I really meant to post a follow up to my last post right away. It is mostly written and everything. But then as I re-read it, I was struck by the thought that perhaps, I am making it sound like it's easy. I want to be encouraging and also, pragmatic. This is not rocket science. Almost anyone can do it. But just like with running or cooking or scrapbooking, anything I have learned how to do from others, I want to apply it to my life, which is decidedly non-mainstream. I want to know what works and what doesn't, and why.
FPU is "easy" like Weight Watchers is "easy." The method is not hard in itself. But the doing of it can be very hard.
This month, December, has been very challenging. For many reasons, not all of which have to do with Christmas. I feel out of sorts right now, like I don't know what I have and how much, like I don't know what I spent and where. It's a combination of a Christmas bonus from work, given to me on a gift card (so I went back to swipe-swipe-swipe), trying to do a credit card balance transfer, an emergency emptying my savings, and Christmas spending. I did my best, but I am definitely not as on top of things as I want to be.
So I don't want to say it's "easy." It can be done. And I really appreciate having a system or a method to follow. It helps me make decisions and set priorities. But the doing is not always "easy."
So I'll get back to that topic eventually.
I got some questions from falwyn on that post that I thought I would answer.
I'm curious about how any online interactions interact with the envelope system. For example, any bills you might schedule online, or any shopping you might do there. (I live in tiny rural town, and though I could definitely stand to curtail some of my online spending, I would also not really see it as viable to give it up entirely.) I wonder about this as regards any other category that you might want to still do with a card - for me, gas. I absolutely do not want to stop paying at the pump, particularly because I like to stay far away from all the temptations of the inside of the store. Anyway, if you have comments on any of that I'd love to hear it.There are many ways to answer these questions. It's hard to know where to start. So much of the answer is tied into my budgeting, which I have not posted about yet.
One thing I want to point out, which is important. Our society is set up to make spending money easy. Consider these examples in the comment:
1) Scheduling bill payments online.
2) Online shopping.
3) Buying gas at the pump with a card.
Not meaning to pick on anybody; these are just some really good examples.
One of the very basic behavior modification methods used in FPU is to transfer spending money from easy to hard. Or at least, not-so-easy.
• Easy = Mindless
• Easy = Not Paying Attention
• Easy = Spending More Than You Intended
• Easy = Fun, Not Painful
Dave says: "One study in particular conducted by MIT and published in Carnegie Mellon magazine, indicated through the use of magnetic resonance imaging (MRI) that the pain centers of the brain are activated when you spend cash." (click to read entire story - it's good)
I do not want my spending to be "easy." I do not want it to be mindless. I want all my spending to be mindful. I want to feel it when I do it.
Therefore, I have moved myself from a place where my spending is easy, convenient, and therefore mindless, to a place where it takes some effort to spend money, and I thus forced to really think about it before I do it. FPU is designed that way, because it is a behavior modification system to teach people how to be mindful with money.
To specifically answer these 3 scenarios:
1) Scheduling bill payments online/automatic payments.
This is tied up in how I budget for the month. The very short answer is, my budget has a line for every monthly bill as well as for spending categories. Therefore, I know with every paycheck how much I need to stay in my checking account to pay bills, and I take out the rest and keep it in cash.
First “region” (blue) is all the budget categories with the total in each to pay or spend per month. Next to that is total income. The budget numbers subtract from the income column, and that is the running total. I could have just these 2 columns and that would be fine.
Next is the breakdown by pay period. The orange section is the income for the first half of the month - her and her husband’s paychecks combined. Each line indicates how much of that paycheck is going to that bill or category.
For example: Rent and utilities are paid out of the 2nd paychecks, so those amounts in orange are $0. The green section is the 2nd half of the month, and there you see the rent and utilities payments. Cable is $0 in the green section. It is due earlier in the month, so it is paid from the orange section.
In this way, I have the auto withdrawals and bills I need to pay “scheduled” based on which paycheck they come out of. On my version of the budget, my car insurance is automatically withdrawn on the 7th, so I have the amount for that in my “orange section” and that line says $0 in my “green section.” The column to the far right has a list of due dates for each bill so I know when to pay it.
My own budget is done a little differently, but this is a good example.
2) Online shopping.
The short answer is, I don’t do it. FPU is about getting out of debt and then building wealth, not buying stuff. I am on Baby Step #1 - Save $1000 in cash for an emergency fund. Until my debt is paid, I don’t buy anything I don’t need (theoretically - in reality I do, sometimes, because we all want to live, not just exist). My experience of online shopping is that it’s mostly for wants, not needs. I don’t buy milk, bread, diapers, shampoo, gas, etc online. There’s nothing I truly need to buy online.
