One of the things that I noticed catching up with our budgeting is that our budget is totally out of whack now that we don’t pay rent, don’t pay for phone and internet, don’t pay for energy, and don’t have to pay that much for my commuting. Just take a look at how our new spending matches up with our old budget:
Our categories need some major adjustments. Our monthly bills have dropped from over $1000 per month to under $100 since we moved out of our apartment. If we drop our gym membership for my wife, which I think we will soon, our monthly obligations will drop below $50. With these changes this portion of our budget will have been reduced by over 95%.
Another area where we seem to be spending a lot less these days is on gas/transportation. I have recently talked about how my bike commuting is turning out to be very frugal, but I didn’t really realize how this savings was translating into our monthly budget. The $71.01 we spent in gas this month represents the cost of two tanks of gas and a single one way bus fare. This category has been effectively reduced by 50% given previous spending habits and could see additional reductions now that gas prices have fallen sharply. I might leave some padding in this category in order to accommodate for the seasonal changes in fuel prices.
With all the dramatic drops in our spending habits, it might be a better gauge of how effectively my wife and I are managing our money by looking at our cash inputs and outputs for the month. I call this tab on our monthly budget spreadsheet “the ledger”:
Oh the glories of a positive cash flow. Our effective savings rate in October was 52.66%. I would love to keep that up, but I have a feeling that this will be increasingly difficulty once we move east to go to school. I probably won’t earn very much of anything then, so saving around 50% of it seems like a pipe dream. I’m just happy with what we did this month.
It seems like I have a few points of action over the next month in terms of budgeting:
Come up with a more realistic budget given our current needs and priorities
With the coming of our baby at any moment this month (due date is the 10th of November) I should really try and think through how the baby will affect our budget as well as observe how our baby is affecting our budget. This may take a few months to determine, but I hope to have some idea of what I need to do by the the beginning of 2009.
Which reminds me - my son is due to be born soon! I am so excited, I can taste it. Whatever ends up happening over the next month or so is going to be awesome - even if we spend twice as much as we did last month - because I can’t wait to hold my baby in my arms.
Welcome to the November 3, 2008 edition of the carnival of twenty something finances. For this edition, because I am in control (muhaha), I have decided to use my Phenomenal Cosmic Power that carnival hosting brings to intersperse what I want into this collection of personal finance articles: oddly colored, magical bears.
You see, these bears are dashing, they are daring, they are even courageous and caring, faithful and friendly with stories to tell. That’s right, they are the Gummi Bears:
I remember that this show taught me a lot about living life with a magical potion that you need to keep out of the hands of Duke Igthorn and his band of Ogres. I don’t think I could have gotten through third grade without learning that one. But that wasn’t all that the Gummi Bears were about. I think that we can also learn something about the world of personal finances, and especially personal finance for those in their twenty somethings.
So without further ado, the carnival.
Savings, Banks, and Credit Cards
Zummi Gummi is the wise yet unreliable keeper of the Gummi wisdom. Very useful to the Gummies in principal, when it comes down to times of dire need Zummi can be frustratingly forgetful. I think he is much like banks, credit card companies, and other aspects of our consumer side financial insitutions: useful in principal, but hard to work with when times get tough.
Grammi Gummi is the voice of reason and the glue to keeps the Gummies together. Her maternal strength and knowledge of the secret gummiberry juice lets the Gummies go about their business of protecting the forest from evil and maintaining internal cohesion, even with teenage Gummies getting the group into a mess or two with Ogres. This is the same role that I think a budget performs in a person’s or family’s life. It keeps the financial wheels from falling off and the person or family moving in the right direction.
Danny Gamache presents Simplify Your Budget posted at The Success Professor, saying, “This article shares a simple process that can help twenty somethings to develop a simple budget system that works! It provides lifestyle freedom with the benefits of a basic structure.”
Frugality, Life Lessons, and Other Financial Survival Skills
Gruffi Gummi was a jack of all trades, making due with whatever was around him to get the job done. He was wise, but not like Zummi - Gruffi’s knowledge came from the school of hard knocks and experience. If you ask me, this is what being frugal is all about. A person can save a lot of money over the long term by applying themselves and learning to do something rather than paying the “easy tax” and getting and “expert” to do it for them. And besides, it pays to learn.
