Teaching Children About Money

Thanks to Nicole for today’s guest post

One thing my parents were really good at was teaching me about money. I grew up knowing that money was not to be wasted and that I couldn’t have everything I wanted. I am so grateful for this lesson.

In college when my roommates were calling their parents to bail them out, I had plenty. I had already figured out how to budget. I took one crisp $20.00 bill out of my checking account each week. This covered my food, entertainment and any extras I would need. As you can imagine, there were not a lot of extras in a $20.00 a week budget.

Teaching my kids about money is something that is really important to me. I have friends who didn’t learn about how to handle money when they were growing up and it has been really hard for them to transition into adulthood.

I am not perfect at this yet, but I feel like I have gotten a pretty good start. Here are my best tips. My oldest child is seven, so this is definitely a work in progress.

Give them an allowance. It doesn’t have to be a lot of money. My seven year old gets $2.00 a week and my five year old gets $1.00 a week. In my house, getting an allowance is dependent on doing chores, so that they learn that money is earned. Giving kids an allowance teaches them respect for money. It ends the “can we buy. . .?” question and changes it to, “how much more money do I need until I can buy. . .?”

Give them freedom with their allowance. My five year old never has any money, she spends her $1.00 each week. That is her choice and she is often disappointed when she sees something she really wants and she doesn’t have the money. But she will get it eventually.

Encourage them to start a savings account. My seven year old has already started her savings account. She had about $10.00 that she had saved, the minimum at our bank is $25.00. I told her that if she raised another $10.00 I would give her the last $5.00. She went back and forth for a while. She wanted the extra $5.00, but she also wanted the junk that she buys regularly at the $1.00 store. Finally she had the whole $20.00 saved and we went to the bank. She thought it was a really awesome experience with the banker offering her something to drink and asking her questions.

Our bank, Wells Fargo, offers a special kid’s savings account. There are no fees and each time you make a deposit, you are given special Wells Bucks that you can save up and redeem for prizes. It gives kids an extra incentive to save up their money.

Teach your children to work. When I was about fourteen, my parents told me that they would pay for my college tuition, but that if I wanted to go away to school I would be in charge of my own room and board. I definitely wanted to go to college anywhere buy my home town. I started working when I was sixteen and I put away enough money to pay for three semesters of living expenses.

I was only able to save up this much money because I knew how to work. Chores were a daily part of my life growing up, and I am grateful for that. I have tried to instill these values of hard work in my children as well. Each of my kids are responsible for keeping their own room clean and my older two daughters have additional chores like unloading the dishwasher, giving the dog food and water, cleaning the bathroom counter, and emptying the garbage. It takes my five year old about an hour to unload the dishwasher, and she is usually complaining the entire time, but she is learning and important lesson about responsibility.

Be a good example. My seven year old asked the other day if I had any coupons for cottage cheese because we hadn’t had any in a while. My three year old got really excited the other day because she saw a coupon for Life Savers, she couldn’t wait until we bought them. She doesn’t totally get it yet, but she is understanding the correlation between buying things and coupons.

Nothing you teach them will teach them more than what you do. Kids absorb more than we ever know. I don’t know how I knew that my parents didn’t believe in car loans. I don’t remember having any important discussions about it, but I just knew.

I am so grateful that my parents passed these values onto me and I hope that my husband and I can be just as successful in teaching our children.

What are your tips for teaching your children about money? Have you done this successfully? Let us all know in the comments section, I would love to hear from you!

The Importance of An Emergency Fund

(originally posted in December 2008)

If you are trying to get out of debt, you may be following Dave Ramsey and his Total Money Makeover or some variation of his advice.

When I first bought the Total Money Makeover 6 months ago, I read it in two days and told Brad “This is what we are going to do!”.  He was on board with everything except Baby Step 1 – Building a Baby Emergency Fund of $1000.  He didn’t see a need for it and he wanted to skip straight to Baby Step 2 – The Debt Snowball.  After much discussion and me telling him that this is what I needed to feel secure, he agreed.

And our $1000 has sat in the bank since that day.  A few times he has mentioned using it for something (like Christmas Shopping or even just putting it toward the one credit card to speed up our Debt Snowball) because “nothing has happened” to us, but I held firm.

Events in the last 2 weeks have shown me how important that fund is!

