by Brad Hoffer
Extreme couponing and buying in bulk are crazes that have been around for quite some time. There are these ridiculous stories of people spending hours upon hours over coupons to get stuff for free and/or routinely shopping at bulk grocery stores which results in having a year or two of products in the pantry, closet or basement. All of this is done in the name of 'saving money'. The problem is, are you really saving money? It becomes very hard to measure at times. For instance, if you save $.50 a tube on a year's worth of toothpaste, let's say you go through 12 tubes a year, you have saved $6. However, if you make one errant purchase, such as a huge tub of pickles that you don't eat, or a pack of 12 kitchen brushes for $30 that you end up losing, you are at risk of throwing away your savings. The same thing happens with coupons. If you purchase something you don't need, the savings from your coupons are quickly eliminated. I have no doubt, there are super-disciplined people, who never make a wrong purchase and only purchase the necessities, and to you, I say, 'good job', 'keep up the good work'. However, for the rest of us, I think a careful look at how we are arriving at our savings and the 'extras' we end up buying needs evaluated. If your efforts to save money is failing, why are you doing it? Isn't it far worse to have the illusion that you are saving money, but in reality you are actually spending more?
Keep in mind, the goal of the companies issuing coupons and operating bulk stores, is to get individuals to buy more. If you are buying more than you need, you are losing the game. Call a time-out and re-evaluate your buying habits, your needs and your wants, and then shop smartly for only those things you need. This is at the core of saving money, buying only what you need. Even when you go to your local grocery store, everything is centered around getting you to buy more than you need. Every aisle has random stuff hanging from the shelves, trying to get you to make that impulse buy, that is, buying something you don't truly need. Think about it, one $3 'excess' item per trip, based on consumers' average 1.5 trips per week*, equals $234 a year. Think of the grocery store's motivation, every customer spending an extra $234 a year times an average of ~11,500* customers equals $2,691,000 in additional annual sales! As with any game, everyone likes to win, don't let the grocery store win! Develop a strategy and stick to it. For my household, we like to shop around the outside perimeter of the store and avoid going down the inside aisles. This approach will typically get you fresh fruit and vegetables, meats, the deli counter, milk, OJ, yogurt, eggs, cheese and bread. There is always something we need down the middle aisles, but we walk those aisles with trepidation!
In every game, big and small, there is a winner and a loser, well, except for some kids' sports where every participant gets a medal. The problem with not keeping score is you don't know how good or bad you really are. Also, if you don't keep track of past scores, you don't know if you are improving. The xlyf excel budgeting spreadsheet will help you keep score better than ever before, keep your history so you know if you are improving, and help you set appropriate goals.
Download the xlyourfinances spreadsheet today and start winning the game against impulse purchases from coupons, bulk stores and grocery stores.
By Brad Hoffer
How many categories should you use when you budget? 10? 20? 40? When I first started tracking our spending, I probably had 40 categories. Today, I use 10 spending categories. So why did I change and which way is better?
I really think it is personal preference, however, I would like to share my experience. When I had so many categories I found budgeting to be overwhelming. I also found that when I created a budget for so many small categories, often things in our life would change and I was spending lots of time adjusting budgets, moving budgeted dollars from one category to another. I stepped back one day and said, 'why am I doing this?'. My main goal is to spend less than I make. If one month we needed to spend more on food and less on home improvement, what difference did it make? My main concern was making sure that in total, we didn't overspend. What I landed on was to focus on fewer, but larger categories. I ended up with 5 variable and 5 fixed expense categories. This made it a lot easier to remember what category items fall into. It also reduced the number of times I had to adjust where my budget dollars belong.
I will be honest, the detail-oriented part of me still struggles to group so many things together into one group. But if I am even more honest, I really believe we are doing better today with sticking to our budget than ever before. By reducing the number of categories, you give yourself the flexibility you need to adjust to the needs of the month and still control your overall spending.
If you are familiar with xlyourfinances, you realize that the number of categories doesn't really matter because the spreadsheet will automatically categorize and summarize them against your budget. So there is little to no extra work regardless of the number of categories you have. However, I still believe that when you sit down and look at your budget vs. actual, you are better off with less categories. Each week you are more likely to be focused on your goals and more determined to reduce your spending if you can see the one or two areas you need to improve vs. 15 areas because you have 40 categories you are trying to analyze. This is why I say, "less is more".
This brings me to my concluding thought. There are many products available to choose for personal finance. I don't claim that xlyourfinances is for everyone. But I do believe that for the majority of individuals and families across almost any income level, it will be an invaluable tool in keeping track of and improving your understanding of your finances. Xlyourfinances will help you set goals, reduce your stress and improve your financial situation by giving you the information you need to make informed financial decisions. Whether you decide to use 400 categories or 10, it is your choice and there really is no wrong answer, as long as it works for you!
by Brad Hoffer
For years, my wife and I have struggled to overcome the trap of spending more than we make. When you sit down to budget and compare your spending vs. your income, it is not much fun when you are perpetually in the hole. No matter how you look at it, it is just depressing. These negative feelings make it very difficult to continue to pay attention to your finances because no one enjoys getting bad news, week after week, month after month, and year after year.
It seemed impossible to break the cycle. Everything we were buying seemed necessary. Now, 'necessary' is a very relative word. I may feel we need to eat out because neither one of us wanted to cook that night and it was 'necessary' for our sanity to just enjoy eating out that night. I may feel we need to replace our vehicle because it is nickel-and-diming us and it is 'necessary' to have reliable transportation. It is 'necessary' to have nice clothes for my job. It is 'necessary' to fix up the house. It is 'necessary' to add a patio to the back yard. It is 'necessary' to upgrade the dishwasher because the dishes just don't seem to come clean anymore. On and on the list of 'necessary' items grows and grows. So what can you do?
I believe the only way out is to become 'fed up'. 'Fed up' with the stress, the worry and most of all, the feeling of helplessness. You then use this frustration to become determined. Determined to spend less than you make, regardless of what that means. This sometimes means taking drastic measures. But no bad habit or routine is easily broken. Changing your heart and mind regarding your money is incredibly difficult. Your way of thinking seems logical and your reasons for spending seem legit. But until you can break down the walls that cause you to continue to fall into the overspending trap, you will not succeed.
But the moment you do break the cycle and start spending less than you earned, suddenly, budgeting becomes fun, that very month! I should clarify what I mean by budgeting. To me, budgeting is the act of comparing your actual results to an accurately prepared budget. When your results are better than your budget, you can't help but be happy. You feel empowered, in control and you feel a sense of freedom.
How many times have you heard the phrase 'financial freedom'. What does this mean to you? I use to think it meant you had so much money you could just purchase whatever you wanted, when you wanted. What is interesting, I know several millionaires, and they just don't spend much money. They set limits and parameters and live within them. Why? Because financial freedom is not being able to buy whatever you want, it is buying what you can afford and living free from uncontrollable spending habits. Overspending is not freedom, whether you can afford it or not.
It is very interesting, when you spend less than you make, you find 'financial freedom', regardless of income. You are free from the financial pressures and stress that come from carrying debt and you feel more prepared for the future.
Fun budgeting is when you sit down, and realize you have some cushion, because you spent wisely, made a plan and stuck to it, or even beat it. If you want budgeting to become fun, stop overspending and you will find true financial freedom.
I have been an Auditor, Analyst, Accounting Manager, Business Systems Manager, Controller, School Board Vice President, Director of Finance and CFO over the past 19 years of work experience. In my free time I developed the XLYourFinances spreadsheet and website I enjoy golf and spending time with my family. We attend church at LCBC.