Gusto Gummi is an artist, and like all artists he feel like he has something to say about pretty much anything. Sometimes he says it straight up, other times he uses his art to express his thoughts. Maybe we all have a little Gusto in each of us, spurning us on to make our voices and opinions heard. And what else is there to make our voices and opinions heard on if it is not the state of our economy?
Tummi Gummi is a fat, gluttonous bear with a penchant for sweats. He seems to be a little slow to think and to act, but on the whole he is just as helpful and courageous as the other Gummi bears. Investors are kind of like Tummi. They want to gorge themselves on phenominal returns or sweet, sweet dividens. Knowledge in the game of investing is key, but sometimes as a group investors can appear slow to think and to act - but then burst into a frenzy of activity. In the end though, everybody wants their account to be a full of cash as Tummi wants his stomach to be full of pies.
Cubbi Gummi is the youngest of the Gummies, but he is by no means someone who should be ignored. His youth is a great asset to himself and to everyone around him. But he needs guidance and help in his path to mature Gummi Bearness, guidance and help he finds in those who have gone before him. In the same way, we as 20 somethings need to be taught by those that know more than us and have walked down the path of financial success before us. For some that means going to college and finding a smokin’ deal, for other it means finding somebody that you trust and listening to what they have to say.
Ogres are really stupid but insanely powerful creatures. Servants to the evil Duke Igthorn, they are better left alone. Some financial products and services are definitely better left alone. In the long run, they will not help and will in the end only hurt your financial situation. Stay away from them just like you would a terrible ogre, unless you want to hit the ogre over the head with a nice fat cut of mutton. Then it is okay to get close.
That concludes this edition of the Gummi Bear Carnival of Twenty Something Finance. Feel free to submit your blog article to the next edition of twenty something finances using the carnival submission form. Past posts and future hosts can be found on our blog carnival index page. Thanks for stopping by and have a wonderful day!
I haven’t been keeping up on budget numbers since my wife and I moved out of our one bedroom apartment that ran us $890 a month in early August. This has been gnawing away the life-blood of my financial soul (not really, but it sounds so dramatic) as month after month marched by and still no budgeting or expense tracking went on. Early this month I bit the bullet and fuddled through my credit card and checking account history for August, September, and early October in order to catch up. This was not fun, but did teach me a few things about my accounting system.
Some portions of my budget spreadsheets are so complex I didn’t want to take the time to relearn what I was doing in them after 2 months of inactivity. Being away from looking at my budget daily gave me fresh eyes, and my eyes were stunned with how hard I make my spreadsheets to understand. My use of colors can at times be kind of ugly and bewildering. I can throw too much information onto a single screen without organizing it into a helpful system. One sheet in particular made me cringe with the thought of figuring out what I was trying to accomplish let alone how I was trying to accomplish it. It was just total yuk.
Yet despite all that, I actually do some things really right in my budget spreadsheet. I might even use the word “elegant” to describe with what spreadsheet grace I effortlessly calculate sums and display my monthly summary. I really like how I make use of tabs to break up different information and provide me with different glances at my spending, earning, and savings. The one area that I could probably improve further is how I manage my savings information - but I think it is still pretty cool what I do there.
Another key thing I learned is that budgeting is best done regularly. Being lazy does not pay off here and just makes for a lot more work and a lot more headache down the road. It is really much easier and much simpler to keep up with the day to day expenses of my family on a day to day or weekly basis. Having to wade through a mountain of receipts was tedious and no fun. Don’t pull a Steward and make sure you are up to date on your budget.
I have already started to implement some of what I learned into a new budgeting spreadsheet set to go live for 2009. Well, implement might not be the right word - steal is probably better. I have stolen the ideas that I think work best from my current budgeting spreadsheet system and simply placed them in my new spreadsheet system. I haven’t done any of the hard work of rethinking how I do certain things, but I plan on doing that before January 2009. Who knows, I might even pick up the budgeting basics series I tried to start a few months ago with that one post Budgeting Basics: An Expense Tracker That Works.
