The Other Budget Categories

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laundry area

Our washing machine died yesterday and it isn’t an emergency.  The Fisher and Paykel washer was 11 years old and after 3 loads a day (roughly 12,000 loads), we knew it’s days were numbered.  Planning for this didn’t start last week, or even a few years ago.  It started the day we bought it. After we became debt free with a fully funded emergency fund, we added some other budget categories to prepare for days like today.  Every month, we set aside $10-30 in an “appliance fund” and since we know ourselves and needed extra accountability, the cash went into a real envelope and tucked into a combination safe (not into the bank account where we pay for other bills.) We also fund other bonus budget categories including a car replacement fund and furniture replacement fund.  We set aside small amounts each month into these envelopes so that over the period of 10-15 years we can replace our items that wear out.

craigslist washer

If I hadn’t had an appliance replacement fund, my day yesterday would have looked very different.  I would have searched our local Craigslist for a working washing machine to limp by with until we could raise the money we needed.  They had used machines about the age of ours ranging from $50-$150.  I would have used part of our emergency fund or my home repair fund, to pay cash for the appliance.  It’s not a bad plan really and if there hadn’t have been any good sales on, I might have done that anyway so we could wait for a better deal.

Instead, I had the cash to shop for the best rated machines I could afford.  I looked at reviews online, drove to the scratch and dent outlet store to see their choices, and thanked my lucky stars that Independence Day sales were still going strong.

When it came time to make my final decision, I almost went with my less favorite, just to save a few hundred dollars.  Then Darren reminded me that this machine should last us 15 years or more and that since we had the cash saved up, I should buy the set of machines that I wanted to use for the next 15 years.

Even though our dryer is still working, it is almost 18 years old.  We decided to buy a matched set since the machines are visible from most of the main floor.  I should be able to sell the working dryer on Craigslist to offset our costs a little.

spin_prod_914554512

I chose the Whirlpool Cabrio set because of it’s huge capacity, low resource use, and good reviews.  I loved the idea of a front loader and would love to be able to build a counter over the top of my machines, but the whole mildew thing and needing to leave the door open discouraged me.

After searching the prices online of all the stores that carry this model of machine, We called Sears to order over the phone.  I needed the dryer door reversed and that couldn’t be specified online.  While I was on the phone the operator asked me if I had a coupon code I would like to use.  I said, “oh! Is there one?”  He put me on hold and we both searched for any available coupon codes.  I was unable to find a coupon code that would work in their system, but his manager approved an additional 5% discount for us. The cool thing about this, is the 5% discount is the same we would have earned by using a sears credit card.  As a rule, we don’t use credit cards and I was feeling kind of bad about missing the discount.  Turns out, I didn’t have to miss it after all.

It may seem like a lot of extra little categories, but most people won’t miss the extra $10-$30 a month and over 15 years that fund will grow to be $1800-$5400.

 

How to Use Your Debit Card Like a Cash Envelope System

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I am personally convinced that cash envelopes are the best way to stay on budget, but I also know that this method doesn’t appeal to everyone.

I’ve talked to people who won’t shop with cash. It makes them nervous to carry it around.  They don’t like making change between budget categories or the fact that cash leaves no trail. Then there’s that nervous feeling they get that they might not have enough to pay for their stuff (which is kind of a bonus, because it is what ultimately curbs overspending.)

There are several apps that allow you to track debit card spending as if it were in an envelope. Dave Ramsey has one called Every Dollar. The basic version is free with a paid version available if you want it to automatically sink with your bank account.  You enter your budget into the app, then record your purchases as you make them.  The app subtracts and lets you know what you have left in the categories.  Below are similar apps that are also initially free.

  1. Good Budget
  2. Mvelopes
  3. Expense Keep
  4. Simple Track
  5. Budget Ease
  6. Envelope+ Kid–for kids to track their spending

I like that debit cards come out of the bank account right away, so there’s no accumulation of debt.  The danger is the card will scan as long as there is money in the account even if that money was budgeted for something else.  If you are spending cash and spend another category’s money—you KNOW it right away, because you had to take it out of the envelope for that other category.  It’s a conscious decision.  Going over budget with a debit card is less clear cut until you write it down.

When you are scanning a debit card, the only way to keep on budget is to record the purchase BEFORE it’s made. Then you can see ahead of time if there is enough money in that category.  I intend to record my purchases, but I DON’T, this is why I can’t see myself giving up cash any time soon.  Using a debt card requires more organization and discipline—character qualities that aren’t yet well developed in my repertoire.

If you aren’t a smart phone fan, my sister-in-law showed me a paper and pencil method to using your debit card like envelopes.  Get a small notebook that will fit in your purse.

Give each budget category it’s own page and write the amount you’ve budgeted for that category at the top next to the title. Then as you shop, write down what you spent in each category on the appropriate page and SUBTRACT so you can see what’s left.

If you need to move money from one category to another record it in the book.  For example if you need to move $50 from clothing to food, simply, subtract it from the clothing page and add it to the food page, with a note of where it came from.

At the end of the month, create new pages for each of your categories.  Clip the front pages together so you can access your new pages easily.  Add post-it tabs with labels to help you find your categories easily.  You can reuse the tabs by moving them to the new sets of pages each month.

Do you think any of these methods would work better for you than cash?

Wrapping up the Spending Freeze

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Can you believe the 31 day freeze is over?  I know some of you have already told me you are going for another month and I think that’s awesome.

 

We had a possible $200 from our basic living expenses to put back into our goal fund.  Those dollars were kept separate from my purse, where they would have normally gone.  Those budgets were: eating out, misc., hygeine, and blow money. The clothing fund also came out of my purse, but we can’t put those saved dollars into our goal fund. They need to be saved for future needs that we know are coming.

We had a few expenses and mistakes which left us $173 from money that normally disappears throughout the month.

I was gifted $200 from 2 separate places for Christmas/End of year bonuses that I decided to donate to the goal fund.

I also earned an extra $400 selling items on craigslist and online.

So the Spending Freeze found $773 for our project!  Guys, this is huge for us.  This means we can move the door, do the drywall, and basically create a finished bedroom to sleep in.  The bathroom won’t be done yet, but still I had doubts that this much was even possible.

 I’d love to hear how your spending freeze turned out–good or bad. Nobody can do this perfectly but even a little push in the right direction is awesome!