As you may remember, we now operate on a cash system in our house and as part of our Total Money Makeover, we have every single dollar that comes in to our house budgeted, with every extra dime going to paying off our credit card & cars (which will be complete with our tax return this year).  We DO live paycheck to paycheck, but that is because I have budgeted us as such in order to pay off our debt.  Of course, if something is coming up we can (and do) rework the budget, but my husband gets paid every other Friday, I go to the bank and cash a check for our expenses for 2 weeks, pay bills on Saturday and then the cash that I took out of the bank on Friday is all we have until the next paycheck.  This has worked fine for us (although my sister thought I was a bit odd when we were in Indiana and I only spent $40 at Hobby Lobby…we LOVE that store and it has always been a several hundred dollar shopping spree for both of us when we go to Indiana and are able to go to Hobby Lobby).

But in the past two weeks Murphy has hit our household.

Two weeks ago, I found out that my identity thief had hit my bank accounts again.  Once again, I got all my money back, and the minute Brad’s check had been Direct Deposited, I closed all of my accounts and opened new ones.  I took out the cash we needed for 2 weeks, paid my bills and thought everything would be fine.

The next day (after all the money was taken out for our cash or used to pay bills), my grandfather died and I found myself needing $300 to drive back & forth to Indiana as well as pay for a hotel, meals, etc. In the past, the solution would have been to simply put those expenses on the credit card.  But because I now had that Emergency Savings Fund, I took the cash out of there (and the Debt Snowball gets put on hiatus until that $300 is replaced)

Yesterday was payday again.  When I went to my online banking, I found that someone who shall remain unnamed (but rhymes with “my Nusband Trad”) forgot to change his Direct Deposit for the new accounts and our bank refused the attempted deposit in to the old account.  We have no money except for the $40 left over from the last paycheck that I didn’t spend.

We got the paycheck situation figured out and we will have his check by Wednesday or Thursday, but by having the Emergency Savings Fund, it doesn’t have to affect our daily living (except I am supposed to pay bills today and now won’t be able to until we get that money…and being borderline-OCD, I don’t like my “schedule” interrupted….but then again, I’m a lunatic).  I simply took the cash for our expenses for 2 weeks out of the Emergency Savings Fund and will replace that money as soon as we get his check.

My purpose for telling you this story?

Because I know the temptation to skip Baby Step 1 – Creating a Baby Emergency Fund.  If you are trying to get out of debt, you want to just GET OUT OF DEBT.  But please don’t skip this important step of creating a “backup”.   Once you have that “backup”, resist the temptation to just grab that money to speed up your Debt Snowball or for any other non-emergencies.

Our fund sat there for 6 months unused.  If we hadn’t had that money in savings, we would have been pretty much screwed with the Direct Deposit mix-up.  I can’t tell you how glad I am that it was there when we needed it!

How To Budget When You Are Broke

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Budgeting for anyone takes time and a lot of energy. However, in a society where everything is going up and wages are staying the same, you need to know how to budget even when there isn’t much there. Are you ready to take a look at your budget and start inserting some new tips?

:: Look Again

There is always some wiggle room in a budget. How is this? Well, each time you take a closer look at your budget, you might find some available money. Can you call and get another discount on your cell phone? Are you willing to get rid of some channels on your television? In all honesty, if you’re that broke, it may be time to cut the cable bill completely. Are you stopping to get coffee on your way to work because it is “only” $1 (when you can make it cheaper at home).  Hitting the vending machine at work for a $0.75 soda?

Every time you take a second look at your budget, you become a little less broke.

:: Pay Necessities First

A lot of people who are on a tight budget are faced with what they should pay first. If your family is going to be suffering financially for a while, you need to pay your main bills first. What constitutes as a main bill? Paying your mortgage or rent first would be an example of paying your necessities first. Of course your heat, water, and electricity can also be considered your main bills.

If you can’t make major credit card payments, loans, and other debts, then it’s time to start calling your creditors.  This is a time to look at every bill you have and to take an even closer look at where all of your money is going!

:: Get Creative

Okay, no one likes eating macaroni or ramen noodles for an extended period of time, but if you’re broke, it’s time to swallow your pride. There is no shame in putting yourself on a tight food budget. After all, cutting a food budget is one of the easiest ways to stretch a budget. It’s a little scary to reduce this part of your budget, but you may not have a choice.

