Greetings and Salutations-
So lets jump into this ting--yah? In my world, and I live with a lot of abbreviations as a language in and of itself, EDA stands for Every Day Account. Our first account was The Main Checking Account- which is where the main meat and potatoes of our bills come out of. Either auto-drafted or manually drafted for each bill. The main account is the one that eventually you will fill every two weeks (or weekly if that is how you are paid) and let it run like the well oiled machine it will become. Now the Every Day Account it where (at least for me) things that are more variable and somewhat controllable come from such as gas, food, and some incidentals. I have figured up how much I need to live on for the flexible stuff and then we will have a final move to a last account- your spending/savings account. More on that later but just know that the money gets split one more time.
Know that everyone's situation is different and this is a place that is a big variable in and of itself. Accurately estimate an amount as close to reality and monitor it. Make sure that what you thought you first needed for gas is correct. for Groceries is correct. Think about where you can cut things.
The grocery store is a vortex of possibilities to cut your bottom line. It is a place that most people don't realize (or want to realize) how much control they actually have .Can you shop for groceries at Wal-Mart? (I know you need meds to go in there but there is always a possibility you can end up on people of wal-mart.com or what ever that site is LOL) Make it a game to switch brands from name brand to store brand with your family. Make it scientific with yourself. Make a list of all the products you try and know which ones don't make a differences and which ones do (like a check list). I can promise you that you can switch more items that you think and you can't tell the difference for most except in your wallet. Write down the price differences. Go shopping at Harris Teeter or Publix's and then go to Food Lion or Wal-mart and buy the same things. Substitute store brand where ever you can. It adds up and fast. Make it that game again that will keep you on the pathway of success.
Another place is Costco/Sam's Club. Can you split things with someone if it is more food than you or your family need at once? A word to the wise-all of the items that they sell in these warehouses are not always a bargain. DO THE MATH!! sometimes it is just buying in bulk- other times it is savings by the dollars. I have taken a calculator (yes I am a dork), gone up and down the isles and divided items per piece, ounce, etc and compared it to what I buy at Wal-Mart. I can tell you from my list what is really cheaper at Costco and what isn't worth the storage or that I won't be tricked into buying. I save a lot of money for the items I buy there. It is a pain to shop at several different places sometimes but the savings are always worth it. You have to know for your self and your situation where the bargain is.
Hope you are reading some of the books I have suggested and would love to have any input that you would like to share including any successes and any reading that you have done.
Tootles
Heather :)
Monday, September 24, 2012
Monday, September 17, 2012
Sharpen Your Pencil
Greetings and Salutations-
So- shall we take a break from studying and put some lead to paper so to speak? You have gotten your calender and now you need to start filling it in. I will tell you how I do it, but please don't hesitate on working out your system that is best for you. How I do it will get it done until you can devise your own way as you get comfortable with the process. I use a green highlighter to mark my paydays. When I see green I think $$. I will mark them ahead as many months as I have the patience for at that time that I am doing it but at least 2 months head. Gather your bills (this may take a few cycles to capture all bills including the irregular ones) and mark them when they are due and I pencil in my estimates for the variable ones (for example the electric) and in pen when I know they are fixed (like rent/mortgage).
I have all my bills on auto-pay, and depending on your situation, I recommend this. Even if you have to start out with one bill-- It does a few things. Number one it starts the automation process for setting something and letting it do its thing. Today it is a bill payment- tomorrow it will be auto-payments into savings. The second thing it does is it makes you more honest with yourself and your bills because you know that on the 15th of the month your cell phone bill is going to be drafted and so you can't pay it late to have fun with until payday and play makeup. It helps you get away from robbing Peter to pay Paul. Its due and you better have the money in your account. I would recommend that you think this through and if it isn't something that you can do now, try and make it a goal in the super near future again even if it is one small bill. Remember small victories are what makes big changes.
Every 2 weeks after payday (usually saves me from spending/going out on a Friday) I pick a day that weekend and set aside time to plan my next 2 weeks of bills,savings, and pre-spending. I also balance my checkbooks. I estimate my total in bills and add a cushion (I choose $100 but I am already to the point I can lower that amount) just in case a bill hits that I wasn't planning on, forgot, or drafts on the "wrong" date. I write that amount down on my payday. Then I take my paycheck and subtract the difference and MOVE IT TO ANOTHER ACCOUNT. then the money I have left over in that "main checking account" tends to itself and I never dip into it. Because all of that money is as good as spent. It is just waiting for the drafts to kick in.
