Getting Back Into the Black

I hate buying brand new things.   Obviously there are a few caveats to this: I do not buy used food, used batteries, or used diapers…ewww.  However, I love shopping around on ebay, craigslist, or freecyclelooking for stuff that my family needs that I can get usually for pennies on the dollar compared to the regular price.  My most recent purchase was 2 Blu-Ray movies, both in excellent condition for less than $15 each, over 50% savings off the retail price.

While these types of sites are great for saving money, you can also use some of them to make money as well.  Everyone knows that you have stuff in your home that you no longer use or will never use again.  A perfect example of this is baby items.  Until my wife found out recently that she was pregnant, we were vigorously trying to go through all of our baby items to find out what still retained some value and what we could donate to Goodwill or The Salvation Army. 

We ended up selling our old baby swing ($10) a stroller/carrier combo ($30) and a few sets of infant clothes ($20 total, $5 each).  That took a grand total of 30 minutes out of our life to make a quick $60.  I would suggest everyone go through their closets and storage boxes and determine what you do and do not need.  You’d be amazed at how much of your trash is truly someone else’s treasure.

My wife and I were going to the farmers market the other day to pick up our weekly supply of fruits and vegetables. We prefer to utilize the farmer’s market for these items since we know the items are grown locally and usually taste better than the store bought equivalent. Along with the fact that its usually cheaper, it is just a trifecta of benefits.
Getting back on topic, the only downside to the farmers market is that its a cash only interaction. As we pulled up to the parking I realized I did not have any cash on hand. I set about trying to find an ATM. Normally, anytime I need to get cash out I will either take out extra cash during a grocery store purchase or stop at the ATM at my bank. I ended up going to a small corner market to use their ATM. $1.75 ATM fee later and I had my $20 to spend on fruits and veggies.

Ever since we’ve started living under our budget I’ve really started watching every penny that goes in and comes out of our accounts. I was shocked after a few days when I see a $2.00 charge pop into my online banking application as an ATM fee for using an out-of-network ATM. $3.75 in charges for withdrawing $20 of my own money.

That is an 18.75% charge for withdrawing my money.

I know a lot of people that withdraw money from the ATM regularly, and if they are not using their own bank’s ATM those charges can add up quick. Talking with a friend and showing this to him he realized he was spending $20 a month on ATM fee’s alone. That is $244 a year he’s paying to access money that is already his. I don’t know about you, but I can think of a lot better things to do with $244 a year than pay fee’s to access my own money.

A few ways to save yourself from those fee’s:

1. Always use your bank’s ATM or in-network ATM’s. You can usually check your bank’s website to find out where their ATM’s are located.
2. Use your ATM card to make a purchase at a store and then withdraw extra cash at the time of paying.
3. If its possible, write a check!
4. Plan out your cash expenses every week. Take out enough cash on the weekend to cover any expenses you may encounter where paying with a card is not an option during the week.

The first step for my family to get our spending under control and to start saving money was to determine where our income was being spent. It took about 2 hours total to get all of this information and then get it down into an easy to read format.

1. Calculate your income after taxes, this includes any paychecks you receive along with any other sources of income.
2. Make a list of all of your expenses. Anything you spend money on monthly needs to go on here. examples: rent/mortgage, gasoline, insurance, online services, groceries, dining out, etc.
3. Take all of the expenses you have written down and divide them into two categories. Discretionary (you dont HAVE to spend this money but you do) and Non-Discretionary (money that has to be spent: groceries, rent, gasoline, etc)
4. Add up your monthly expenses and subtract that total from your monthly income. If you end up with a positive number then you are already on the right track. If you have a negative number, you are spending more every month than you make and are forcing yourself further and further into debt.
5. Make adjustments to your spending to increase the surplus you have after all your bills are paid. This may include not stopping for a latte every morning or reducing the amount of channels on your cable bill to get a lower bill, or even something as simple as taking food to work for lunch instead of dining out every day.
6. Lastly, you want to make sure you review your budget every month. Keep track of your expenses for a month either through your bank’s online services, a notebook, or whatever system works for you. After a month of living on your budget, compare your actual expenses to projected expenses and see what area’s need more work.

Once you have yourself trained to live within the budget you have created you can start planning how you are going to save your surplus and what goals you want to set for yourself.

A comment over on freemoneyfinance.com really caught my eye just now. I’ve been trying to figure out exactly how the Economic Stimulus Package is going to affect me and my family over the next year and especially how its going to affect my taxes.

CF had this to say:

***They’re temporarily removing the 10% tax bracket on the first $6,000 in income for single filers (total of $600), and the first $12,000 in income for married filers (total of $1,200)***
To use an example: Assume congress never passed this bill, and suppose you are someone (an individual filer) who would receive a $300 refund next year for your 2008 taxes. What would you rather have?
1. No stimulus package: $300 refund in April 2009
2. Stimulus package figured on your tax return: $900 refund in April 2009
3. Stimulus package as it has been passed: $600 in June of 2008 and $300 in April of 2009

I’m taking #3 every time.

While it may be an “advance” on next year’s taxes, it’s a prepayment of an excess that they’ve decided to give. If they had passed nothing, we’d be worse off. I hope this makes sense - sorry if it doesn’t, but bottom line, we’re better off financially with the stimulus than without.

I think thats the best summary so far of what is in store for us. My thanks to CF for clearing it up.

Kiplinger.com has a great article that shows the three simple steps to starting down the path of financial security.

Three Simple Steps to Financial Security - Kiplinger.com

• Save for a rainy day - There are two ways to buy what you want in life: cash or charge. The very definition of financial security is being able to buy what you want on your own terms.
• Be prepared for an emergency - Even the best-laid financial plans can get derailed by an unexpected cost
• Invest for retirement - Your immediate and short-term needs are easy to focus on. However, it’s not so easy for young adults to take this third step seriously.