Thursday, October 20, 2011

Money Matters (Final / Part 4) - Making a Variable Income Steady (and the perks that result!)


 Okay, so I kind of got off track with my Budget Blogging mini-series.  You can find the beginnings of it here:

Intro / Part I (Our Three Foundational Financial Steps) / Part II (Creating Your Budget) / Part III (Money Saving Tips)

I used Part II and Part III to expound on the first financial step we took (creating a budget and finding ways to save in that budget).  The second foundational step, found in Part I, was living a month ahead.  I was going to go into more detail here, but I listed all the advantages and explained it pretty well within that original post, so I think I'll go ahead and just skip to the third/last thing we did in our attempt to manage our finances wisely as a young couple starting out in the big city - making a variable income steady.

Here is an excerpt from what I originally posted:

3.  I am on salary, which is great, but Nick has a variable income.  He can make $5,000 one month and $600 the next.  How on earth do you make a budget around that?  How can you know you will make $3,000 a month when one of you may not bring in enough or bring in too much?  What do you do with the extra money?  This step takes a little figuring out.  You need to look at last year.  We looked at how much Nick made in 2008.  (This wasn't much because he was still in school for part of that!).  We added it all up.  Then we divided it by 12 (for each of the months in the year).  That gave us his monthly AVERAGE.  That is what we said his "salary" was.  Now we were both on salary.  When he made more (which he inevitably did as he was not in school part time in 2009), we took ALL that extra money (yes ALL of it) and created a "slush fund".  Whenever Nick makes more than his "average", we do NOT spend it.  It goes straight to that fund.  Whenever Nick makes less, that's okay cause we have a slush fund to take money from and "top his salary up" back to what it should have been for that month.  And, as mentioned above, this makes it okay even if we have to chase clients for an extra month to remind them they still owe us!  (I will go into more detail in a later post about what we "cap" the slush fund at, and what to do if we made even more after the cap).

The only think I didn't really add on here was "raises".  We sit down each December, and if Nick made more money than he did the previous year, then his salary goes up.  And vice versa, of course.


The Perks:

I'll use this opportunity to do as promised and go into a little more detail about what we do when we reach the "cap".  We chose three months of Nick's "salary" as our cap.  We took Nick's average "salary", which we figured out as stated above (by taking his previous year's earning and dividing by 12), and multiplied it by three.  When we have 3 months of his salary sitting in our slush fund, then we stop sinking every extra penny he makes into there.  (Note:  remember to raise this cap each time you raise your salary!).  We find three months to be a great safety net and enough to cover things when it gets really slow in the winter, or when bigger clients haven't paid their invoices yet, or even when the finishing up of projects gets delayed, and thus, so does the invoicing of them.  We may even consider 4 months in the future when I'm home with kids - God willing.

We only actually cap out our slush fund about once a year just because of the nature of Nick's work.  He makes a ton of money in June, July and August, and comes in under budget most other months of the year.  We normally top it off, and overflow it, in the summer, and then gradually drain it all year long until we reach the summer again.  (Generally speaking - there are exceptions).  June and July normally help replenish it (especially if we have raised the cap amount due a "raise" in Nick's "salary") and by about August, we find we have topped the slush fund right back up again (to three months' worth) and have even extra.  We take that extra and split it in two - half for Nick's business and half for the home.

This is where we find the money for bigger purchases around the house.  It's how we buy a new mattress, or deck furniture, etc.  It goes towards those things in life you want that are just too expensive to really save for otherwise.  You may find a more "fun" use for it, but we think it's fun to be able to buy new furniture, etc.

But we only do that with half of it.  The other half is for Nick's business, but in a fun way.  Business needs throughout the year we just make work because we have to.  But this is where Nick can buy his toys tools for his trade.  Last year it was a new computer.  This year it was new speakers. 

It's a way that about once a year, we can each make big purchases that otherwise wouldn't really be justifiable.

 That about sums it all up I think!  Any questions, just let me know :)




Tuesday, October 11, 2011

Money Matters (Part 3): Money-Saving Tips

Okay, back on track with the budget blog.  To finish up my blog from the weekend, Creating a Budget, I wanted to share the creative and not-so-creative/common-sense ways Nick and I have found to save money, so that we have more to spend or save as we like.  (I will use the same categories as I listed in my previous blog.)  I will also see what photos I can dig up off my computer to give a bit of a glimpse into how we actually applied these ideas over the past couple of years. 