Buying just the necessities like milk, chicken, beans, and bread is something you may have to partake in for a while. Don’t get discouraged though because there are a lot of different recipes you can try out thanks to Pinterest and the Internet. (Have to cut the Internet out? No problem, take exclusive advantage of free WIFI in various places in your town.)

Are there other places you can get creative in your budget? Sure! Maybe now is the time to learn how to sew and patch your own clothing. When you are broke, there is never a wrong idea for getting creative with your budget, as long as it’s legal.

:: Increase Your Income

It’s understandable that for some families, increasing the revenue coming in is simply not doable. However, if you can get a part time job, then now is the time to do so. Even if you only have the job for a short period of time, any extra money coming in will help pay down debt and balance out your budget.

Most people have experienced being broke in their lifetime and there is no shame in it. Sometimes being broke is our fault and sometimes it’s not. That’s why you have to reevaluate where your money is going and double evaluate what you can cut. Use these tips to create a lasting budget while you’re broke. Things will get better, but until they do, it’s time to cut back and create a new budgeting plan.

What are your best budgeting tips?

Ways To Save Money On Your Cell Phone Bill

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Save Money on Cellphones

Want to find a way to cut your expenses in your budget but you aren’t sure which part to look at? Maybe it’s time to take a good look at that cell phone bill.

Don’t just look at the amount, look at what you are spending money on; the breakdown of the bill. Do you pay for a data package? Do you pay for texting? Do you pay for extras like games and other apps?

Did you know that if you pay $30 per month in “extras” on your smartphone or cellphone including a data package or any of the above, that’s costing you an extra $360 per year! Do you really use that data package that much to be needing to spend that much per year on it?

Consider Your Extras

Take a good hard look at those extras on your bill. Do you need to download 3 new games a month? Are you really using that data package? Let’s look at the numbers…if you download 3 apps a month for $3 each, spend $30 a month on a data package, and spend $15 a month on a texting package, that adds up to $648 a year! Look over all of these things and decide what you could possibly cut out.

Look at a Different Plan

You may have a commitment to your cell phone provider until your contract is up but after that, all other plans are free game. Straight Talk offers a monthly plan as low as $30 (including texting and data!), Verizon offers a pay as you go plan that starts at $45 per month and also includes data and texting. Would something like that be something you could get by on?

Whatever you decide to do, make sure you are getting the best deal for your dollar and you are getting all the things you actually need!

Which cell phone provider do you use? How much do you spend on your cell phone bill in a month?

Ways To Save Money In College

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Ways to Save Money in College

Pretty soon it will be time to hit the books and head off to college. You already have to worry about the expenses of paying for your books and paying for the classes and the rest of the school year, you don’t need to worry about your other expenses emptying your pocketbook as well!

Start a Simple Budget

If you are going to need to buy clothes, foods, and school supplies throughout the year, make sure you set up a simple budget at the beginning of the year. Know how much income you are bringing in (if you have a job or if you are dipping out of your savings account) and how much you will be able to spend on each category per month. Make sure to stick to this budget and don’t overspend!

Use Your Student Discount Everywhere

If you go out to eat or go shopping, make sure you ask if the store or restaurant offers a discount for students! You can also grab other cool freebies like a free subscription to Amazon Prime for Students to get free tv and movies to watch and free shipping on Amazon.

Save on Textbooks

Make sure to try and buy your textbooks used at the beginning of the year (just make sure they are the correct edition). If you bookstore doesn’t have a used copy, a quick Google search will bring up dozens of websites that sell textbooks. Also make sure to sell your books back to the store (or even the online store) that you bought them from at the end of the semester to make a little of your money back.

Don’t Spend Money on What You Don’t Need

You don’t really need that cup of gourmet coffee from the coffee shop, fill up your thermos at the cafeteria after breakfast instead. Buy snacks but stick with generic brands (or just ask your mom to send you some!). Not spending money on unnecessary things will end up saving you the most out of all the tips in the long run.

What are some tips you have for other college students on a budget?

12 Items That Will Be Less Expensive in 2012


After the bad news about the 11 Items that will be more expensive in 2012, there IS some good news! From TVs to laptops, cash-strapped shoppers should keep an eye on prices for these items; even wine might see notable discounts next year!

