 BPM:

I was so nervous for my little 5k race, I took this picture beforehand, sent it to my family, and told them to pray for me. Seriously. But the playlist payed off--I hit my goal!

Good luck! Have fun updating your playlist and watching your mile times drop!


What are your favorite running songs?

Budget Boot Camp: To Do #5 - Budget for Irregular Expenses

We're now officially getting into "budgeting all-star" territory. If you budget successfully for irregular expenses, you're well on your way to having a budget better than 95 percent* of the American population. Most people budget for regular expenses, but when the opportunity to take a vacation, give Christmas gifts, or pay to get the car fixed comes, there's nowhere in the budget for that money to come from, so they resort to their emergency fund, credit cards, or savings earmarked for other purposes. But not you. Here's how to budget for irregular expenses.

If you're just joining us, don't forget to check out our other Budget Boot Camp posts.

• Calculating your net worth
• Setting financial goals
• Tracking your spending
• Budgeting for regular monthly expenses

To Do #5: Budget for Irregular Expenses


Step 1: Brainstorm potential expenses and their amounts

Take a moment to brainstorm those irregular expenses that crop up during the year. Personally, when it comes to creating expense categories, I've found that it's actually easier to be specific (within reason) than general for a few reasons. First, it's easier to figure out how much your going to spend if you break it down into sub-categories. For example, you're probably going to come up with a more accurate amount for "gifts" if you've broken it down by holiday. Find out if there's anywhere you can save online as well using a cashback extension.  For example, just like eye care, you will know when you are due for a check-up. By planning ahead and keeping money aside in case you need new glasses, then you can make sure you can afford some that you really want. To find some fabulous men's glasses, find it here.

Second, it's actually easier to categorize when things are specific. If you have a category for parking at the airport, you're not going to waste time trying to decide if you need to use your monthly parking budget or your irregular travel budget. If you're using our free budget template, we've gone ahead and brainstormed a lot of categories for you (listed below), and left you with spaces to create your own custom categories. Download our free template on our Facebook page. Do any of these apply to you? Do you need to create additional categories?

• Insurance: Car, renters/homeowners, medical, dental, life, disability
• Car Related: Registration, safety inspection, oil changes, car washes, excise tax, car repairs, miscellaneous parking
• Travel: Plane tickets, car rentals, gas and tolls for road trips, parking at airport, transportation to airport, food for travel, checked luggage fees, entertainment on vacation
• Gifts: Wrapping supplies, birthday, Christmas, wedding, baby shower, Mothers Day, Fathers Day
• Medical: Copays, parking at the doctor's office, flu shot, prescriptions, contacts/glasses, dental bills, vision bills
• Memberships/Subscriptions: Costco membership, Amazon Prime membership, newspaper/magazine subscriptions, anti-virus software subscriptions, museum passes
• Children's classes/activities: Swim class, preschool
• Hobbies: Race fees, craft supplies
• Photography: Family pictures, photo books
• Education/Career Related: Tuition, books, CPA renewal fees
• Clothing Related: Dry cleaning, clothing purchases (although I use a fund to keep track of this-- we'll talk about this more next month)
• Miscellaneous: Hair cuts, stamps, credit score requests, will software, cash withdrawal

Now assign an amount to each expense. If you don't know the amount, estimate it. As you live with a budget, it will get more and more accurate over time.

Step 2: Divide the total of that expense for the year by 12 and put it into your monthly budget. If you're using our free Excel file, available on our Facebook page, you enter the amount for the year in the total column at the end, and the monthly amount will automatically populate into each month's budget. As you enter the actual amount each month, you'll see the actual total accrue in the total/actual column. If you are using Mint or Yodlee, I believe there is a "rollover" feature that you can use to rollover the unused amount in each budget to the next month. However, in the month when you do use the accrued funds, it will show you as "over" budget if you go over the monthly amount.

Step 3: Save that money each month so it's there to use when you need it. There are several ways you could do this. We send the amount we budget each month for irregular expenses to a separate savings account, and then transfer the actual amount spent on irregular expenses back into our checking account each month to make sure we don't "accidentally" spend that money on other stuff. I believe Lisa pays large irregular expenses out of that separate bank account directly. Or you could just hold your budget in the other areas and float the amount accrued for irregular expenses in your normal checking account (works better when you're not on a tight budget). We'll talk more about cash flow strategies with irregular expenses later in our budget boot camp.

Step 4: Refine over time. It's not going to be perfect the first time. It's a combination of both trying to live within your budget and improving your ability to forecast your spending as you continue to track it that will give you a workable and effective budget.

*I made up the 95 percent-- but seriously, it's got to be high.

Share- What are the random expenses that you always forget about in your budget?


And for the mom products I'm loving: Since we'll be moving to New York City in a few months, and space will be TIGHT, we put our baby in a pack 'n' play. The combination of this mattress pad (we're using the bassinet attachment, so we didn't want a thick pad that would make it too high) and these oh-so-soft crib sheets actually makes it a really great and comfy space. 

Why I Love Our California Home (And How We Made It Happen)

When Lauren and I originally created this blog, a lot of readers wanted to hear about home buying. I haven't said much about the subject because, quite frankly, I feel like it's a miracle my husband and I were able to buy in the beautiful (aka PRICEY) Bay Area at all.

We started the house hunting process by creating a budget (you know I love budgets). Looking around at what was available for sale on our own, we thought we'd only be able to afford a small, two-bedroom condo at best. Luckily, we found a great REALTOR® who helped us figure out how we could get what we really wanted (a single family home) within our budget! He found a great neighborhood with no HOA fees, which increased the monthly amount we could put towards a mortgage. Our house is definitely a fixer-upper, but we've had fun putting in our own sweat-equity. (Details of our renovations here: bedroom, bathroom, and living room).

One of my favorite DIY upgrades to our home: our painted fireplace and mantel. (See the "before" picture here)

We still have a few more renovations to do, but we're enjoying the journey! And even though I'm not a native Californian, I'm loving it here.

My Favorite San Jose Spots

If you're ever in the San Jose area, check out some of my favorite spots:

Budget Boot Camp - To Do #4: Budget for Monthly Recurring Expenses

Give yourself a pat on the back for getting to this point-- the actual BUDGET part of the budget boot camp!

So far, you've

• Calculated your net worth,
• Set financial goals, and
• Tracked your spending for a month.

I know it took us a while to get to the point of actually creating a budget, but now that you've done those other three things,