Month: October 2011

Budgeting 101

The basic concept of budgeting is this: Dividing your estimated earnings into assigned categories for spending. If you are on a fixed salary this process is fairly simple. I’ll cover some basics, and then talk about some more difficult cases. I am addressing this primarily to people who are not in dire financial need or poverty. People in those situations need to seek out local resources for help in finding solutions which are tailored to their particular situation. This post focuses on budgeting on particular. I’ve got a more general post about financial management that might be helpful to read first. Onward we go.

The mechanics of budgeting can be as simple or as complex as you wish to make it. If you never overspend and always have money waiting for emergency expenses, then the system you’re using is working for you. Stick with it. If otherwise, here are some places to start in putting together a budget.

Pick some categories and assign dollar amounts to them, making sure that the totals don’t add up to more than your salary income. We have categories for groceries, gas/electric, water/garbage, auto insurance, life insurance, medical, auto repair, auto fuel, clothing, dining, entertainment, savings, and assorted other categories which are more particular to us. What you name your categories is not as important as making sure that you have one to cover every way in which you spend money. I use a lot of categories because my financial program (Quicken) makes them easy to track, and then I can run reports to tell me exactly how much we spent on comics in the last year. If you’re new to budgeting, fewer categories might feel less overwhelming. However it is best to make sure that your fixed expenses, like utility bills, are not in the same category as discretionary expenses like eating out at restaurants. One of the most important things that a budget can do for you is to make sure that you don’t spend your rent money on going out to see a movie, but it can only do so if rent and movies are not in the same category.

A useful way to visualize budgeting: When I’m teaching my kids about budgeting, I use the envelope method to help them visualize. They divide their allowance into several envelopes or jars. This lets them plan ahead for how much they want to spend on the various things in their lives. If the Candy envelope becomes empty, the only way to spend more money on candy is to borrow from another envelope, or wait for a new influx of income. The kids borrow money from envelope to envelope all the time, but the act of pulling it from another envelope helps the kids see that if they spend all their money on candy, then they will not have any left for books or for what ever cool toy they’ve been coveting. In my budget, I loan money across my discretionary categories all the time. I do not pull money from the fixed expense categories like Mortgage Payment.

Pick a tracking method. We keep all our money in one checking account and just track the categories in our financial program. When money is really tight, I keep a little tally in a notepad that I carry with me. Then I can refer to it at a moment’s notice when making buying decisions. If I buy socks I subtract it from the Clothing category on my tally. I know a friend who issues himself a cash allowance for fun spending, essentially applying the envelope method for everything except bills. What ever method you choose for tracking, always refer to your budget tracking method before spending money. If you don’t have money in an appropriate budget category for those lovely new curtains, don’t buy them. Not even if they are on sale.

Knowing how much to put in each budget category can be tricky if you have never done a budget before. Start by looking at bank statements, bills, and receipts from the last few months. This can teach you a lot about where your money is going. Add up the amounts you spent in the various categories. I’m usually shocked by some category of spending that I did not realize was adding up to so much. Use whatever information you have to make some guesses and then get started. It is more important to start training your brain to think about how you spend, and whether you should spend, than it is to get the numbers right. The numbers are your measurement tools, not something which will be graded by others. You will goof up. That’s okay, learn something from it and do things differently next time.

Some good practices for budgeting:

  • Pay your bills first, as soon as you can. That way you’re less likely to use the money for something else.
  • Don’t use your checking account balance or your credit card balance as a measure for whether you can afford something. Use your budget.
  • Build savings into your budget. Keep an “in case of emergencies” fund. But also, pick something you want and save for it. It can be anything: college, retirement, a trip, a car, being debt free. It needs to be something you’re willing to sacrifice for. Put that money aside until you have enough to pay cash for your dream. This fund will probably be raided in times of emergency, but then you’ve made your emergency less financially catastrophic.
  • Pay down your debts as fast as you can. Debts weigh on you and limit your financial possibilities. The interest you pay on debt does not add anything to your life except stress.
    Be extremely cautious about acquiring debt. See above.

Some questions and answers about difficult cases:
What if your income is irregular? Not everyone has a bi-weekly paycheck, which can make budgeting seem difficult. However most bills are on a monthly billing cycle. If you set up your budget on a monthly basis, then having a budget can help even out the bumps. Average out your expected income over the course of four months, then divide that by four. I would recommend low-balling your estimated income per month. Some months you will have more than this, others less. Sticking to your budget in times of financial plenty will help you fill in the times when money is scarce. If your income is irregular, stashing money into savings is crucial.