Apple iPad 2

The iPad 3 will not feature a significant price drop (if any at all), but one thing is guaranteed — Cupertino’s forthcoming tablet will most certainly bring down the price of refurbished iPad 2s. (As the iPad 2 did for its predecessor.) The iPad 3 may even cause resellers to offer more deals on new iPad 2 models as they try to move yesterday’s tech to make room for Apple’s latest and greatest.

Android Tablets

The Kindle Fire has been Amazon‘s most successful product ever launched. The release of this groundbreaking tablet has, a-hem, ignited a fire among tablet manufacturers as they scramble to match Amazon‘s $199 price tag. For consumers, the competition translates to better tablet bargains in 2012.

Wine

Wine connoisseur extraordinaire, Robert Parker, predicts the coming year to be the “Age of the Buyer” — a prolonged period of time with stable or declining wine prices. With less disposable income, folks have left wines priced at $30 and above untouched on store shelves. So to move stock, retailers are expected to offer more sales and even flash deals on wines. Price is also affected by industry competition, as consumers note the quality-to-price ratio from wines originating in countries like Australia, Argentina, South Africa, and Chile. Aficionados should check out sites like Lot 18 for their boozy offerings.

Home Prices

Despite record-low mortgage interest rates, United States home prices are expected to limp their way into the coming year. In 2011, average home prices across the country were down 3.4% (compared to the same period of August to October, 2010). And with unemployment expected to remain high, 2012 is looking like it will remain a buyer’s market.

Standalone GPS Units with Lifetime Maps

The smarter our phones get, the greater the number of gadgets they’re capable of replacing. And no gadget is as close to extinction as the GPS unit. So it comes as no surprise to see manufacturers slash prices on standalone GPS units with lifetime / live maps. dealnews data shows that in 2011, units that were once fetching around $160 reached price-lows of just $70.

You can find the complete list here.

11 Items That Will Be More Expensive in 2012

Prices rise all the time…it’s just an unfortunate fact of life. I just read an article about the things that are almost guaranteed to go up in price this year.

The worst thing? We aren’t talking about items like fur coats, trips to Bermuda and diamonds. We are talking about basics, such as food water and gas! From the article:

Food for Home Preparation

If your grocery bill seemed higher in 2011, you weren’t imagining things. Most retailers have reported that food prices are rising and those increases are being passed along to shoppers. Food costs rose 6% last year and will likely go up at least 2% more in 2012. Increases are likely to affect food eaten at home, rather than restaurants where those costs are easier to absorb when combined with sales of liquor, says Harry Balzer, Chief Industry Analyst for the NPD Group.

Water

Most communities in the United States will face water rate hikes this year, even places that are rich with the natural resource. Water rates in the greater Chicago area will increase by as much as 25% next year, while the parched high desert Denver market is set to rise an additional 5.5%. Like the above-mentioned fees, this increase is mostly a result of cities needing to increase revenue to balance their budgets.

Gas

Fuel prices began inching up just before the holidays, and 2012 is looking to be another budget-breaking year at the pump, with prices once again topping $4 per gallon.

Domestic and International Airfare

Greater demand and fewer available airline seats will likely lead to higher ticket prices for flights next year. American Express predicts prices within North America will increase up to 5% for economy seating, depending on the length of the flight, and up to 7% in business class. Things look more bleak for European travel. A new “green tax” implemented by the EU is aimed at reducing emissions, and it will levy a fee of roughly $15 per passenger, each way, for flights to the U.S. Fees on shorter flights within the EU will be taxed slightly less.

Shipping

Unfortunately for avid online shoppers, the U.S. Postal Service will raise rates by an average of 4.6% next year, while both FedEx and UPS are hiking small package rates by 4.9%. Personal shipping will certainly cost more and it’s anybody’s guess how long retailers can continue the ubiquitous free shipping offers as rates rise.

Mobile Device Data Plans

Data plans in the past have had a tendency to decline, but as carriers build out 4G services, and move away from unlimited plans, data is set to become more expensive in 2012, according to Ross Rubin, Executive Director of Connected Intelligence at the NPD Group.

You can find the complete list here.

Free Budgeting Software

So it seems that I am a little “late to the party” on this one, because I have been hearing about Mint.com for a while and just now tried it!

What can you do with Mint?

