Financial Fridays: Some Organizing Tips

Today I wanted to go over a few simple organization tips to help with keeping track of bills/debts/and other obligations.

The first step is choosing what format you want to use to keep these records. I recommend using Excel or something similar. Some of you may prefer to use plain old paper and pencil. Still others might like to use wall and crayon--whatever works for you.

If you are unfamiliar with Excel, check out these simple tutorials. (Thanks John)

Make a list of all of your monthly bill and debt obligations and put them in the order in which they are due. If there is something that you want to put money towards on a weekly basis, I suggest putting this at the top of the list. For example, those of you making regular charitable contributions, put that at the top. Don't forget to include your house savings amount here at the top! I also include a weekly grocery amount here.

Now that you've got a nice list going (or maybe it's more of a daunting list than a nice one), make a column where you can put the full balance of all your debts. For regular bills that don't carry a balance, such as rent or other utilities, you can just put $0.

Next to that column, make another column where you can list the payments that you plan to make towards each of these. For most utility-type payments this will just be the full amount due. On larger debts you can choose an amount to pay, anywhere between the minimum payment and the full balance. (Make sure to add a row at the end for the totals. It's important to know your expected monthly obligations).

Two more important columns to add are the "minimum payment" and "annual percentage rate" columns. These apply to any debts you may have. Keeping track of these things will be an important debt reduction technique which we will discuss another time.

Of course, make a column for the due dates.

The most important column on this page is the one that shows how much money you have put toward the bills. I call this the "Current Funds" column. In this column you will divide up the money you earn as it comes in. For example, if today is the 31st of the month, and you are getting paid today, here is what you would do: First subtract out of your paycheck any "per paycheck" deductions that you may have (hopefully your house savings is among these). Then simply start with the bills due on the 1st and apply your paycheck to each one until the paycheck is exhausted (make sure that YOU don't get exhausted before your PAYCHECK does!). You'll do the same with the next paycheck, and so on.

I also have a column for check marks. I check off when the payment amount is acquired and when the payment has been completed.

This system may not be for you, but it has worked wonderfully for me. If it is confusing at first, just tweak it around until it makes sense to you. Please direct any questions to me personally or in the comments. Good luck!

Wall Street Wednesday?

I like Wall Street Wednesday just fine. But I'm starting to wonder if I have the time to really research company after company enough to give a decent recommendation. So, I am putting the idea on hold until further notice. But I would really like some suggestions as to what else to add to the blog. Especially for Wednesdays. Any ideas? I like alliteration...Wikipedia Wednesday? Whiplash Wednesday? Let's put our heads together on this one...

Quotation of the Week 01/06/09: Rodman Philbrick

"Pain is just a state of mind. You can think your way out of anything, even pain."
--Kevin Dylan (Freak) from Freak the Mighty by Rodman Philbrick

C'mon Jenna! Get with the program!

Seriously though, when I was a piano major at BYU-Idaho, we had a workshop on controlling our body temperature. (We had this because many performers get cold hands before a performance). In this workshop we learned that the mind can literally control not only the temperature of your body, but also the responses that our body has to pain and stress and stuff. We watched a video that showed some guy shoving a huge metal spike through his bicep. Not only did he feel no pain, but there wasn't even any blood!

Financial Fridays: Stefu Suggests Savings Technique.

Last time I talked a little about ideas for saving for a future house down payment or home improvement. Today I want to address an issue that you may find while trying to implement that system.

The idea behind the system I encouraged is that you should be able to afford to put that extra money to the side, assuming you are paying less in rent than your income allows. However, many of us may find that we don’t have that much left over at the end of the month. There are a number of reasons this could be. I’ll address one likely reason today.

The biggest reason we can’t find extra money in the budget (even when it should be there) is because we have already established a certain spending pattern that only allows enough money to cover the bills. I suggest that you pretend like you MUST pay 28% of your income for your rent or mortgage. I know a lot of you haven’t pretended since you played house with your My Buddy doll. But by doing this, you force yourself to save money that would otherwise be used for something less important to you.

