Beating Broke

Personal Finance from the Broke Perspective

Almost Time for a Winter Financial Checkup

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What’s a Winter Financial Checkup, you ask?

Winter, and more specifically, the time around the holidays is when most people have the most problems with their finances.  Gift purchases throw off their budgets.  Bonuses give them a unexpected bit of cash and they spend more than they expected.

Whatever the case may be, your financial picture might end up looking more like a Picasso than a portrait of your true financial life.  And your budget might be way off.  It happens.

The holiday season is one of the hardest to budget for.  Between all the gifts and trips that we all buy and make, it’s easy to lose track of where some of our money went or to over spend in a few categories.  But, keeping tabs on our budget is also one of the most important things we can do during the holiday season.

Performing a Winter Financial Checkup

A winter financial checkup isn’t really as special as I’ve made it sound.  It’s mostly just your regular budgeting session but with some special attention spent on predicting some of the extra expenditures.  And if you’re lucky enough, some extra incomes as well.

You’ll want to ask yourself, first, if you’re expecting any extra income.  Usually, this means a yearly bonus or a Christmas bonus.  If you are, now is a great time to plan for that extra income and budget it in.  Extra income is exactly that.  Extra.  It’s unplanned for up until now.  If you are still paying off your debt, I suggest you plan on using at least 50% of any expected bonus for debt repayment.  You’ll have some pangs of regret for things you could have bought, but in the long run, you’ll thank yourself.  The other 50% should go towards your gift purchases and towards any traveling that you are planning.

You’ll also want to take the time to truly plan your gift giving.  It’s a part of holding yourself to a budget.  I guarantee that if you walk into a store to buy gifts without a list or a set spending limit on each person, you will overspend.  Everybody does it.  It’s the spirit of the season.  Generosity is in the air, but you can still be generous without breaking your budget.  Make a list of all the people you intend to buy gifts for.  If you have any ideas for them, make sure you add those to the list.  Now, beside each name, write down the amount that you will spend on that person’s gift.  They don’t all have to be the same.  Your sister might like her $25 scrap-booking kit just as much as your brother likes his $50 tackle box.  It’s the thought that counts.  And if they do care, then you spent more on them than they deserve.

The main reason for a winter financial checkup is to keep control.  That’s what a budget is all about and that’s what will keep your spending in line and your debt shrinking.  Take the time the next time you check your finances to do a little bit extra and give yourself a winter financial checkup.

How Much is It Worth to You?

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In every purchase we make, we should ask ourselves how much is it worth to me?  It’s a very simple question, but in many cases, the answer may surprise you.  And it applies to much more than items.

Let’s try a few examples.

I’ve been keeping my eye on LCD HD receiver televisions.  With the big switchover in February and all the fear marketing going on about the loss of signals, my family may need a new television.  We don’t currently subscribe to a cable service, so we get our tv over the airwaves and will need a HD tv or a subscription to cable.  The tv’s that I’ve been looking at are in the $500 range.  Not a huge amount for tv’s nowadays, but quite a bit for my debt averse family.  Each time I look at them, I have to ask myself if having television is worth $500 to me.  We currently don’t have cable and we only receive one channel over the air.  And to be honest, it wouldn’t be a huge loss to us.  Except.  Except that I like to watch Football in the fall.  Except that my wife is addicted to COPS.  Except.  Except.  Except.  With each exception, the TV or cable subscription becomes more and more worth it to me.  I become more willing to spend the money to get the TV or Cable because of them.

Much like cable, there are some services that demand the question too.  In my hometown, there is only one full service gas station.  All the rest are self service.  The full service station charges $0.02/gallon more for their gas.  This is a non-question for me.  I don’t mind filling my tank up.  I only end up filling up about once a month, so it isn’t a big deal if I have to stand and pump gas for a few minutes.  However, with temperatures falling (it’s about 30 here today) I can certainly see why there might be some people who are asking themselves if the extra $0.02 per gallon is worth staying in the warmth of their car while someone else fills the tank.

The more my wife and I budget and track our money, the more often I find myself asking this question.  Is this service or that item worth the extra money?  Is the convenience worth paying more for or am I just being lazy?  More and more, I find that the answer is No.  In many cases, the convenience isn’t worth a little more slavery to debt.  Each penny that I spend on that convenience is another penny that I cannot use to pay down debt.  Maybe my answers will change when we get rid of our debt, but I think by then our lifestyles and attitudes will have changed significantly enough that the answer will often still be no.

Don’t Make the Cost of Gas Your Scapegoat

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With all of the discussion about the price of gas that has been going on lately, and rightly so, it’s easy to blame your current financial troubles on the higher cost of gas.  Don’t.  While the higher cost may be hitting you hard, it isn’t the cause of your situation.  But we all like scapegoats and we like to blame things on someone or something other than ourselves.  Something that is out of our control.  As an added bonus, we get to complain about the people behind it and blame them too!

Here’s the dirty truth of it all.  The price of gas is not the reason that you are having trouble financially.  At 17 MPG, the difference between 1.999 a gallon gas and 4.159 a gallon gas is about $1500.00 a year.  A little over $125 a month.  It sounds bad, but when was the last time you remember paying $1.99 a gallon for gas?  It’s been a while.  The recent raises in price took the gas from about $2.499 to 4.159.  The difference there at 17 MPG is just under $1200.00 a year.  Or a little under $100 a month.

And that’s at 17 MPG.  If you are driving a car that gets 25 MPG, the difference is about $800 a year or $66 a month.  At 30 MPG, it drops to about $664 and $55.

$55 a month is nothing to scoff at.  And $125 can be a near catastrophe for some people.  But, if you had your finances in order to begin with it wouldn’t be a disaster.  It’ll still take a dent out of your budget, that’s for sure.  But a person who has control of their money and tells it what to do will be able to quickly rearrange that budget and keep on track with their debt elimination and savings goals.

If you make concessions and shorten trips or consolidate errands, you can cut that gas bill too.  Besides, don’t you feel just a little bit silly about blaming all your financial woes on $50 a month?  I bet you pay more than that on your cable bill…

Wanna see my numbers?  Here’s the spreadsheet I used. http://spreadsheets.google.com/ccc?key=pKnPEyRsjPSLpIC6wCWdjbg&hl=en