  • Include all of your accounts in one place (Savings, Investments, Checking Account, Credit Card, etc)
  • Create & manage budgets online
  • Manage your finances from your phone with iPhone and Android apps

I use Quickbooks to track my business finances, but we have yet to really get serious about tracking our personal finances beyond our cash envelope system.  I love accounting (I’m geeky like that), so this software will be a great way to get a better picture of our finances!

Have you tried Mint.com?  What do you think?

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I’m Dreaming of a Frugal Christmas, Part III

christmas scene

As of today, you have 141 days until Christmas

I’ll wait while you hurl your summer drink of choice at me for even mentioning Christmas before Labor Day

Done?  ‘kay!

When this post popped up in my feedreader this morning, I got to thinking:  “Christmas?  It’s blasphemous to even think about Christmas shopping before Halloween” (despite what the department store decorating schedule may be).  That’s the way we always did it…we waited until the day after Thanksgiving to start our shopping, put everything on the credit card and then paid off the credit card with our tax return!

Then I remembered what happened last year….. 

Last year we managed to get through all of our Christmas shopping without putting a single gift on the credit cards (and we didn’t even really cut back on the amount that we spent).  We did it by following the “rules” that I laid out for ourselves in this post.  Many of those rules still apply, one doesn’t (I gave up my jewelry business the 1st of this year and won’t be at as many craft shows) and some new ones have popped up.

So at the risk of being killed for mentioning Christmas when many of us are still thinking about summer vacations and Back To School, here is our updated list of how we are preparing for Christmas this year:

1.  Set a budget for each person and STICK TO IT:  this was one of the hardest things for us to do last year.  However, since last Christmas we are debt-free (except for our house) and this site is providing more wiggle room in our budget.  On the other hand, creating a per-person budget is really the smartest thing to do and eliminates the urge to “impulse buy” just because you found ”the perfect gift”.  The Perfect Gift can be found in almost any price range if you take your time and keep looking! 

2.  Stockpile Amazon.com gift cards through Swagbucks:  I have written about Swagbucks a few times beforeand I am still in love with them.  Whenever I have enough Swagbucks for a $5 Amazon.com gift card (which, because of the amount of searching I do in maintaining this site, is fairly often), I just take the gift card code from Swagbucks and apply it as a credit to my Amazon.com account.  I’m just pretending that money isn’t there , so by the time I am ready to shop for Christmas, I should be able to get several gifts for little-to-no out-of-pocket costs!

3.  Shop at craft fairs.  I will be on the lookout for unique gifts for much less than I can get at Nordstroms, etc. By the same token, I’ll also be scouring Etsy for some unique gifts (and helping to support independent crafters in the process)

4.  Shop online:  I am now a huge fan of shopping online.  I’ve never been one of those people who can go out and get all their gifts in one day, so by the time that I make multiple trips to the stores, any shipping costs will be cancelled out by the price of the gas I would use going back & forth to the mall.  Not only that, in many cases I end up saving another 6% by not having to pay sales tax.

5.  Shop now:  It’s much easier to find an extra $40 in the budget one week for a gift than to try to buy everything at once and find an extra $2000.  By spreading it out, we can relieve the strain on the budget. If you can’t bring yourself to do any actual shopping now, put that extra $40 that you find away in an envelope labeled “Christmas Shopping” and hold on to it (hide it from yourself, if need be) until you are psychologically ready to go Holiday shopping.

6.  Remembering the immortal words of Dr. Seuss:  “Maybe Christmas, he thought, doesn’t come from a store.  Maybe Christmas…perhaps…means a little bit more”.  We are still trying to teach our children that Christmas is not just about a jolly fat guy and spending ginormous amounts of money.  This lesson is getting to be both easier and harder to teach our children as they get older (you can reason with them more, but they are more aware of what their friends have and want the same…a pox upon the person who taught my children about Webkinz!), but it continues to be a major goal in our lives.

Are you ready to start preparing for Christmas?  How are you going to do it?

Guest Post: 4 Steps to Tackle Your Debt TODAY

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As some of you know, my middle child is having an outpatient procedure today and I will be at the hospital with him most of the day.  Thanks to Trisha for this great post!

Millions of Americans are facing a bleak year with a poor economy and rising levels of debt.  If you are losing sleep worrying about how you are going to make ends meet or get your debt under control you are not alone.  You may find hope in knowing that just as you are not alone in living with debt, there are millions of people who have been in your shoes and successfully paid off their debt.  If you would like to turn the tables on debt and regain control of your financial future you need to take the first step toward being debt free…today.  The following steps can guide you on your journey to living free of debt.