The hardest thing I ever did was move that money the first time. I was sooo scared that I messed up the calculations. That I would overdraft. I pushed past that fear and did it. Closed my eyes and nothing bad happened. The bills were paid and I did nothing to see that it happened except that I arranged them to auto-draft. Should you not be able to do this you can let the money sit in the account until it is time to pay the bill. The rule is that the money that you left in this account can't be used for anything else other than bills and can't cover a night out with the girls/boys and now you are short.
That one giant move is when things started really happening for me. I started accounting for my money and putting it where it needed to go. Next time we will talk about where the balance went that we moved out of the main checking account and what happens to it. Keep up your reading. I have added more books and will continue to do so. Please don't forget questions and feedback is truly appreciated and welcomed!!
Tootles
Heather
So- shall we take a break from studying and put some lead to paper so to speak? You have gotten your calender and now you need to start filling it in. I will tell you how I do it, but please don't hesitate on working out your system that is best for you. How I do it will get it done until you can devise your own way as you get comfortable with the process. I use a green highlighter to mark my paydays. When I see green I think $$. I will mark them ahead as many months as I have the patience for at that time that I am doing it but at least 2 months head. Gather your bills (this may take a few cycles to capture all bills including the irregular ones) and mark them when they are due and I pencil in my estimates for the variable ones (for example the electric) and in pen when I know they are fixed (like rent/mortgage).
I have all my bills on auto-pay, and depending on your situation, I recommend this. Even if you have to start out with one bill-- It does a few things. Number one it starts the automation process for setting something and letting it do its thing. Today it is a bill payment- tomorrow it will be auto-payments into savings. The second thing it does is it makes you more honest with yourself and your bills because you know that on the 15th of the month your cell phone bill is going to be drafted and so you can't pay it late to have fun with until payday and play makeup. It helps you get away from robbing Peter to pay Paul. Its due and you better have the money in your account. I would recommend that you think this through and if it isn't something that you can do now, try and make it a goal in the super near future again even if it is one small bill. Remember small victories are what makes big changes.
Every 2 weeks after payday (usually saves me from spending/going out on a Friday) I pick a day that weekend and set aside time to plan my next 2 weeks of bills,savings, and pre-spending. I also balance my checkbooks. I estimate my total in bills and add a cushion (I choose $100 but I am already to the point I can lower that amount) just in case a bill hits that I wasn't planning on, forgot, or drafts on the "wrong" date. I write that amount down on my payday. Then I take my paycheck and subtract the difference and MOVE IT TO ANOTHER ACCOUNT. then the money I have left over in that "main checking account" tends to itself and I never dip into it. Because all of that money is as good as spent. It is just waiting for the drafts to kick in.
The hardest thing I ever did was move that money the first time. I was sooo scared that I messed up the calculations. That I would overdraft. I pushed past that fear and did it. Closed my eyes and nothing bad happened. The bills were paid and I did nothing to see that it happened except that I arranged them to auto-draft. Should you not be able to do this you can let the money sit in the account until it is time to pay the bill. The rule is that the money that you left in this account can't be used for anything else other than bills and can't cover a night out with the girls/boys and now you are short.
That one giant move is when things started really happening for me. I started accounting for my money and putting it where it needed to go. Next time we will talk about where the balance went that we moved out of the main checking account and what happens to it. Keep up your reading. I have added more books and will continue to do so. Please don't forget questions and feedback is truly appreciated and welcomed!!
Tootles
Heather
Monday, September 10, 2012
Behavioral Economics
Greetings and Salutations
So lets talk about a few of these terms to help increase your awareness of why you do what you do when you are making choices about how to spend your money. Mental Accounting (first named by Richard Thaler)-- basically how do you decide to justify certain expenditures and where you group them. Lets say I asked you right now would you go to Upstairs Audio and spend $550 on a new CD player for your current car and you said no. Then lets say a year from now your car craps out and you go buy a new one and you can get either the standard issue player OR an upgraded CD player for $550. You say "sure what the heck...whats $550 more when I am already spending $23,000".That is mental accounting and framing at work. Its the same $550 dollars and isn't any cheaper because it is hidden the big numbers. Here is another example- would you be willing to go 4 blocks to save $25 on a $100 lamp? of course you would. Now...would you be willing to go 4 blocks to save $25 on a dining room suite that was $1600? of course you wouldn't.