Rent  (OR, if you own:  Mortgage, strata fees, property insurance, property taxes, sewage/water).

Now, how much you spend here really depends on your goals in life.  If you plan to always rent, and owning a place down the road isn't a super high priority, well, then obviously you might not want to get the cheapest, smallest rental place possible.  However, Nick and I did want to own a place within a few years of getting married, so we got creative with our rentals.  We rented two places before buying.  (The reason for two places was because our first landlord was a microbiologist, combined with being OCD.  I left a single hair on top of the shared drying without realizing it once, and boy did I get a lecture!  That is another story, however).

Both places required a 45 min - 1 hour commute to work, as we saved hundreds of dollars by being willing to live outside of the city.  And both were very small.  The second place was 420 square feet (wall to wall - this counts for counters, etc. as well, so NOT 420 sq. ft. of floor space by any means).  We learned to live with this much storage space (plus whatever we could squeeze under the bed and into the kitchen cupboards!):



And we had many dinners at our small Ikea coffee table, as we could definitely NOT fit a real table in that place.  We also successfully managed to have a bunch of people over after church for lunch and games around that same small coffee table.  It was way more of a memory that way! 



Okay, okay... maybe we STILL eat on our coffee table even now that we have a proper one:



Nick worked off his laptop in the bedroom when I needed the livingroom to teach piano, and we made it work.  All the money we saved by only paying $700-$750 in rent (all utilities and internet included) helped us save for our downpayment on our current place.  If we had been paying $1,000 or more in rent, we would have used up at least $300 more a month than what we were paying at $700.  Even that over one year ($300 x 12) is $3,600.  There's half of a downpayment just by living cozy!




I could write many blogs on how to save money when buying a place.  Suffice it to say, go HERE for the full story.  Long story, short - we bought a fixer-upper and foreclosure and worked hard for a good solid month.  Foreclosure sale + $5,000 in renovations + one month of weekends and evenings + a lot of help from family and friends = us being able to sell it for about $25,000 MORE than we paid for it just a few month after we bought it.  Not that we did, cause we're sticking around after all that work!  But, we saved about $20,000 (after paying back the money we borrowed for the $5,000 of renos) by just buying something that wasn't move-in-ready. 

Utilities

Do your best to not SHARE these with other tenants or the landlords upstairs.  I have had so many friends try to save and conserve.  Even Nick has been there with his bachelor place.  And the people upstairs jack up the rates for everyone!  Try to get these fixed as part of your rent, and then you will know what to budget for.

If you have coin laundry:

My mom was pointing out to me the obscene amount of underwear that we own.  (I was doing our laundry at her place one weekend this summer).   It is far cheaper to buy more socks and underwear so that you can go 2-3 weeks without doing laundry, than it is to be forced to do laundry every time you run out!  Calculate how many loads you need to do and how many times a month you need to do them.  We take out $20 in quarters every month and that holds us over just fine.

Also, don't do we what did.  Do NOT give away your drying rack because you don't think you will ever need it.  Then your bedroom will look like this if you forget to pick up enough quarters to wash AND dry your laundry:




Also, here is a short video to demonstrate how NOT to spread your clothes out to dry if you find yourself in a similar situation:

video


Bank Fees

Know what they are.  Budget for them.  If possible, find an account where they will waive bank fees if you keep a minimum balance in there.  (If you live a month ahead, as I briefly touched upon HERE, then you should be able to keep that balance in there.  Also, we use a no-fee credit card for everything instead of a debit card, so we don't have to pay extra for exceeding the amount of allowable monthly transactions.  Just make sure you don't use the credit card for money that isn't ALREADY in your bank account!

Transit Pass / Car Insurance 

If you can transit, please do!  (You get 10-15% back on your taxes!).  If you have a job like Nick's that requires a car, then try to get all the discounts you can.  The car was originally mine when we got married.  But at ICBC, I "gave" it to Nick, or "sold" it for $1, because he has one more year of driving than I do, so his insurance is slightly cheaper.  It is also cheaper if the principal driver is the one who pays for the insurance.  Again, that would be Nick.  And if Nick ever gets another speeding ticket, or something that hurts his discount, then we will legally "give" the car back to me, and I will insure it!  Also, if the only people that drive your car have been driving for 10 years or more, you get an additional discount.  We will be getting that next year, as one of us has been driving for 10 years now and the other for 9.