1.  Know what you are up against-  Before you can successfully work on getting out of debt you have to sit down and finally face the music regarding how much debt you have.  When faced with rising balances many people adopt a “head in the sand” attitude and before they realize it their debt has reached levels they hadn’t even realized.  Set aside time to gather all your recent credit card statements, utilities bills and other monthly expenses.  You will want to take note of the current balances, the minimum payments due and the date when these payments are due each month.  Note the interest rate on each account to better determine which balances need to be tackled first.

2.  Contact your creditors-  This step may be time consuming and perhaps even frustrating as you are not guaranteed to actually find any success, however contacting your creditors is an important step in your path to debt freedom.  You may not be able to get all your lenders to lower your interest rate but hopefully a few might be willing to work with you to make it easier to pay off high interest accounts.  Creditors are notorious during a bad economy of tightening their reins however they are more likely to work with you if you contact them requesting help; especially if the alternative is not receiving payment at all.

3.  Stop incurring debt-  Of course this is a logical step, one that many people simply can’t get past.  If you are facing a financial hardship and lack of disposable income has you turning toward your credit cards to finance you day to day expenses, you may not see how you can stop using your cards.  The fact remains that by using your credit cards you are only delaying the inevitable.  Eventually you will reach the end of the line (your credit line that is) and you will now face paying the same expenses in addition to your debt repayment.  Do whatever is necessary to stop using credit; cut up your cards, close your accounts whatever it takes to stop digging yourself deeper in debt.

4.  Develop a plan-  Once you know where you stand regarding your debt and balances owed you are in a better position to develop a plan that will work for you.  There are many options available and your specific situation will determine which one is right for you.  If you are able to cut costs in your household budget and find money to apply toward your debt, the snowball method might be right for you.  This method allows you to tackle one debt at a time, putting as much money possible toward repaying one debt while maintaining minimum payments on other accounts.  Some people chose to hit high interest balances first while others pick lower balances in the hopes of seeing accounts paid off quickly.  As your accounts are paid off you will then apply the money you were paying on the previous account to the next balance you want to tackle. Choose the method that works best for you and you will see your accounts paid off one by one. For individuals who see no possible way to squeeze extra money into their debt repayment or if you find you cannot meet the minimum payments each month you may need to seek help in the form of credit counseling, debt consolidation, or even debt settlement.  There are pros and cons to each of these method, be sure to do your research to find the method right for your financial situation.

Living a life free of debt may seem unattainable to people who are deep in debt, however it is possible.    It will require self discipline, sacrifice and some hard work on your part but the rewards are well worth the efforts.  

Trisha Wagner is a freelance writer for DestroyDebt.com, a debt community featuring debt forums. Trisha writes regularly on the topics of getting out of debt and personal finance.

Tracking and Banking Your Grocery Savings

People come to frugal living and couponing for so many reasons. It could be a sudden change in the finances, fear over rising prices, a simple desire to cut back on expenses…or even just because you want to “play the game” to see how much free stuff you can get.

Now that you are saving money, you have another issue:  what to do with those savings?

If you read this post, you know the importance of developing and sticking to a budget as well as using the cash envelope system to help you stick to your budget. If you were realistic, you entered your estimated current grocery spending in the appropriate column (with the hope of decreasing that amount).  With any luck, you have been spending less than your budgeted amount. Now what do you do?

Cut yourself a check – that’s what!

But where should the money go?

Like Dave Ramsey, I believe that you take care of your basics first – food, utilities and housing.  If you need those grocery savings to keep the lights on, then obviously it goes to that.

If you have any debt whatsoever, I recommend putting that money back in your bank and immediately cutting a check for that amount (even if it is only $10) directly to your creditor with the smallest balance.  Don’t simply roll it back in to your “bill-paying money” with the intent of adding it to your budgeted payments at the end of the month.  It won’t be there by then!

Next:  do you have a Baby Emergency Savings Fund? There are two types of savings accounts that we have right now.  We have our “Baby Emergency Fund” of $1,000.00 in the same local bank as our checking account.  This bank pays very little interest (less than 1%), but by having that portion of our savings there, we have immediate access (through online and phone banking) if we are at the hospital and need to make a co-pay and need to transfer the money.

