Beating Broke

Personal Finance from the Broke Perspective

Debt Ceiling Crisis?

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If you’re even slightly interested in the US economy, and, let’s face it, most of the world is, then you’ve likely been at least marginally following the last few weeks worth of debt ceiling news.  The quick and dirty of it is that the US government has a debt ceiling that puts a cap on how much debt the US federal government can carry.  If they reach that cap, they can no longer issue treasury bonds and the like to raise money to pay for things.  Based on what I’ve read, everyone would like us to believe that it’s a major crisis, and the world will end if we don’t raise that debt ceiling and allow for more debt.  But, is it really a crisis?

Let’s think about this just a little bit.  Replace “U.S. Government” with John Doe in everything I’ve just said, and all the news you’ve read.  If we were talking about an individual, we wouldn’t be talking about how the world would end if they weren’t allowed to accumulate more debt.  We’d be talking about how they need to radically cut costs, increase income, pay off debt until they can get their finances in order.  Would  it be called a crisis?  Maybe on a personal level, John Doe would believe it was a crisis.  But, it certainly wouldn’t be world ending.

Bus1I’ll admit that it is a bit different when it’s a government entity that we’re talking about.  If the US government goes bankrupt, there will be some pretty serious problems with the economy for a while.  Which brings up another issue altogether.  The US economy needs some diversification of it’s revenue streams.  Way too much of the economy balances on how much money the US government sinks into it each month.

It’s time we start asking the same questions of the US government that we would be asking of John Doe.  Do you really need that expenditure?  That service?  All three cars?  The McMansion?  Unfortunately, those that are in charge in Washington are playing political ball instead of really trying to solve the problem.  They think way to hard about what programs they can cut that won’t lose them votes in the next cycle, or how much they can raise taxes without losing votes, when, instead, they should be looking to make the US government financially solvent and stabilizing it’s fiscal situation.  You or I would start with a balanced budget, I don’t see any reason why the government shouldn’t do the same.

What do you think?  I don’t think I’m being to idealistic in asking that they carry a balanced budget each year.  Or that they cut costs until they can do that.  Yes, they’ll likely have to raise taxes some to pay off what they’ve got for debt, but if it doesn’t come with some pretty significant cost cutting, they’ll all be looking for new jobs in 2012 anyways.

photo credit: Public Notice Media

Couples; To Combine Finances or Not?

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Life
Married couples have been doing it for centuries.  Combining their finances is just something they’ve always done.  Call it tradition if you want.  Call it necessity.  Recently, it’s a tradition that has come under fire as being old and outdated.  After all, the reason that the tradition exists is because it was rather usual for the woman in the marriage to stay home and be a homemaker while the husband went off to work and earned the money.  Since the woman wasn’t contributing to the financial inflow, there was no reason for her to have her own account.  What would she put in it?

But, with a new age, comes new standards.  Now, it’s expected that a woman will enter the workforce (or, at least, the contingent workforce).  And she’ll remain there even after marriage.  Not only will she remain in the workforce, but there is a chance that she’ll bring more to the table financially than her husband.  Suddenly, the decision to combine finances isn’t such an easy one.  In fact, combining finances can lead to more arguments than keeping them separated, unless both parties are on the same page financially.  The way I see it, there are three ways you can handle finances as a couple.

Combined accounts. (What we do.)

We came to the conclusion early on in our marriage that combining finances made the most sense for us.  Neither of us made much more than the other, and we both brought about an equal amount of debt to the marriage.  We combined and pay all of our bills and other expenses from one account.  It makes it easier to balance, easier to pay, and avoids having to figure out how much each owes to what bill, or when/how to transfer money from one account to the bill pay account.

Combined account hybrid.

If you want the convenience of combined accounts, but still have a bit of an issue with purchasing things for each other.  Or, just want a “me” account where you can purchase whatever you want, whenever, no questions asked, a combined hybrid set up might make the most sense.  Combine all of your accounts, but open a new account in each of your names.  Those accounts get a set (budgeted) amount deposited into them each month.  Each account is completely hands off to the other partner.  Spend it however you like, as long as the cash is in the account to cover what you spend.

Completely separate.

You don’t like the idea of combined accounts at all.  They should be separate.  Each of you keeps your own account and you either agree on who is paying which bill, or you create a third account that each of you deposits your share of the bills into and pay all bills from that account.