Internet

Use those cheap 3-month promotional offers to try out another company.  We did and found that we didn't really like company A all that much.  So we told them we were switching to company B, which had a great 6-month promotional offer on.  Company A got very worried that we were leaving and offered us $10 internet for a year!  Yes, our modem is a bit slow, but seriously... $11.20 for internet each month after tax?  For a year?  So worth it.  You play phone companies against each other for the best deal.  It totally works the same way with internet providers!

Phones

We ALL spend too much money on these little devices.  I have one question that can save you lots depending on your answer.  Do you REALLY need data on your phone?  Nick most definitely does.  I do not.  Sure, it would be nice.  But I have internet at work.  Internet at Starbucks, McDonald's etc.  And I have it at home.  I am sure I can LIVE without internet for a few hours a day while I commute.  I also did not NEED an iphone.  Nick bought me a used one off the internet for my birthday that we could use without data.  Also, PLEASE call your company and ask them to reduce your rates, or shop around!  I pay $25.00 a month for my phone (2,500 texts, voice mail, call display, free incoming, etc. etc.) and Nick pays $60 or $65 and he has all I do and more plus data with the latest Iphone.  You do NOT need to be paying $100s for phones!  They are JUST phones!  (Note: I called three times, threatened to quit, DID quit and then signed back on to get my $25 deal, so you do need to really work at it to get it THAT low!  Plus, I took over a friend's phone with a grandfather plan on it, which was the main enabler there.  However, even if you know of a friend with a good, recent plan, get their number, call the provider and say you want THAT plan).

Speaking of phones - I am selling my old one for $10 with charger and car charger - any takers?

Seriously, please buy it so I can help pay for my new computer :)


Credit Card Payment

We borrowed money from savings to pay this off (or you could maybe even ask family), which had no interest to pay back.  Then we paid THAT back instead of our actual credit card company which was charging us around 20% interest.  We also had friends that took out a line of credit from the bank and used it to pay off their cards.  Now they are paying their line of credit back which has SIGNIFICANTLY reduced interest rates.  (Don't use these tricks to go into MORE debt, of course!)

Student Loan

Pay this off last.  We get a tax break on the interest paid.  Hit your other loans first and foremost.  However, don't treat this debt like it is nothing.  JUST because Prime is really low right now, and makes payment really affordable, doesn't mean it won't increase in the future, making this debt a much bigger pain in the butt!

Life Insurance 

If this is something that interests you, look into it now rather than later.  The younger you are, the cheaper your payments will be!

Tithe

As Christians, we give 10% of our before-tax dollars to God.  Obviously, this doesn't apply to if you aren't a Christian.  Tithe by definition of the word is technically 10% so I don't really have any money saving tips here!  Um... make less?

Gas

Use the bus when you can.  Carpool when you can.  Walk if you can.  Budget out how much you need each month.  Keep an eye on it.  When you have established a good amount, and you still see yourself going over, look for times where you can transit, or catch a ride with a friend.

Food

Superstore / no-name brand / Costco are your friends.  Buy bulk if you can and portion into meals.  (We picked up a free second small freezer just so we can make a Costco card worth it).  Look for coupons and deals.  Find cheap meal ideas and create a menu that rotates them in often.  Perogies.  Pasta.  Burritos with refried beans.  Soups.  Salads.  etc.  Buying individual size anything will kill your food budget.  Spend a bit more money up front to buy bulk and portion meals out.  Also, if you are going to a party and have to bring snacks, spend 40 minutes and whip up some cookies.  So much cheaper than buying pre-packaged stuff, and everyone loves home baking anyways!  Figure out how much you need and stick to it!  If you are running out, and the month is only half over... well... you'll get really healthy eating salads and soup for a while until you can go buy what you like again!  Oh, and don't use this fund to eat out.  THAT will kill it faster than anything!