No matter what happens, I’m just glad that budgeting is back.
This weekend my wife and I were traveling home from the tour of our backup hospital for the birth of our son when we stumbled across this little gem of a story from the folks at NPR. It was about two budding entrepreneurs who, (*enter deep and ominous voice*) in the midst of these very serious and very deep economic problems (*end deep and ominous voice*), have found the strength to begin a business together: Lucky Worms and Monster Worms.
Enzo and Otto Fiore, age 6 and 4 respectively, represent something at the very center of the spirit that will help America weather the storm of irresponsible people not being able to pay back their home loans - resourcefulness and ingenuity. And being ridiculously awesome. Can’t forget that.
Case in point: advertising. Instead of trying to hype their product with celebrity endorsements from the likes of Sponge Bob Square Pants or Dora the Explorer they keep it real and go with a simple roadside sign that reads:
People and gentlemen, please buy our worms … here
I think the ellipse might not really be there on the actual sign, but I couldn’t tell from the way Otto Fiore read the sign to the reporter. Speaking of the reporter and Otto reading, this is a story that you really need to listen to in order to get the full power and gestalt of what is being communicated. Trust me, you will thank me later.
Done listening? Good. Here are the main things that I saw grownups like me can learn from these two pillars of American entrepreneurship:
Pick Something You Love
These boys have a serious obsession with worms. When asked by the reporter why they started a worm business Enzo recalls this story:
Well, because Otto really like worms. One day, he liked worms so much that he decided to put worms in his pants … with ICE!
I could figuratively taste the satisfaction these kids get from their work through the grainy speakers of my 1995 Toyota Corolla when I heard that, and I wastn’t even on LSD.
Application: If you can’t see yourself putting your business down your pants … with ice, then you probably don’t love your business enough to make any real money on it.
Use Your Natural Skills And Affections
Worms are deceptively quick, squirming and worming their way back into freshly disturbed earth faster than Richard Simmons make me cringe. It takes a steady hand, a quick wit, and a heavy dose of flashlight-wielding little boy euphoria to catch ‘em and that is exactly what Enzo and Otto are equipped with. You don’t have to goad them into this euphoria, they were made for it.
Application: If you aren’t wired for your business then you might make money on it, but you won’t LOVE it enough to stick it down your pants with a few ice cubes for good measure, which is the whole point running your own business anyway.
Start Off With The Things Around You
Can you turn things from your back yard into $114 with nothing but your hands? If you answered no then you have one of two problems: you aren’t resourceful enough or you suck. If we are both honest about it, it is probably the second one.
Often times it takes a lot of effort, capital, and time to start a business from scratch, but if you are already doing the thing with the things around you, the next step to starting a business around that thing isn’t that great a leap.
An example of this might be trying to make money online. You are already on the internet a lot, you might even have a blog about something near and dear to you heart - lets say “farcical aquatic ceremonies” - that you have some marginal success with. You slap some adsense on that puppy and wham!, you just earned your first $0.03. It is just a matter of time before you quit your day job and work on the internet full-time.
Application: Stop sucking and use the resources around you (whether it be land you own, the local library, or an old skill that you have neglected, or the internet) and actually be able to do something that people need. Before you know it a business may be born.
Use Your Connections or Fail
Even with a huge love for your business and the skills to match you are not guaranteed success. You have to leverage the people you know into buying your product or service. If I was a betting man, and I am, I would bet $50 million that the bulk of the kids business comes from people that they know or that their parents know. The rest comes from referrals from these same people. Without customers you will always fail.
Application: Be ready to sell your soul to market your product. You key weapons must be fear, surprise, ruthless efficiency, and an almost fanatical devotion to the Pope. Or just really good connections.
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I am always a fan of learning from kids and this is no exception. They are often full of exuberance and free from some of the false constraints we have grown accustom to in our own growing up. If I find myself in a creative or intellectual rut, there is nothing better than spending an hour with a kid building a fort or telling stories. It just makes sense to me that kids can teach us a lot, even about businesses and entrepreneurship, if we are willing to listen.
Do you know any entrepreneurial kids that we grownups can learn from? What lessons have you learned about turning what you love into something that makes money?
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