Congratulations, we've made it to step 3! However, the authors tell us that in terms of where the program will take us, we've just begun. Starting with step 3, we'll be doing more of the work needed to make this program successful. (And here I thought digging out old salaries was hard enough!).
Step 3 isn't about budgeting. Perhaps my favorite part of this chapter is that it starts out by saying that budgets don't work. I know some people are major fans of budgets, but I never could be bothered to do them.
One of my favorite bits of this chapter starts on page 78 of the new edition of YMOYL:
This [program] is not about following our or anyone else's budgets...This is not about swearing at the beginning of each month that you'll do better. This is not about guilt. It's about identifying, for yourself, what you need as opposed to what you want, what purchases or types of purchases actually bring you fulfillment, what represents "enough" to you and what you actually spend money on. Consequently, the success of this program rests on your honesty and integrity.
Step 3: Monthly Tabulation
In Step 3 you will use the information gathered in tracking to see what patterns are emerging. You will establish your own spending categories and create a monthly summary or tabulation of your expenses and income.
This is different from a budget, with its arbitrary estimates of future spending. A monthly tabulation shows what you are actually doing with your money in the present and provides an accurate portrait of your lifestyle and spending patterns.
The practices of Steps 2 and 3 form a foundation for Step 4, where you will learn how to evaluate those patterns with an eye to increasing your fulfillment.
Specific steps:
- Discern your unique spending and income categories and subcategories from your daily money log.
- Set up your monthly tabulation.
- Enter all transactions in the appropriate category.
- Total money spent in each category.
- Add up monthly income and expenses. Total your cash and all bank account balances. Apply equation to see how accurate you've been.
- Convert dollars spent in each subcategory into hours of life energy using the real hourly wage you computed in Step 2.
Checking In
As we enter our third week, I wanted to check in and see how everyone is doing. How is your motivation? What's been your biggest stumbling block in the program so far? Are you still with us for the next six weeks?
I read chapter 3 again this week, and remembered why I got frustrated last time. The tracking isn't my problem. I need to work on increasing my income, and making my husband more aware of what he is spending.
ReplyDeleteWell.. I fear I have somehow gotten both behind and ahead of myself at the same time. I still haven't done the exercises from chapter 2, and haven't really even contemplated chapter 3 yet.
ReplyDeleteBUT... all of this talking about YMOYL got me to thinking about the strategies I used to keep my spending in line when I first started down this road. I wrote about it here:
http://ecocatlady.blogspot.com/2012/03/no-willpower-finances-3-step-system.html
Anyhow... I do intend to work on the exercises because I actually think it will be valuable to revisit it all in terms of my current financial situation... though calculating my hourly wage is gonna be a wild stab in the dark at best since my income varies so much and isn't really directly related to how many hours I work.
For the moment though, I'm a tad bit overwhelmed since Princess peed all over the bed this morning, so I'm doing LOTS of laundry and trying to sort out what's going on. She's been drinking up a storm, so maybe she's just got a bladder infection... which would be an easy fix. We're off to the vet in an hour or so and I hope they can get a urine sample... Oh, the joy!
I think doing the exercises is the hardest part. I just want to read the entire book and then go back to do it, but I do think you probably get more out of the book by actually doing the exercises. Anyway, I did a post about being stuck at Chapter 4. I managed to get unstuck but I'm only a little ahead of you guys now and posting my new thoughts soon!
ReplyDeleteI agree, doing the exercises is the hardest part and my motivation is waning as well. And it's only week 4! I did read through the whole book before doing any exercises. Twice in fact. But I didn't experience any great changes that others mention when raving about this book which is why I'm trying to go back through and do the exercises this time. We must stick together and we can get through this!! I hope...
DeleteThe exercises are a real pain, but they are basically no worse than homework for school, so they are possible. And the authors keep saying that they help you discover things you wouldn't discover otherwise. So I am also trying to do more exercises or do them more thoroughly this time around. One week isn't really long enough for some of these, but we can at least get started.
DeleteOf course it is more fun to read ahead, and I do that, too.
Ack! I've missed the first steps. I'll have to try to get caught up next weekend. Looks like a great idea!
ReplyDeleteGreat! Jump on in whenever you get a chance, Martha. The more the merrier.
DeleteMy favorite part of this chapter is figuring out categories. I actually include clothes and gifts in my "fun" category--I don't really worry about those going over budget. The first budget buster I found from doing this in the past was education, specifically, earning degrees. I finally decided that I wouldn't earn another one (two was enough) unless a) an employer paid for it or b) a raise was promised. As a result, I still have just the same two degrees. Instead I have enjoyed auditing classes. If you're auditing a class and you hate the book, you can just look for some better ones. If you're taking the class for credit, you have to read it anyway, paying close attention for the test. I also enjoy using libraries and google for my educational fix.
ReplyDeleteEating out was a problem category for a while, but no more. Lately, I've been breaking down my food costs based on food group (protein, dairy, produce, or grain) or "empty calories" or other (vitamins, spices). The proportions are quite different from month to month.