Toiletries 

The best money-saving tip I have found here is use what you have!  Seriously, how many bottles of STUFF do we have under our sinks?  Shampoos, conditioners, samples, make up, lotions, face cleanser, etc.!  Don't go buy yourself something brand new until you use what you have!  I just avoided buying face soap for the last two months because I dug under my bathroom sink!  Also, research less expensive alternatives.  A coworker just pointed out to me that rose water acts as a good toner and can be picked up in the ethnic isle of Superstore for just a few dollars.  That sure beats the tens of dollars you would spend for something in a nice bottle!

Clothes

You know what I'm going to say, right?  Value Village.  Yes, it takes longer, but you get quality stuff for affordable prices.  Yes, I do buy stuff at the mall occasionally.   I give myself $15 a month for clothes, and if I choose to spend it at the mall, then so be it.  Or if I choose to spend my "allowance" at the mall, then that's cool, too.  However, $15 will buy me a couple pairs of pants at VV, and only a cheap shirt at the mall.

Haircuts

I have discovered the world of highlighting my hair!  Super fun.  Super expensive.  I've done it only twice, on sale, in the last year.  And now I'm on a break until probably the spring when I'm up to spending my "allowance" on it again.  In the meantime, I cut my own bangs, and live with naturally brown hair.  (Some places will give you bang trims for free if you get your hair cut there - worth looking into!).  I get my hair done at Mastercuts (nothing fancy), and Nick gets his done at the barber down the street.  Nick can get his done for $18 and I can get mine done for $23.  I do mine 3-4 times a year, and Nick does his every other month.  We added it all up, divided by 12, and set aside $20 a month for it.  (Also, go to schools of hairdressing!  I have a friend that goes there and can get super cute cuts for $15.)  When I have kids, I am going to learn to cut hair while they are still too young to care.  Right now, I am avoiding styling...:




Long-Term Savings 

I will admit that we currently don't have anything in this category.  Right now we will save more money long-term by paying off as much of our mortgage as possible.  We also have a real blessing in my parents making an agreement with us to rescue us temporarily (i.e. we stop paying extra on our mortgage and then pay them back asap) from any emergencies that pop up while we focus hitting our mortgage as hard as we can.  If we did not have this agreement, we would be putting aside whatever we needed to have at least $5,000 in there as quickly as possible for unforeseen special levies, car issues, etc.

Okay, now here's the part where you aren't trying to cut back or give just enough.  Here's the part where you want to do the opposite, but should probably reign in!

Nick's "Allowance"  
Laura's "Allowance" 
Entertainment 

For the above three categories (personal spending money for each of us, and money to spend on fun stuff together), we have made lots of adjustments.  (These are also the first thing to get adjusted if we have a really hard month and want to cut back and conserve.  We each currently get $55 a month to spend on our own and $70 to spend together.  (We just gave ourselves a raise - it was a lot less for a long time).  This is the stuff we eat out on, and buy each other presents with.  (We decided to let our "gifts" category be just for Christmas, and if our friends have birthdays throughout the year, we use our allowances for it.  I honestly don't know whether some would consider this a lot or a little!

We just went $55+$55+$70 = $180.  $180 x 12 = $2,160.  Then we said to ourselves, do we REALLY need to spend more than $2,160 on junk food and fun times, and whatever we want a year?  Mmmm.. probably not.   We learned that no matter how much or how little we make these categories, we will almost always spend them within the first 10 days of the month... entirely... lol.  (Well, I DO tend to save my allowance longer than that, but then I buy computers and cameras and expensive stuff, so I never really have money to spend cause I'm always saving up for something bigger!).  You just need to decide what you're comfortable with spending.  Add it up for 12 months, and see if you're okay "blowing" that much a year :)  (Albeit, gifts for friends isn't necessarily "blowing" it, but that majority of it is not used for that!).

Discretionary 

This is not to top up your entertainment fund when it runs out.  This is to top up OTHER more important expenses when you run short.  (No, not your allowance either).  Trust me, I know how tempting it is.  This was an "extension" of our entertainment for over a year, before we realized that we never had it when we needed it then!

This is for the girl guide who comes to the door and you don't want to say no.  This is for when a wedding comes up and you need to buy a present that would ordinarily wipe out your allowance.  This is for when you use a lot of gas one month for some reason.  We put $45 a month aside, but again, this is a personal decision.  This is for pesky passport photos and the like.