Next it’s time to work on your “real” Emergency Savings Fund. This is the money that is going to get you through a layoff, an accident or the bathtub falling through the floor and in to your kitchen sink.  It is recommended that you have 3 to 6 months of expenses in your Emergency Savings Fund at all times and that you keep it liquid, but not overly easy to access. This avoids the temptation for my husband someone to declare that a 50% off Flat-Screen Plasma TVs sale at Best Buy is an “emergency”.  This is the fund that you want fairly liquid AND earning you money.  Check with your local bank, but in most cases the better interest rates will be found online.

We have our Real Emergency Savings fund right now in an  Orange Savings Account with ING Direct.
We signed up with them because they were giving a $25 bonus when we started our Emergency Savings account, but I don’t see that they are giving that bonus now.  Their interest rate is 2.75%, the signup took less than 5 minutes and you can open the account with as little as $1. It links to your “regular” checking account so you can make transfers of all those little overages from your weekly/monthly budget as you find them.  If we need to access it, money can be transferred in to our regular checking account in 3-5 days.

Another online option is HSBC Direct.

We have been thinking about changing to them, as their interest rate is 3%. It works on the same premise as ING (link to checking accounts, etc) and you can get a debit card linked to it as well.  It also requires just a minimum of $1 to open an account.

But no matter what you end up doing with with your money (paying the gas bill, the credit card or putting it in savings), the most important thing is to do SOMETHING constructive with it. Don’t just fork it over to Starbucks or Kohl’s.  Make your supermarket savings work for you.

And if you do it right, you can end up with a tidy little savings account if you start this at the beginning of your coupon journey.  Look at it this way:  If you budget $200 per week for groceries and can manage to shave just 25% off of that amount through using coupons, at the end of the year you will have $2600 in your savings account.

Sounds good to me!

Baby Steps to Switching to a Cash Envelope System

As mentioned before, we converted our household to our own little cash-based economy this Summer.  While the system may not be for everyone, it is working remakably well for us and I cannot encourage you enough to give it a try!  Believe me when I tell you – NOTHING that I have done in the last two years has done more to curb my shopaholic tendencies than switching to the Envelope System!

But how can one transition from relying solely on debit and credit cards to not using them for anything?

Like most things, there are two ways to do it.  You can either transition slowly or you can take the “rip the BandAid off” approach and just do it.  We ripped off the BandAid, but you may not be ready for that.

The first thing you need to do is create a budget.  There are hundreds of programs out there that can help you to do it (some of which may have come pre-installed on your computer), but my all-time favorite free one was created by Kendra at Shopping For Two.  (As much as I link to her budget sheet, you might think I’m getting paid to do so….I’m not, just in case you were wondering!)  

If you want to take this slowly, take a look at a few expenses over which you most want to gain control:  Eating Out?  Groceries?  Your “Little Things” spending (you know – the $3 toy from Target, the Starbucks run, all small expenses that can quickly add up to over a hundred dollars each month)Just pick any that you want and set weekly, bi-weekly or monthly limit for spending in that category. (you decide the intervals.  Brad gets paid every two weeks, so that is when we fill the envelopes)

After that, it’s very simple….Grab a few envelopes and write the category name on it.  Go to the bank/ATM and get enough money out to fund that envelope.  For the next week/two weeks/month, any spending in that category comes out of that envelope.  When the money in that envelope it gone, you are done spending money in that category until the next time you are scheduled to refill the envelopes.

Of course, you are going to find that you need to make adjustments in the beginning and even along the way.  For example:  when we started this, my grocery budget was $100/week.  I quickly realized that I didn’t need that much money, so now I only put in $114 every two weeks (which includes money for diapers). On the other hand, we had to increase the amount of money that we put in to Brads gas envelope (Brad & I each have our own) because his driving back & forth to work cannot be reduced as gas prices flucutuate.  But we made up for his increase in gas expenses by me staying home more often and giving him money from my gas envelope. 

After a few weeks of this, add on another expense and create an envelope.  Continue doing so until everything but your mortgage/rent, utilites and debt payments are being managed through the cash envelope system.

Oh – and if you are used to swiping your debit or credit card for everything, prepare to be shocked at how unwilling you suddenly become to spend that money now that you are handing over cash and have to look at the balance in your cash envelopes go down!