I do have trouble with total expenses. So many expenses are so highly variable from month to month that I'd rather input my budgeted amount than the actual amount spent. Examples include property taxes (thousands of dollars, once a year), auto insurance (hundreds of dollars, twice a year), homeowners insurance (hundreds of dollars, once a year), car and home repair bills (highly irregular), and buying a replacement car (thousands of dollars, once every ten years or so). Knowing that I want a home-owning, car-owning lifestyle, I feel that including the budgeted amount would give me a better picture than only the actual amounts I am spending.
So, from now on, when I add the money to savings, I'm recording that as an expenditure. When I pull the money out of savings to spend it, I'm not keeping track of that here (though I do keep track in my spreadsheet that shows me how much I have in savings). If I've been saving too much or not enough in another category, I can make a transfer and change the amount I record in future months, but I'm not keeping track of transfers here either. This method has problems: My budgeted amount could be off. And showing unspent money as spent doesn't show me how much wiggle room I have because until the money is really spent, you can change your mind. Still, I prefer those problems over those that result from wild swings in spending that would appear if I recorded only my actual spending. And since I am recording my actual spending elsewhere when I withdraw money from one of these targeted savings categories, I'm not losing the information.
More on the actual exercise in my next comment.
Comparing the amounts of time spent for different categories is not as helpful as it could be: sometimes you spend more on things that are less important to you than other things simply because they cost more. Eating is more important to me than transportation, but I try to spend the minimum needed for happiness in each category, and that ends up costing me more for transportation than for food.
ReplyDeleteIn case numbers are interesting, so far this month, here was my spending in terms of life-energy units, with full-month estimates for categories where I am not done spending for the month:
* food - 5.9 hours (6.6 hours estimate for month)
* utilities (electricity/water/trash, natural gas, landline phone, internet) - 7.2 hours
* short-term fun (restaurants, social activities, clothes, supplies, tools for hobbies, decorations, books/movies/games, career, cell phone, miscellaneous) - 19.6 hours (19.6 hours estimate for month)
* long-term fun savings - 5.7 hours
* housing savings (taxes, insurance, maintenance, repairs, appliances, renovation) - 21.3 hours
* transportation savings (gas, insurance, taxes, car and bike maintenance, repairs, next-car fund) - 13.8 hours
* medical/health insurance and savings (doctor visits, prescriptions, tests, insurance, surgery, over-the-counter drugs) - 17.7 hours
I don't feel I have any problem areas at the moment (like my previous ones in education and eating out), so I haven't separated any of those out.
When I have a full-time job, I normally also have retirement savings, renovation savings, and more charitable contributions, but less spending on health insurance.
Given that I work only about 80 hours a month these days, this does show that I am currently spending more than I am earning. That is what I expected.
There you are Debbie! I knew we could count on you to do the exercises! :-) You may be the only one who has so far. I got caught up in trying to create the perfect spreadsheet, where I'd only have to enter expenses, and everything else would automatically total for me, but alas it is beyond my meager spreadsheet skills. So I need to redo everything. :( I'm pretty sure I know my hotspots though, we eat out too dang much!
DeleteI finally sat down and created an all new spreadsheet and did monthly tabulations for February and March. Actually I can total categories each month in one spreadsheet without having to transfer totals to a second sheet, yay! I'm probably the only person who got bogged down trying to create the "perfect" spreadsheet eh? Damn perfectionist tendencies.
ReplyDeleteAnyway, my categories aren't as fine-tuned as they could be, since I had credit cards charge totals, but no receipts for most expenses by this point, but it's close enough.
Now I see what Debbie meant about about including actual monthly expenditures versus budgeted amounts. My transportation totals are a bit misleading because I pay insurance every six months and didn't need any maintenance so far this year. But my extraneous expenses are also much lower than they would have been even last year, since I'm trying to cut down on stuff and unnecessary purchases.
Seeing Debbie's hourly totals was interesting, so I'm going to share mine as well.
(life energy for Feb / March)
* gas - 2.75 hrs. / 1.7 hrs.
* groceries - 8.2 / 9
* eating out - 1.7 / 5
* cats (usually just food, boyfriend buys litter, but in March I had to buy flea meds too - 3 / 6
* housing (mortgage, taxes, maintenance) - 44.7 / 44.7
* utilities (gas, electric, cell phone) 11 / 7.7
* Fun (cable, newspaper, booze, gifts, decor, etc.) - 7.6 / 10
Again, a lot of stuff is missing as it's paid for quarterly or semi-annually, like trash, water, and insurance.
Thoughts: Housing, groceries and eating out all seem high. Eating out is probably the only one I can realistically reduce, but it would be a pain since I HATE cooking.
Glad you found a better way to deal with your spreadsheet!
ReplyDeleteYour eating out looks really low to me for someone who hates cooking. Here's some brainstorming on that anyway, in case an idea you like pops up:
* get better recipes--ask your relatives for all your favorite ones and ask for more that you discover at potlucks
* get better equipment--if there's something that drives you nutso, maybe there's a better version out there somewhere
* trade cooking for something else with friends - plenty of people might love to trade big casseroles or even just dinner for lawn mowing, laundry, mopping, window cleaning, help with picking out stylish things (for people who hate shopping), help with decluttering, or even just keeping them company (or distracting the kids) while they cook; then there's always the classic helping people move for pizza and beer
* cook bigger batches and freeze the extra--more food for almost the same effort
* get quicker/simpler/more fun recipes
* pay extra for some of the processing you hate--you can still save some money over restaurant eating.