Mental accounting and framing dictates that your mind will see the savings of 25% on the purchase price of the lamp worth the short distance but the savings of 4% of the purchase price of the dining room suite as not worth the hassle. The point of this really isn't if you would or would not go the 4 blocks. Its to make you acutely aware of how you size things up and rationalize how you see the dollar. $25 bucks saved is $25 bucks saved. Period. Do that over and over in the course of a year for various purchases and put the difference aside. You would be amazed at how much money you would have at the end of that year.
Loss Aversion is another key concept in understanding how our brains work with money. It is our strong tendency to prefer to avoid losses even over acquiring gains. Simply put it is more painful to pay for a $5 surcharge than receive a $10 or even $20 bonus. Here is a great example. I want a new phone. I can get one from Sprint for $29.99 and I really like it. Even though all it will do is text and make calls (exact same as what my phone does now)I will pay $36 for an "upgrade". I'd really rather Sprint just tell me that it is $66 (+tax) for the phone. The thrill of the phone being cheap at $30 bucks is way offset by the fact I have to pay $36 bucks for the upgrade/surcharge.
Here is another example of loss aversion that hits the old elusive savings account in the kisser. When you asked to put aside money today for a upcoming bill in the future..lets say you have $100 and you take $50 and put to the side--you feel as if you have "lost" $50 dollars. You haven't. You are planning on spending it in the near future-but your brain tells you that you now have $50 less spending power, despite the fact that you now either have a bill paid for or have a good contribution saved to lessen the amount owed.
I hope that while driving the point home that in order for you to make sound financial decisions and raise your financial intelligence I have kept you interested. Remember it is only through behavior modification that real and solid life changes can be made. Go to the dollar store and get a basic calender in what ever size you choose. How is your reading going? Will someone please ask a question? or something?? Feedback is very welcomed and encouraged!!
Tootles :)
Heather
So lets talk about a few of these terms to help increase your awareness of why you do what you do when you are making choices about how to spend your money. Mental Accounting (first named by Richard Thaler)-- basically how do you decide to justify certain expenditures and where you group them. Lets say I asked you right now would you go to Upstairs Audio and spend $550 on a new CD player for your current car and you said no. Then lets say a year from now your car craps out and you go buy a new one and you can get either the standard issue player OR an upgraded CD player for $550. You say "sure what the heck...whats $550 more when I am already spending $23,000".That is mental accounting and framing at work. Its the same $550 dollars and isn't any cheaper because it is hidden the big numbers. Here is another example- would you be willing to go 4 blocks to save $25 on a $100 lamp? of course you would. Now...would you be willing to go 4 blocks to save $25 on a dining room suite that was $1600? of course you wouldn't.
Mental accounting and framing dictates that your mind will see the savings of 25% on the purchase price of the lamp worth the short distance but the savings of 4% of the purchase price of the dining room suite as not worth the hassle. The point of this really isn't if you would or would not go the 4 blocks. Its to make you acutely aware of how you size things up and rationalize how you see the dollar. $25 bucks saved is $25 bucks saved. Period. Do that over and over in the course of a year for various purchases and put the difference aside. You would be amazed at how much money you would have at the end of that year.
Loss Aversion is another key concept in understanding how our brains work with money. It is our strong tendency to prefer to avoid losses even over acquiring gains. Simply put it is more painful to pay for a $5 surcharge than receive a $10 or even $20 bonus. Here is a great example. I want a new phone. I can get one from Sprint for $29.99 and I really like it. Even though all it will do is text and make calls (exact same as what my phone does now)I will pay $36 for an "upgrade". I'd really rather Sprint just tell me that it is $66 (+tax) for the phone. The thrill of the phone being cheap at $30 bucks is way offset by the fact I have to pay $36 bucks for the upgrade/surcharge.
Here is another example of loss aversion that hits the old elusive savings account in the kisser. When you asked to put aside money today for a upcoming bill in the future..lets say you have $100 and you take $50 and put to the side--you feel as if you have "lost" $50 dollars. You haven't. You are planning on spending it in the near future-but your brain tells you that you now have $50 less spending power, despite the fact that you now either have a bill paid for or have a good contribution saved to lessen the amount owed.
I hope that while driving the point home that in order for you to make sound financial decisions and raise your financial intelligence I have kept you interested. Remember it is only through behavior modification that real and solid life changes can be made. Go to the dollar store and get a basic calender in what ever size you choose. How is your reading going? Will someone please ask a question? or something?? Feedback is very welcomed and encouraged!!
Tootles :)
Heather
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