The other thing is...hm. Well. Everybody has got their thing. Their thing is the thing they won’t or can’t change. Their thing they have to live with or work around. Online shopping is not my thing, so I don’t have to work it out. But I do have a thing, or a couple of them, and those things require thought, experimentation, making mistakes, recovering, and trying again.
For example, I won’t switch banks, and my bank is a 45 minute drive. So how do I get my cash out of my bank? That’s my thing. I really have to work with that. Another thing - I can’t cook at home, and I can’t really store perishables either. Therefore, I eat a lot of takeout. Most people cut their eating out to almost $0. I really can’t do that, unless I want to suffer from severe malnutrition. That’s my thing. I have to work with it.
Dave may say this or that, but Dave also has his own house, and he has a wife who is a full time stay at home mom, who does the grocery shopping, the cooking, and the cleaning up. Dave brings his lunch every day like that is some kind of accomplishment, but he is not the one shopping for the food, planning the meals, cooking the meals, washing the pots and pans, and packing the leftovers. If Dave had to do all that himself every single day, plus work full time, plus commute, plus do his own laundry, Dave would be eating lunch out more often.
Speaking of Dave…Funny story. Several weeks ago, I got an email from Dave Ramsey promoting a speaking tour. There was one date that was close enough for me to attend. Now, Dave’s pricing is based on time. The first xxxx people get tickets at $xx, the next xxxx get tickets a bit higher in price, the next xxx get tickets higher, etc. Therefore the faster you buy your ticket, the cheaper it will be.
I wanted to go. Tickets at the time I got the email were up to $20. I could afford that, and the date was in the spring so I could save money for the trip.
But. I could only buy the ticket online. I had $20… but I didn’t have $20 in my checking account. All my money was on me in cash. I had maybe $13 in my checking account. I had several hundred in my savings, but that is for emergencies only. Seeing Dave Ramsey live is not an emergency. The other option was a credit card. But we are supposed to have cut up our credit cards.
Oh Dave, Dave, who came up with this plan? Do you not see how the very people your talk is for should not be able to attend, if they are doing your system correctly?!?!?
Now, all that being said, Dave was having a $10 sale on his website, and after 3 months my paper envelopes were really ratty and needing replacement. So I bought this little number online. But I believe I have mentioned I am a little out of whack from December. Not over budget, but out of whack.
3) Buying gas at the pump with a card.
The short answer is: I don’t do it. The longer answer is, this was a big topic of discussion in my FPU class, because walking into the gas station and standing in line to pay is a giant hassle. No one wants to do it. Everyone wants to swipe at the pump, for whatever reason.
I don’t do it. I don’t want to swipe anything for any reason.
I have budgeted $30 a week for gas, based on my usage over the past 6 months. Since I commute to work daily by train, I don’t drive much daily anymore. Therefore, on weekends I have time to fill up, and I do so then. I take $30 in cash out of my envelope while in the car, I walk in and buy $30 on my pump, and that’s what I put in my car.
The first time I did this, I paid $35, since I wasn’t sure yet how much I would budget for gas. A fill up was $33.85. Oh you bet I walked back in there and waited in line, again, and got my change. I also got my receipt. Toto we are so not in Kansas any more. Since I only fill up once a week, and it’s usually late Saturday evening, I have the time. Doing this really woke me up. Made the whole thing seem real in a very visceral way. Yes, sometimes I have to wait in line. Twice. Yes, sometimes $30 is not enough for a total fill up.
Yes, sometimes I buy something else in the store, like coffee or a soda. I know I am planning to do so when I walk in. I bring $35 or $40 with me instead of $30. I get a receipt. I subtract the extra amount from my food budget (writing it on my Food envelope, and recalculating my total). At some point I reshuffle my money to match the totals written on my envelopes.
For others in my class, buying gas at the pump is their thing. If you have a baby, of course you are not going to drag the kid in and out of the gas station while you buy your gas, especially in the cold. That’s not a choice based on laziness. We discussed various options, which included keeping the amount you have budgeted for gas in your bank account and buying using a debit card, as well as the idea of purchasing gas gift cards at the beginning of the month, storing the card in the Gas envelope, and using those specifically and only for gas.
So that’s how I try and deal with those issues. The short answer, for me, is always: the easier and more convenient it is to spend money, the more I have to watch what I am doing. The more likely it is that I will mess myself up. People have to use different methods to deal with their things. I have things, you have things.
The question is always: can you afford your things? Are your things holding you back? I have had to really think about that.
Photo 1: Holiday budgeting. From "Christmas will send one quarter of us into debt." By Lucy Bower. ThinkMoney.com. 21 Dec 2011. LINK
Photo 2: Budget sample. Created by me. Dec 2011.
Photo 3: Dave Ramsey Deluxe Envelope System in red. From "Longing for Freedom." A Blossoming Homestead Weblog. 22 Sept 2010. LINK