Now, how do you put this money to the side without noticing it? The easiest way I find is this:

First calculate the amount that you should be able to afford in rent (28% of your income). In our last example we assumed this amount to be $1,400. Next, subtract the actual amount of rent you are paying from this amount. In our example it would be: $1,400 - $900 = $500. This is the amount you should be able to put to the side every month. Next, take your savings amount and divide it by the number of paychecks or pay periods you expect during the month. For many people this would be 2. Some people only get paid once a month, and others weekly. If you are married and both working you may get anywhere from 4 – 8 paychecks in one month. For our purposes we will assume 4 paychecks coming in. So, take $500 divided by 4 paychecks = $125. If you take out $125 out of each paycheck, you can save up that $500 without noticing as much of a ding.

It is vitally important that you PAY YOURSELF before you pay your bills. If you don’t do this, you may have a hard time saving anything. In the event you pay yourself first and then don’t have enough for one of your upcoming bills, you can simply take out what you need from your savings. I don’t recommend doing this very often as it will defeat the purpose. We’ll talk more about this later.

I hope you are all on your way to your savings goals!

Quotation of the Week 12/30/08: Dale Carnegie

"Leadership usually gravitates to the man who can get up and say what he thinks."
--Dale Carnegie from How to Stop Worrying and Start Living

Don't be afraid to share what you think with people (while standing if necessary). This is what sets leaders apart.

Quotation of the Week 12/23/08: Rodman Philbrick

"If you try hard enough you can remember anything, whether it really happened or not."
-Maxwell Kane from Freak the Mighty by Rodman Philbrick

Remember that time we were out shopping for Christmas presents and you accidentally tripped over that little booth in the mall? Sure you do! It was a booth selling mirrors. You and I were talking and I pointed out that new movie poster display--you know the movie you liked so much...what was it called again? Oh yeah! Wall E. Anyway, I pointed out this poster and you got distracted and tripped over this booth in the middle of the mall (you know how those are always out during the holiday season especially). They had all these mirrors shaped like famous people's faces and outlines and stuff. I actually thought the Elvis one was pretty cool--I think I even mentioned it to you. You remember! Right? Anyway, so you trip and break one of the Beatles mirrors (there were lots of those). This big dude selling the mirrors gets all upset and tried to make you pay for it! (They were grossly overpriced--something like $150 for a mirror the size of your palm). You wouldn't pay and he got real mad. I forked out the $150 plus an extra $10 for his troubles. Sure you remember, right!? I bet if you looked hard enough, you'd find those shards of glass in your closet somewhere...

Introducing Financial Fridays: Homeward Bound!

I know it's not Friday, but I didn't get a chance to write this out and post it on Friday, so I am doing it today. As some of you may know, I'm studying up to be a Financial Planner. I thought it would be good practice for me (and hopefully helpful to you) if I came up with some useful financial thoughts once a week. These articles will be coming to you by Stefu (Smart and Trustworthy Everyday Financial Understanding). Please leave your feedback so I can improve the content of future posts).

The largest investment that most of you will make in your lifetime is the investment to buy your own home. I wanted to share some ideas that should help you get into your first home, or renovate the one you already bought.

Those of you who are not yet homeowners are probably renting (or camping out in an abandoned part of town like I keep trying to convince my wife to try). If you are renting and want to save up some money for a down payment on a house, here is a useful tip that I have been trying. The first thing you need to know is what percentage of your income should be going toward your rent. Most experts will tell you that you shouldn't spend more than 28% of your monthly income on your rent. So if you are making $5,000 a month, then you shouldn't be paying more than $1,400/month for your rent (or mortgage payment).

This brings us to my suggestion: if you should be able to afford $1,400/month and you are only paying $900 then it makes sense to put the extra $500 under your mattress to help save for that happy home you hope to have. Now, if you are in a 12 month lease, and you tuck your money under the mattress, you will come up with an extra $6,000 to help with that house down payment (or closing costs, or finders fees, or whatever you anticipate paying for in connection with that perfect white picket fence).

Assuming you want to get a better return than your mattress can offer (and a cheaper chiropractor bill), here is what you can do: save the first 6 months for a total of $3,000. Put this amount into a six month Certificate of Deposit and continue saving during this last six month period. This will give you a small boost in your savings while keeping it nice and safe.

If you already own a house, use this money to make those much-needed renovations you've been thinking about. Go ahead, get the wallpaper.