Car Repairs

This amount technically doesn't fall under stuff you want to throw a lot of money at.  However, I'm doing these in the order I previously listed them.  This will depend on how old your car is.  This needs to cover oil changes, wind shield wipers, new tires when you need them, and general repairs.  This is so you don't go "oh, oh" when your engine light comes on.  Well, you still would probably say that, but it wouldn't be QUITE as bit of a concern.  This fund has also financed a couple tickets over the last two years :S :S

Netflix

Netflix, cable, whatever you like.  We do Netflix because you can watch t.v. shows on it, and it's only $7.99 a month.  We'll cut it first if we ever need to, but this is our treat.  (Notice how cable and internet are separated?  Yes, one is more of a need than the other in today's society).

Giving

We like to give God an "allowance".  I know, that sounds really cheesy.  But we like to have extra money to give to people in need or the homeless on the street.  We want to support the churches we are a part of with our tithe, but we also want a little spending money on the side to help those who need it.  I can't tell you how much to put here, because 1.  you may not even be a Christian (in that case, substitute charitable donations here), and 2.  it's a personal decision and has to do with what God has put on your heart.

Gifts

Christmas time :)  We used a simple formula here.  Nick's family draws names, so we will get two names a year from them.  My mom and dad makes 4 people total.  Then we added a few others we like to buy for as well.  Then we decided how much we wanted to spend on a Christmas gift for a person, multiplied that by the number of people we wanted to buy for, and divided by 12.  Saving for Christmas all year long :)


Yes, I save ribbons from year to year, too.


Short-Term Savings

Travelling time!  We figured out how often we could feasibly see our families, added up the gas for each of those trips over two years, and divided by 24.  (We didn't do 12 because we sometimes only make it out to the prairies every other year).  Just decide where you want to go, how often you want to go there, and start saving up.  Guilt free vacations right here :)

P.S.  Driving is much cheaper than flying ;)

Notice Nick's eyes are on the road.  This is because we are safe drivers and never speed... ever... 


Mortgage Savings 

This is only because we have anniversary payments where we can pay extra one a year.  Everything that we make above and beyond our above-budget goes here.  Tax returns go here.  Money from teaching piano goes here.  Christmas bonuses, raises, etc. all go here.  We are a little bit hard core in this department (though note, we did give ourselves a spending money raise this year!).  That's just because we have a goal we are trying to reach, and need to hit the mortgage hard in order to do so.  Soommmeettimmmeess we will use a bit of this money to buy a new mattress for our bed, for example, but we have other ways to get extra spending money for house-hold stuff that I will touch upon later.  Basically, we're really happy with the amounts we have allocated everywhere, so we don't really need to begrudge putting everything extra here.  If we did begrudge it, we would sit down and re-evaluate stuff :)


Okay, phew!  Long post!  I think this one "should" be the longest of them all.  Okay, now to go watch some Netflix with my hubby :)




Sunday, October 9, 2011

Money Matters (Part 2) - Creating Your Budget


First off, happy Thanksgiving :)  I have found a place that is not perpetually raining to celebrate it, and will post pictures when I am home again :)


For now, as promised, I am going to elaborate more on my previous post.  If you remember, I stated three basic principles that we have found helped us allocate our money wisely.  They were:  

1.  Figuring out how much you need to live on each month.  In other words, creating a budget.  
2.  Living one month ahead of your needs.
3.  Creating a slush fund for variable income.  I.e. Turning inconsistent income into a salary.

1.  CREATING A BUDGET:  (This one will take more than one post to explain.  But we'll start here.)




The first of the three steps I listed is to figure out how much you need to live on each month.  What is your budget?  What categories do you need?  

Categories aren't set in stone.  Our budget continually gets modified as our needs change.  For example, we used to have three categories for debt - credit card, personal debt, and student loans.  As debt is eliminated, so are those categories.  They are replaced now by things like savings, extra money for mortgage anniversary payment, etc.  

Some people like to have just a few categories that encompass a lot of things.  For example, they may have "Food" as one category.  This could include groceries, toiletries, eating out, ordering pizza, getting slushies at 7-11, etc.  We prefer to micromanage a lot more than that, so we have a good idea of exactly where our money is going.   It is also good to have a more exact idea of how money is spent if you share a bank account.  