What if money is always scarce? If the total of your estimated expenses by budget category is greater than your estimate income, you are in financial crisis mode. It is time to sit down and seriously look at all all your financial commitments to see what can be eliminated. Being able to eat is more important than having 300 channels. Find every way you can to reduce expenses: cancel subscriptions, pick less expensive foods, sell a car. There are a lot more than you might think. I recommend reading books like The Complete Tightwad Gazette many of the methods inside won’t apply, but the mindset of “I can do this cheaper” is important when money is tight. If you can’t bring yourself out of financial crisis mode within a couple of months, look up local debt management resources. There are often free resources out there to help people get control of their finances.

What if you get hit by an unexpected expense? This happens all the time. Medical bills and car repairs are the biggest culprits. In a solid budget there is some planning ahead for these things. Create a budget category for “in case of emergency” and stick money into it each month. This is what savings accounts are for. Planning ahead means that the unexpected expense is merely annoying instead of an emergency.

What if you have an expense which is not monthly? My auto insurance comes due twice per year. Property taxes on our house are due once per year. I take the amount I’ll need to spend on these bills and divide it by the number of months between payments. Then I put that amount aside each month. To use some made up numbers: if $100 per month is allotted to Car Insurance, then when the $600 bill comes due I have money waiting. If the $600 insurance bill was an annual bill, I would only need to set aside $50 per month. Put this set aside money where you can not accidentally spend it. I routinely put this into my savings account and then transfer it back out when time comes to pay the bill.

What if I goof up and forget to track my budgeting? I do this all the time. This past year I hardly checked my spending against budget categories at all. I was too busy and distracted. The result is that we over extended a little bit, but not much. The reason we did not over extend is because all the years of practice I’ve had in tracking a budget trained my brain to think about money in ways which kept me in check. The act of tracking your budget is training your brain to be financially responsible. Like any sort of training, it takes practice. Just start up again and keep going if you forget for awhile.

What if it is just too overwhelming and stressful to track all those numbers? Then your budget needs revision. Simplify it. Break down to something that is one step more organized than you were before. Adding little pieces of financial organization to your life can make a huge difference over the years. I revise my budget about once per year to make sure that my categories and tracking methods are still working. Systems fall apart, just use the good pieces from the old system to build a new and better system.

And that is enough for now. There are lots of good books on budgeting and financial management that you can get from your local library for free. Your librarian will be happy to help you find them.

When I get Financial Management for Creative People 102 and 201 written up, I’ll link them here.

Take time to read the comments below. Lots of additional good ideas there.

Gleek Doodles

“I need this mom!” said Gleek intently “It is a Doodle Journal!”
I’d already planned to buy her something from the school book fair, so saying yes would have been simple, except that she had already displayed four other items which she also desperately needed. Patch had a similar stack. I sat down on the floor with them to examine their finds. The winnowing process would have been easier if they had been less selective, but I could see how each item was perfectly suited to the child who selected it. The needs of my budget required me to force them to make hard choices, and we put some of the things back. The Klutz Doodle Journal was one of the things which came home with us. I didn’t think all that much about it. Drawing books are common fare around here.

A week later and Gleek is still carrying the Doodle Journal almost everywhere. At random moments, in the car, at dinner, mid-afternoon, she spouts bits of information about doodling “You just let your mind and your pen wander.” “Pens are great for doodling, cause there’s no erasing in doodling.” “Doodling has no mistakes, you can’t get it wrong.” I watched how Gleek grabbed her doodle book and drew an angry little picture when someone at school made her mad. She doodled during movies, on car rides, and before bed. Once when she was off doing something else, I picked up her doodle book to look at it. She loved showing us her doodles, so I knew she did not consider the book private. I thumbed through and realized that once again the folks at Klutz have demonstrated brilliance. It was full of starter doodles, idea pages, and little messages about having fun without stressing perfection. Gleek found exactly the book she needs right now. I fully intend to support her doodling by supplying a blank paged doodle book when this one runs out of space. I sort my psyche with words, Kiki uses art, Gleek now has doodles. It is good.

A Snippet of Cooking

The cake was Link’s idea, part of his Sunday dinner plan. He’d done most of the ingredient dumping, but felt intimidated by the specificity of the mixing instructions. I creamed the butter and sugar together, watching as these two separate textures blended into smoothness. One egg went in for a minute of mixing and the texture changed. The second egg and second minute changed the swirling mixture again. I watched and pondered the chemical magic which causes molecules to bond when mixed together in the proper order. I was taken with a desire to make more cakes, learning how to side-step those boxed mixes and start from just the separate items on my shelves. We don’t need to be eating the dozens of cakes necessary to perfect a recipe, but I had conceived a desire to master cake in the way that I have chocolate chip cookies. I shall have to try, bit by bit, over many months.

