February Challenge: Tracking Food Costs

I like 30 day challenges for many things: writing, exercising, eating. So here's a 30 day financial challenge (or less as February is a short month) I'm going to give a shot.

The idea here is that as I talked a little about before I'm expecting to drop down to a single income here in 2012. In preparation for that I've been doing a whole lot of things. But one of those is refining my budget, and especially as it pertains to one particular cost: food. Right now I eat out. A lot. Maybe not a lot for the typical American, but a lot for someone who's trying to pay off debt and save money.

So for January I had two food budget items: out to eat and groceries. Come single income days, my out to eat will be drastically reduced. And the grocery bill will have to take a bit of a hit too. But it will be all the harder since I won't have the out to eat money I'm spending now helping me stretch my grocery dollars. My future grocery spending needs to be about $400 to feed two people for all but one meal a week. So that's about $13 per day, or $6.50 per person per day.

This is not wholly unreasonable. Many folks don't spend anywhere near this. I do live in a higher cost of living area where (inexplicably) groceries seem to cost a little more, as does everything else. For January I just kept a grocery budget and we stuck with it just fine. But for February I'm challenging myself to break out my daily food costs. I'm going to look my grocery and figure out how much each item I ate that day cost me. Should help me to eliminate the unnecessarily expensive foods in favor of tasty but affordable options. Here's to cheaper eating!

(Photo from Shorts and Longs)

My 2012 Financial Goals: First Look

It's time to put the personal in personal finance and talk about some of my goals for the coming year. 2012 is going to be a big year for me. 2011 was my highest earning year ever. 2012 is hopefully putting some of that money to work and then working towards some of my major goals.

A big deal for me in 2012 is I'll be going down to being a single income earning household. Having dual incomes is pretty nice. It gives you some amount of comfort and insurance against one of you losing their jobs. I will be the primary earner and my spouse is going back to school. So as many of you can guess, loss of income is only a part of this transition as is saving money for school.

Budget: I'll admit I've kept a "budget" and tracked spending for years. But it seems like I've only tracked spending. When we go over we just shrug our shoulders and move on. That wasn't going to work. We really needed to get used to getting by on less. So with about six months to prepare I started at a budget that was close to our normal spending and only a little bit more frugal. As we get closer to the end of the six months the budget will get more and more stripped. But we needed to practice. So January was a practice month and I'll report back on that some more in February to see how we did.

College Savings: I've had a 529 for several years now for my spouse but it's not very big. In 2011 I doubled my contributions to it from less than 1% if my income to about 2%. Still, I don't live in a state where there are strong tax benefits for a 529 so it's not my primary college savings vehicle. It now has about 4% of what I expect college will cost (assuming no scholarships or aid). I'm hoping to get that up to 7% by the end of the year, and about 12% by the time it's actually needed. One could argue that's almost nothing. But I think any little bit is better than nothing. And I do have other savings, but this can't be touched until college so it's a nice safe place to keep it in a very conservative 529 portfolio.

Debt: Last year we had to make a tough call on a car. Fix something that cost about what the car was worth, and risk it going out again while my spouse was not working. Or go ahead and buy a newer car while we still had time to pay it off. I started off with about $15,000 in car debt (ugh! I know!) In 4 months I've gotten that down to less than $10,000. I hope to use my tax refund to kick it down a little more. But this is the primary motivator for the budget subject above. I need to save a set amount every month to pay down the car. Technically it's a 3 year car loan at 0.99% interest and if I paid the car payment amount I could pay it off in another two years. But I don't have two years. And I don't want to carry around this debt with me much more.

Mortgage Debt: In 2011 I refinanced from a 6.25% interest rate to 4.5%. Saved myself a lot of money in my monthly bill. This year I plan to switch my home insurance (though I suspect savings will be minimal as both are discount insurers). But counter intuitively, I am putting my home on the back burner. I'll just be paying the minimum every month for the foreseeable future, or at least until my spouse is done with school. Other goals are more important at this time and paying down the home will become an issue again once we have two incomes or as my income continues to grow.

Retirement: This is tricky. I've been contributing to a 401k now for about 6 years with a 403b rollover from a previous employer. My spouse also has about the same. For most of that time we've been paying in 10%, paying way more than the match at either one of our places. In 2010 I started a Roth IRA but put far less than the limit in it each year. My workplace recently added a Roth 401k so I've moved most of my regular 401k contributions to the Roth 401k. It's also hard to see the Roth IRA as a priority with the looming debt and necessary college savings. So I intend to keep contributing to it, but again, probably less than the max. I'll still keep my overall 401k contribution at around 10% because that's an easier amount to deal with when it comes out of my paycheck before I get it. Unfortunately my spouse will no longer be contributing to their retirement in another six months so I'll be unintentionally slowing down my retirement contributions. And I need to think carefully about how this will impact my future, and how I will catch up later.

So there you have it, hope you enjoyed a peak into my very personal, personal finance! I'll keep updating with progress and my goals each month and challenges I'm dealing with as they happen. Would love to hear if you have any feedback on your personal situation or any suggestions for mine.

(Photo from Powi)

Both frugal and cute

In the whole year of 2011 I spent approximately $189 on my cat. That includes food, litter, any special treats that might have been purchased for her. I don't go over the top for the cat. Let's face it, she appreciates an empty cardboard box or a plastic bag more than a fancy cat toy. And most days she's satisfied to eat dried food. Only every now and then does she get wet food as a "treat" and turns out, comparatively, that's not very expensive either.

I think I've spent more in all my other categories: food, housing, insurance, savings, entertainment, utilities, gas and auto repairs. The cat remains, to date, my cheapest yearly expense. Probably get a lot more enjoyable hours spent with her as well than with certain things.

Dieting and Saving Money Are Both Tough

In a lot of ways our finances are mirrored in the way we treat food. Not only do our brains treat money like they treat food (with a resulting dopamine response) but they are both finite resources of which our primary brain and/or rational brain are always trying to get more of.

I think dieting is a lot like trying to save or pay off debt. In both instances, it's probably easier to cut back. Either to consume fewer calories or to cut your spending budget. It's much more difficult to earn extra. It's a lot easier to save 300 calories saying no to that cookie than it is to jog the 3 or more miles it would take to burn off 300 calories.

Similarly, when people are faced with tremendous debt or the need to save for a goal we'd much prefer we could just make the extra money. But earning more income is pretty tough. Sure you can look for a better paying job, ask for a raise, try to start your own business on the side, or maybe even take on a second job. But it's probably a lot easier to save an extra $50 a month by cutting back on certain bills or utilities where you can, or spending less in discretionary areas. It would be a lot more difficult to convince your boss you're worth $50 extra a month. Especially in this economy.

(Photo from Better Than Bacon)