The State, SC
08-29-07
Month on tight budget provides lessons in winning money game
I am horrified at how careless I used to be with my money.
Before I started budgeting this month, I would easily spend the equivalent of a
month’s rent on shopping and dining out in just two weeks.
“A lot of spending happens at the unconscious level,” said Tahira Hira, a
consumer economics professor at Iowa State University, so it’s important to
know your spending weaknesses and habits.
My weakness is buying purses. I also love buying books and pretty much
anything on sale. I have been known to shop out of boredom, too.
This month, I cut myself off from shopping cold turkey, did the same for
entertainment and limited myself to $5 a day for food.
As a result, I saved enough to more than double my usual monthly credit card
payment, make my first savings account deposit since I was a college freshman
and get a haircut.
Now it’s time to devise a realistic budget.
Starting next week, I’m going to give myself an allowance, in cash, each payday
— and when I run out of money, I’m done shopping.
Paul Haisley, a financial planner in Charlotte, said it’s important to “get to the
point that you understand it’s OK to spend on what you enjoy, but there are
consequences; it’s all about choices.”
Surprisingly, after my extreme budgeting, I’m motivated to keep living cheap.
Yes, I resorted to soup, Spaghetti Os and grilled cheeses too often because I
spent my food money on weekend entertainment.
But I learned how to make stir fry, got more creative with salads and even
ventured to try new recipes, such as homemade sweet potato fries.
I also now realize I can still have a social life while spending little to no money
and without mooching. I could call friends and hang out at a community pool
rather than going out for lunch.
Because I banished my debit and credit cards, I learned to give away dollar bills
— a much harder feat than swiping a card at the cash register.
Hira said the technological access to our money allows for mindless spending. “If
you give a consumer a $1 bill, they’re less likely to spend it than if it’s on a card,
... so train yourself to use cash,” she said.
And I’ve discovered vast resources dedicated to keeping people my age on the
right financial track.
Suze Orman’s book, “The Money Book for the Young, Fabulous and Broke,”
makes budgeting easy to understand and explains how to prioritize between
paying down debt and saving for a specific goal.
“Use your savings to pay off as much of your credit card debt as possible,”
Orman writes. “If you have credit card debt, you don’t really have financial
security, no matter how big your savings account is.”
Magazines including Young Money and Kiplinger’s are helpful and have articles
catered to college students and grads. Young Money, for example, has articles
about everything from starting a business to buying a first house, to finding a
credit counselor.
I didn’t find much help on the Internet. I was frustrated that while many Web sites
emphasize the importance of budgeting and saving, they never explain how to
accomplish it.
But I liked Janet Bodnar’s book “Money Smart Women,” in which she suggested
tracking expenses is the first step to devising a budget. “Just having the numbers
is helpful,” she told me. “You can see where you need to cut back.”
OK, the advice might sound obvious to some, but as a 23-year-old, I’m just
beginning to learn my weak financial spots.
For the first time, I was motivated to fix those weaknesses. And I learned it pays.
By not shopping or eating out in August, I saved $588.
I pocketed $150 more in saving on gas because I didn’t drive as much to stores
and restaurants, stopping my cable and Internet service, and switching to a
generic prescription.
My grand total is $738.
I would have had an extra $127 if not for some unexpected car trouble — which I
was able to pay in cash because of my budget.
Of my August savings, I used $550 to pay down credit cards. I usually pay about
$250.
I also put $100 into my savings account — my first deposit since I opened the
account five years ago.
The rest, about $90, will go to my first haircut since Memorial Day, beer for
tailgating and a “victory” dinner.
All month, experts kept telling me I couldn’t keep up this extreme budgeting or
risk a huge spending spree from my self-denial.
They said having a goal — such as saving for a house or car — is critical for
devising a workable budget.
My goals are to allocate $300 a month toward paying down credit cards and put
$100 in my savings account.
“If it’s a hard and fast budget that’s not important to you, then you won’t stick to
it,” Haisley said. “It’s all about priority, what’s important to you.”
Look, a cute, new pocketbook is still important to me, but only after I pay my bills.
LIZ’S FINAL TALLY
From extreme shopping to extreme budgeting
JULY 1-31
Shopping: $521
Food/entertainment: $207
Total: $728
AUG. 1-31
Shopping: $0
Food/entertainment: $140
Total: $140
Shopping/food/entertainment sav-ings: $588
LIZ’S LESSONS LEARNED WHILE LIVIN’ CHEAP
Columbia offers an abundance of free and cheap entertainment. See a list on my
blog: www.thestatecom.typepad.com/livincheap
Use the public library, which has free books and DVDs.
When living on a budget, its best to avoid the stores altogether. That way I dont
fall into market-ing traps and sales ploys.
Setting the amount of cash needed each week for grocery shopping makes it
easier to con-trol the amount I spend on food.
Going out to eat doesnt have to be my main form of socializing. Consider
heading for the river-walk or hosting a movie night.
It’s OK to mooch, as long as I am aware I might have to one day return the favor.
Budgets are like diets: I have to find one thats right for me or Ill never stick to it.
It’s OK to spend money on shopping, as long as I cut back somewhere else, like
in food or entertainment.
Shopping with a list allows for more controlled spending at the grocery store.
Eating breakfast curbs my mid-morning snacking, which helps me spend less on
food.
• Top Ramen isnt so bad.
BUDGETING TIPS
Advice from Tom Harrell, a certified public accountant with Elliott Davis and Co.
of Columbia, and Paul Haisley, a financial planner in Charlotte
Review and average all your purchases and expenses for the past three months.
• Break down your basic living expenses, including rent, utilities and
transportation, and subtract the total from your net pay.
Think about what you dont pay every month (property taxes, renters insurance,
etc.) and factor those expenses into your monthly budget.
Have a goal: saving for a house, paying down debt. Much of the money left after
you pay living ex-penses should go toward your goal.
Think about what you can cut: entertainment, eating out, nones-sential spending.
Allocate some money for indul-gences; otherwise youll resent and cheat on your
budget.