A Greenhouse Realization

Four kids steered through pre-church preparations, two kids helped to weather emotional upsets, dishes, Sunday dinner, and Family Home Evening preparations were all done. I’d earned some quiet space. I thought that the me-of-now should get to do something she wanted. So I gathered my journal and scriptures to retreat to my room. I also carried with me a printed article that I’d read on the internet that morning. I’d skim read it in the last moments before the pre-church rush. Something in it called to me, so I printed it for a more in depth reading. Or perhaps for clipping and taping into my River Journal. The events of the day had left no time for pondering until that moment.

The article told the story of a woman who had an invigorating, well-paying, and rewarding job. Yet one evening she discovered herself crying without knowing why. Something about her job did not fill her soul. She realized her life did not give her chances to nurture. I could see why the story resonated for me. I too have cried and then had to puzzle out why. I began to write a journal entry to puzzle out how her experience was different than mine. I started the sentence “I nurture all the time” but stopped halfway through, suddenly not sure that the sentence was true. I spend all day most days creating a family structure optimized for the growth of everyone inside it. Yet building a greenhouse is not the same as tending and fertilizing the plants within it.

There in my room, away from my family I realized that at any free moment my first thought was to retreat, to spend time alone. All day I maintained the structure of the greenhouse and then fled from it rather than relishing the atmosphere inside. As I scratched away with my pen, my four children were downstairs engaged in reading, drawing, and playing. I put my pen down and grabbed a deck of cards. At least I could sit in the same room with them playing solitaire. I could be part of the quiet togetherness that they were having. Within moments of the first card shuffle, Kiki offered to show me a different game. She and I played several rounds together while the other kids played their own games. We laughed a lot. I once dreamed of the time when I could play cards with my kids without having to adapt for young players. I almost missed out on it.

I need to remember that the point of the green house is the flowers.

Pulling Myself Forward

Sharks must keep moving or they will die. I am not a shark, and yet I hardly ever stop. It used to be that my days filled with things were driven by fear. I kept moving because I was afraid of the consequences if I slowed down. This fall I’ve put a lot of thought into identifying the sources of those fears and attempting to disconnect them. It is working. I am much less afraid. Yet I am just as busy as I was before. Instead of spending my energy fleeing, I spend my energy pulling myself toward things I imagine. My free minutes are spent upon projects which inch me closer to things that I want. I organize the house so that the next-week me will have a nicer place to live. I pick grapes and turn them into jelly so that the winter me will have no guilt about letting them rot and she’ll also have amazing jelly to spread on her toast. I do lots of things for other people as well, but in order to not feel put-upon I have been focusing much upon the benefits I get from the things that I do. I like it when my family is fed, wearing clean clothes, and has their homework done. This being pulled through my days by future desires is much more pleasant than being propelled by fears. However I still need to find ways that the me-of-now gets a turn instead of always being spent doing things for the me-of-the-future. So, further adjustments are necessary, but these are so much smaller. It is nice to be in the tinkering phase of family routine rather than in the midst of major overhaul.

Finding places to query

The process looks something like this:

See a book on my child’s desk at Parent Teacher conferences. Realize that the book cover and title seems very like the type of book I’ve written. Carefully scribble down title and author when teacher thinks I am writing notes about the conference.

When at home, look up the book at Read synopsis. It does seem similar in tone to my book. Write down the name of the publishing company next to the name of the author. Scroll through the “people who bought this book also bought” list. Identify more books which look similar to my book. Write down those authors and publishers.

Take the titles to my local library’s online catalog. They do have the book, so the next day when I’m at the library with the kids, take a detour into the adult non-fiction section. Find the book. Peruse the shelves around the book for other books which look similar in content or tone. Shush kids who are playing with the library’s rolling stools. Grab a stack of books to check out.

When at home, sit down with the books and the list. Flip through the books to see who the publishers are. Look at acknowledgements to see if the author names an agent or an editor who worked on the book. Write those names on the list next to author names. Take the list to my computer. Google to identify more agents and/or editors associated with the book titles.