Nick and I would never dream of having a separate bank account, though I know lots of husbands and wives do.  We are in this thing (marriage) for the long haul and divorce is not an option for us.  We are two people sharing life together until death does us part, so there is no reason why our finances should not be shared as well.  But THAT is a whole blog in and of itself, so I digress.  

The first thing you need to do may seem obvious to those familiar with budgeting.  However, for those just starting out, bear with me while I state what is obvious to you :)  You need to figure out your "fixed" expenses.  These are the expenses that you HAVE TO PAY no matter what.  Rent = fixed expense.  Clothing = not so much.  Both rent and clothing are important, but the difference is, one you can't "pass" on for a month if you wanted to, and the other you could.  


EXAMPLES FIXED EXPENSES

Rent  (OR, if you own:  Mortgage, strata fees, property insurance, property taxes, sewage/water).
Utilities
Bank Fees
Transit Pass / Car Insurance 
Internet
Phones
Credit Card Payment
Student Loan
Life Insurance 
Tithe (obviously not if you aren't a Christian)

Now, there are some things in life that are a necessity, but are not completely "fixed" - i.e. you can control greatly how much you spend on them.  Let's call these variable expenses.

 VARIABLE EXPENSES

Gas
Food
Toiletries 
Clothes
Haircuts
Long-Term Savings (for emergencies and the future)

The last category we'll call discretionary expenses.  These are the ones that you really can live without, but are really nice to have.  It will be the easiest if I just give you what we have for examples:

DISCRETIONARY EXPENSES
Nick's "Allowance"  (spending money that he can do whatever he wants with without me caring)
Laura's "Allowance"  (spending money that I can do whatever I want with without Nick caring)
Entertainment  (when we go out together, or together with friends)
Discretionary  (in case we run out of money in another category and need to top it off, or in case of unforeseen expenses)
Car Repairs (we have a separate category for this apart from savings)
Netflix (or cable t.v.)
Giving (separate from tithing)
Gifts
Short-Term Savings (we mainly use this to save up to visit family or travel)
Mortgage Savings (we are allowed to pay extra money towards our mortgage principal once a year so we set aside extra money for this throughout the year, though this could also count as savings for a downpayment, if you are looking to own in the future).


When making your budget, allocate money to the Fixed Expenses first, then to the Variable expenses and IF you have some left over, then you can create Discretionary Expenses.  I will spend some time in my next blog post explaining how to decide how much money to allocate to each of the non-fixed expense categories and also tips on how to save money in each category (even in the fixed expenses categories).  


Thursday, October 6, 2011

Money Matters (Part 1)

It is 7:38 in the morning, and I have already been at work for about 10 minutes.  Yawn...  So early!  The good news is, we have established that driving takes just as long as transit if you leave before rush hour really kicks off.  The bad news is, we totally did not need to leave so early.  Albeit, Nick had a meeting at 7:30 downtown anyways that he is only going to be slightly late for instead of really late for so it all works out.  And besides, it gives me a few minutes to blog before starting my day.

Nick was trying to help me brainstorm and come up with ideas of what to blog about - a theme or topic, if you will.  30 days is a lot of blogging, and my life seriously is not THAT interesting.  So yesterday's post "A Penny Saved..." was the start of something.  It was the start of me sharing what Nick and I have found "works" for making it financially as a young couple starting out in a big city.  Don't get me wrong, I am certainly no expert, but, through trial and error, we have come up with some pretty workable ideas that I thought I would pass along because it would have been great to have someone sit down with us when we first got married and share a bunch of ideas to get us started.

P.S. The title is supposed to be a play on words, JUST in case your brain is as foggy as mine is at this early hour.  Don't go thinking I'm putting too much emphasis on the importance of money.  I just want to share ways we have found to be responsible with it - not to make it our "god". 


Okay, I like the cute pigs.

I don't know if anyone can relate to where we were at, but I'm willing to bet that a lot of people might.  We were married at 23 and 24 with a good student loan, some credit card debt and throw in some personal debt to family members as well.  I was just starting a secretary job at a good, but still base salary and Nick was on Craigslist trying to break into the film industry.  Both of us had spent about a year's worth of school on what we were doing, though I did have piano teaching to fall back on, but no students as I had just moved here!