Which is right for you? I can’t say which is right, or which is wrong for you.  It’s something that you need to sit down and discuss with your spouse/partner and decide on.  I think that combined finances are easier, but with automated deposits and bill pay, the separate accounts could be made pretty easy as well.  And, just because you settle on one way, doesn’t mean you can’t change it down the road.  What I will say is that people are sometimes quick to judge based on the decision that you make.  Are you too trusting by combining?  Not trusting enough by leaving things separate?  Perhaps your relationship is doomed if you don’t combine?

The truth of it is this: a majority of divorces have some root in money issues.  Forcing yourselves into a money model that you don’t like won’t help with that statistic.  Be open with each other about money.  Be willing to discuss your finances, both separately and combined, and get yourselves on a path to a solid financial future.  If you do that, it won’t matter which option you choose, it’ll be the right one.

photo credit: Will Folsom

You’re Doing it Wrong! Rethinking Your Processes

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Habit.  It’s a dirty little 5 letter word.  I read somewhere that it only takes 6 times of doing something before it becomes a habit.  Habit is a close relative to addiction, although somewhat easier to change.

If you’re like me, you’re a creature of habit.  You like doing things the way you’ve been doing them and don’t feel very compelled to change them.  That’s the way I was before I began taking control of my finances.  I was a habitual spender of my paycheck.  There was no saving involved.  When I started this personal finance journey, I had to break that habit and begin a new one.  One that involved paying off my debt and saving money.  Like any other habit, it took time to really make it into a habit.

Within that greater habit, there are other habits.  The habit of checking balances regularly.  The habit of balancing the bank accounts.  The habit of keeping the budget.

That last one, the habit of keeping the budget, is the one I’d like to focus on here.  In the beginning (anyone else hear that choir?), I used only a copy of Microsoft Money (now defunct).  As I matured in my budgeting, I adapted a spreadsheet based on the budget spreadsheet that Dave Ramsey created for his Financial Peace University.  And that’s where it’s been since.  I have spreadsheets going back several years, in fact.

LedgerRecently, my computer became ill.  I ended up having to back all of my data off the hard drive and rebuild it.  Not a lot of fun, but it’s sometimes nice to start with a fresh drive and get rid of some of the flotsam that it’s accumulated.  Long story short, it took over a month to get it all sorted out and rebuilt.  When I had gotten everything installed and ready, it had been nearly 6 weeks since I had last checked in on my budget.  The process, if you’ll indulge me, is somewhat cumbersome.  First, I would manually enter in transactions from the internet banking application at my credit union.  With the version of Money that I had, I was never able to get it to properly import a file, so manual entry was my only option.  I would then manually enter in any outstanding checks and bill payment items.  Once the info was entered into Money, I would then manually, line by line, transfer the amounts from Money into the appropriate budget categories in my spreadsheet, using a calculator as I went to calculate the totals for each category.  (This was necessary because I didn’t have the individual line items in the spreadsheet, so I merely took the existing total and added whatever the line item was in Money to it.)

So, you can see, 6 weeks of undone budget work was quite a pile of work.  And like any good person with lazy tendencies, I put it off.  Before I knew it, there was almost 3 months worth of budget to do.  That was about the time that I decided that maybe my habit needed a bit of rethinking.  I began looking into new personal finance software that might integrate a little bit better.

What I decided on was You Need A Budget.  I’ll have a review of that coming up in the next week or so.

Telling all of you that was just getting us to this point.  The meat of the idea.  You’re doing it wrong!  Somewhere, something your doing is being done wrong.  Maybe not wrong in the sense that it’s incorrect (none of us make financial mistakes right?), but wrong in the sense that the processes that you are using are costing you;  Time or money, or both.

If there’s one thing I’ve learned through all of this, it is that you must be vigilant.  You’ve got to rethink your processes periodically.  It doesn’t have to be all that often; Some will go overboard and spend so much time rethinking their processes, that they’ll suffer from analysis paralysis.  Instead, set up a schedule where by you set aside an hour or two to go through your processes and try and discover new ways of performing those processes that might save you money or time.

In our case, moving to a newer software that made it easy to import our transactions and had the budget part of it all built in has resulted in saving us a lot of time.  What about you?  What processes do you perform that you’ve never changed?  Take a look at them and see if you can’t find a way to save yourself some time or money!

Image Credit: Ledger by er1danus