Open and start filling in agent names. See if the agents are open to unsolicited queries. Peruse the “what I’m looking for” list to see if the agent will be interested. Compare the agent’s name to my submissions document to make sure that I don’t already have a query out at that agency. If all looks good, copy the agent’s name and contact information into my “To Query” file.

Google publisher names and editor names. See if I can find submission information. Add that information to my “To Query” file.

I am now ready to send out queries. Each query takes at least 10 minutes as I try to personalize the opening and closing paragraphs. Sometimes I have to print and mail the query.

By this time I am tired of the whole process, so I sigh in relief that I’ve done my job. Either it will sell, or it won’t. For the moment I can cheerfully ignore it… until I happen across another book which looks like it might cater to the same audience. Then I have a job to do again.

Fall Parent Teacher Conferences

Parent teacher conferences are always fraught, not with peril, but with the potential for high emotion. Sometimes I enter with worries and exit with new reassurance and confidence. Other times I have no particular concerns going in, but leave reeling from how much more that child needs than they have been getting. It is my chance to speak with teachers who have alternate viewpoints upon my child’s development. They see things that I don’t, not because I’m unobservant, but because school is different than home and different aspects of my children rise to the surface.

Last week I had conferences for my older two kids. Today I had conferences for the younger two. I now have a laundry list of needs which require me to adjust the family schedule (yet again) so that they fit. The adjustments are minor, but time and energy must be spent on them. Mostly the things which turned up in the conferences are not surprising. We’re having new iterations of familiar problems, nothing new or baffling. This means that the solutions are new iterations of old solutions. In a way the familiarity of it all is reassuring. The kids are all exactly where they need to be for steady growth.

I’ve never seen parent teacher conferences from the teacher side of the desk. I know how tired it makes me, even when there’s no major issue to address. I marvel at the stamina of those teachers, who have 25-30 conferences in two days and a laundry list of issues they hope to address. They must face varying levels of indifference, anxiousness, over-protectiveness, and outright bewilderment from the parents who show up. Teachers are expected to find all the trouble spots and provide solutions, often when no easy solutions are to be had. I am constantly impressed by the efforts of the dedicated teachers who work with me for the benefit of my children.

Financial Management for Creative People 101

The first thing any creative person needs to know about managing finances, whether you’re an artist, a writer, a musician, a film maker, or anything else: Good financial management is a skill. It can be learned by anyone no matter how good or bad they are with numbers. Granted, if numbers are not your friends, there may be struggling and swearing involved, but learning and practice will gain you the skills you need. You will get things wrong, sort them out, and then get them right. More than once. The key is to not give up, because if you are a creative person who wants to make a living doing creative things, you’re going to need to manage your finances effectively. Even if you don’t want to make a creative living, you can still make your finances more organized and less stressful. I graduated with a major in Humanities. I picked that major in part because it did not require me to do any math. Numbers were not my friends, and yet I learned this. You can too. Here are some places to start:

1. Create physical space for financial things. This can be anything from a basket to an uber-organized filing cabinet. The key is to have a place to drop all those bills and receipts before they have a chance to get lost. I have a file basket on the end of my kitchen counter. It contains file for the school papers of each kid, and a file for bills and other To Do papers. When mail arrives, I throw away the junk and drop the bills, checks, and other business papers into my accounting folder. Howard empties his wallet and dumps receipts into the folder as well. Then I ignore them until it is time to go through the folder.

2. Pick a method for tracking your money. I use Quicken for family finances and Quickbooks for the business accounting. Both of these are solid programs which will require a learning curve, but I’ve found them invaluable. I know people who use spread sheets or even hand-written ledgers. Pick something that feels most comfortable for you. The key is to start keeping track of where your money comes from and where it goes. If you’ve never done it before, this process can be very instructive about your spending habits. It is vital information which you can use to make your life better.

3. Make an appointment to do your accounting. Put that appointment on your calendar and keep it. I do this weekly. Every Monday I grab that accounting folder and go through everything in it. I pay the bills, enter the receipts, cash the checks, and file important papers. Once per week gets me the good news quickly and prevents the bad news from getting out of control before I handle it. When I’m pretty sure the accounting holds bad news, I do it anyway. The bad news I imagine is always worse than the bad news in the papers. I know people who do their accounting every other week or once per month. I found that it was easier to procrastinate on the longer schedule, so now I account every Monday morning.

4. Outline clear responsibilities for all people associated with the accounts/bills. If you’re a single person who manages your own money, this is not yet relevant to you. If you share your bills or finances with any other person, it is important to know who is responsible for the accounting and bill paying. Early in our marriage, Howard and I split the accounting. These days I do it all and just give him financial reports. How exactly you do it doesn’t matter as much as the fact that everyone involved knows their responsibilities.