It was pretty tight.  However, we took a moment (and advantage of the fact that we were on our honeymoon for two weeks so had less expenses), and figured out a few primary things that our entire budget/financial plan is based upon.  I'm going to share what  those things are for this blog and, yes, I have already used up my 10 minutes I allowed myself to type this.  However, I'm not even supposed to be at work for another 10 minutes and I've already been working, so I will help myself to another few minutes to continue this.  I will unpack each of them in a subsequent blog post, but for now, here is an overview: 


1.  We sat down and figured out how much we needed each month to pay our bills and our debts and realized we could live on about $3,000 a month all inclusive.  We added up our rent and our other "fixed", unchangeable expenses.  We made a plan of how to pay off our debt.  The end figure was $3,000 a month. 

2.  We postponed paying off debt aggressively and postponed saving for the future.  Both of those things are what any financial planner will tell you are super, duper important, but we put them on hold for a minute.  Instead we socked away as much money as we could for a while, scrimping and saving, and paying minimum payments on everything until we had saved up about $3,000.
    Then, on November 1, 2009, we had $3,000 in the bank and we started to spend it.  We didn't TOUCH any money we made in November at all.  All of  November's expenses were paid from our $3,000 in savings.  Then on December 1, 2009, we started to spend the $3,000 we had earned in November while living off our savings, and didn't TOUCH any of the money made in December - until January 1, 2010.  You get the picture.  We were living one month ahead.  This has huge advantages that, in my opinion, made it SO worth it to do this rather than just attack our debt right away.  Some of the advantages are:

          A.  We never have to worry about such and such a bill coming out of our account on a certain date.  We didn't have to check and see if one of us got paid before we could take money out to pay for our phone, etc.  The month's expenses were ALWAYS ready to be taken care of.  Our bills and our paycheques do not need to dance around each other in perfect timing.

          B.  When we had a really bad month and did NOT make a full $3,000, we knew we had to cut out everything (including our bit of spending money, etc.) in order to make it work.  We knew this on the first of the month and could change our spending accordingly.  We weren't left sinking deeper into a hole at the end of the month because of unexpected shortness of cash.  We knew exactly where our "tough times" were because we had a month's advance notice.

          C.  This is SO MUCH LESS stressful, which makes for a happier marriage in general.

          D.  We always have a "back-up-plan".  If Nick breaks his ankle, or can't find work, etc.  That's okay, because we have a month's savings at all times. 

          E.  We don't waste $100 a year on bank fees.  (Add it up - that $8.50 you pay to have a bank account each month adds up over a year!).  We have an account that lets us pay no bank fees as long as we have a minimum balance of $2,000, which we do because as we spend it, we are getting paid and the money is going right back in getting ready for the next month.

          F. Nick does not always get paid right on time.  Sometimes a project drags out, or clients are late paying their bills.  We don't need to panic in these situations because we have bought ourselves a little extra time to chase them down if they are a week or so late in paying.

3.  I am on salary, which is great, but Nick has a variable income.  He can make $5,000 one month and $600 the next.  How on earth do you make a budget around that?  How can you know you will make $3,000 a month when one of you may not bring in enough or bring in too much?  What do you do with the extra money?  This step takes a little figuring out.  You need to look at last year.  We looked at how much Nick made in 2008.  (This wasn't much because he was still in school for part of that!).  We added it all up.  Then we divided it by 12 (for each of the months in the year).  That gave us his monthly AVERAGE.  That is what we said his "salary" was.  Now we were both on salary.  When he made more (which he inevitably did as he was not in school part time in 2009), we took ALL that extra money (yes ALL of it) and created a "slush fund".  Whenever Nick makes more than his "average", we do NOT spend it.  It goes straight to that fund.  Whenever Nick makes less, that's okay cause we have a slush fund to take money from and "top his salary up" back to what it should have been for that month.  And, as mentioned above, this makes it okay even if we have to chase clients for an extra month to remind them they still owe us!  (I will go into more detail in a later post about what we "cap" the slush fund at, and what to do if we made even more after the cap).


These three things formed our financial foundation and have been the springboard for a LOT LESS stress in our life and marriage.  I will unpack each of these further in future posts, and go into more detail, but for now, there you have it.  (I also promise later to show how we still have fun and treat ourselves.  It's not all hard-core saving and work - just at the beginning to get started and slush funds built up, etc.).

Now, it's getting light outside and I have to go work :)