5. Create a budget. A budget is a plan for how much money you will spend on the various expenses in your life. This topic is big enough for it’s own blog. I wrote up some basic budgeting in my post budgeting 101. For now, let this suffice. If you have never budgeted or planned your spending, start by keeping track of what you earn and what you spend. When you have several months of information you are ready to make a budget. The power of a budget is that it lets you see when you should not buy that shiny toy even if you still have money in your checking account because that money will be needed next month for car insurance. A budget helps remove the surprise from your bills and can lower your levels of stress.

6. Save save save. If you get extra money, squirrel it away into a savings account. This money is what helps you reach your dreams. The only reason Howard was able to become a full time cartoonist was because we spent the prior decade of salaried employment saving up money and paying down bills. A solid savings account is also your shield against disaster. Everyone ends up with unexpected bills. These are easier to handle if you have money in your hands instead of lots of take out pizza. It is easier to save money if you know what you are saving it for, so keep your dream in view and save for that. This year I’m saving money because there is a trip I want to take next summer.

That’s enough to get started. Changes and learning are easier to incorporate in your life if you don’t try to change too much at once. Other financial posts which may interest you:
Budgeting 101
Financial Management for Creative People 102: Structuring your finances to support a creative business. (Forthcoming)
Financial Management for Creative people 201: Taxes, incorporation, and business plans, Oh My! (Forthcoming)

You can learn this. Good luck!

Small Beautiful Things

It was my intention to make at least one small thing beautiful today, but I discovered that once I began it was hard to stop at only one. So here is a short list of the small, intentionally beautiful things I did today.

I cut off six inches of my hair. At the length my hair was this means it feels worlds different to me and no one else notices much. Then I broke out the curling iron and fixed it nice instead of leaving it in a braid. I even put in earrings.

I folded laundry, making each fold precise and neat. I admired the stacks for a moment before putting them away.

Unable to find stationery at a store, I used my design tools to create some. My printer is only black and white, so I took colored pencil to the flowers. Then I wrote my Grandma a letter.

I made cookies, not just throw-the-batch-together cookies, but carefully-cream-the-butter-and-use-the-baking-stone cookies. When they came out of the oven I topped my hot cookies with vanilla ice cream and ate them.

Looked at my children and really saw them while listening to them.

Tomorrow I will find more small beautiful things.

Making Things Beautiful

I’ve had the stationery box since I was a teenager. My grandmother often gave gifts of stationery for holidays. Mostly the boxes came and went from my life without notice as I used up the contents. This particular box was large enough that got pressed into service for storage. I collected my various papers and envelopes all into this single box so that I could access them easily. I was a diligent correspondent in those days. I wrote letters to people from other states that I’d met at youth conferences, to friends had gone on trips or moved, and to distant relatives. I got a lot of satisfaction out of putting words to paper and then putting the paper into envelopes. People did not write back so often as I wrote to them, but I figured that letters were gifts that I was giving without expectation of return. That way any letter I did happen to receive was also a gift.

Like most people, I shifted from paper letters to email. The stationery box was shoved into various corners and cupboards, used to store stickers, and used to store the few letters that did trickle to me over the years. Then in the past month I happened to receive a pair of letters. One from a friend and one from a person who sent me a thank you note. These things combined with the blog entry of another friend who is actively encouraging people to send her letters, spurred me to go find my old stationery box. It was a fairly ugly box by this stage of its life. The walls were structurally sound, but the lid a little caved in and stained. I decided to make it pretty again by re-covering it. So that was my small beautification project of the day. The box is made new and ready to collect more letters. Finding stationery to supply it will be a slower process. Stationery sets are not so commonly available as they once were. Also I’m afraid I’ve gotten picky about design.

Fixing up a stationery box was not a particularly productive activity. It did not forward any of my goals for the day. It did not accomplish any of my To Do items. Yet the decoration made me happy. More importantly, it will continue to make me happy for years to come. I made a whimsical post on Facebook and Twitter about how I had made something needlessly beautiful. Several friends wisely answered me that beauty is never needless, it always has value in and of itself. So I am issuing myself a challenge for this week. Each day I will make something beautiful. These will be small projects. Things I can accomplish in 30 minutes or less. Conscious focus on the beauties of my life will be a good thing I think.

My stationery box: re-covered with fresh paper and decorated with pressed wisteria leaves.