Saturday, January 02, 2010

Budget Tips for Newlyweds

I was pondering recently about the novelty of setting up a budget when we first got married (It's been over 2 years - hard to believe!), as I was talking with my sister, who has 2 close friends marrying soon. I remember not having a clue what to budget for each category, totally forgetting major regular purchases (like clothes!), and feeling like our small salary would never stretch far enough. Budgeting can be a lot to think about, when added to all the other newlywed things like. . . getting used to living with each other, working out schedules, meals, chores, etc.

I thought I would jot down some of the things I found along the way, that helped us with our budget. I can't promise anything amazingly innovative; these are just things that worked for me.

Important: I'm not saying that everyone has to follow all the things I suggest, or that you're somehow a wiser financial steward if you do them. These are suggestions, not ultimatums. You are responsible for your budget and I am not. I make purchases that some would consider frivolous, and I scrimp in areas where others would think I am crazy. That's okay.

Some background. When we first got married, I was staying at home throwing up all day and trying to stand for more than 3 minutes at a time (aka happily pregnant) and Adrian was working a low wage job. We were scraping to make ends meet. We had a student loan to pay off, a birth to save up for, an impending move, a job search, and a partridge in a pear tree. Oh yeah, and after we moved, we still had to pay rent for our previous apartment for a few months. Can you say tight? But God provided for every expense, and then some. Sometimes I didn't know how.

Adrian has a salaried job now, that uses his educational training more thoroughly. Now we're just tight because we can be, and because we realize that our financial goals will never be met unless we budget and cut expenses. Our initial major financial goal was to become debt free. By God's grace, we met that goal last fall. Our major financial goal while we are still living in Connecticut on an engineer salary (hopefully for 6-7 more years, but we'll see what God has in store for us) is to have 3-6 months living expenses in savings and save up at least 20% down for a future house purchase.

Our long-term goal is to be dirt poor while raising a zillion kids on a private schoolteacher's salary.
Everyone laugh now ;-). No, but seriously, that's our goal. And that goal is impossible from a realistic standpoint. But we see the vision we believe God has placed in our hearts (realizing that He may alter the plans we have) and we see how He provided for us when we were on a small wage salary. But we also know that such a crazy financial goal cannot be met unless we buckle down and get serious. We only have one kid now and Adrian makes a decent salary. So we pinch and save. We save for the day when we may have many more kids, private school tuition to think about, and very little salary to go around. So yep, we're weird :-).

Starting off with grocery budget suggestions, since that's what everyone seems to like:

See if you have a discount grocery store near you. I have a Price Rite next door to our apartment complex. I get 99% of our groceries there. For those in the South, a Price Rite is like an Aldi's, only with a much better selection. They are both discount, no-frills grocery stores, where you can get a lot of food for your money, if you don't mind things like bringing your own grocery bags and depositing a quarter for using their carts (given back on return of cart). When we moved from Virginia to Connecticut, our grocery bill actually *lowered* because of Price Rite. The cost of groceries in CT on average is much more expensive than VA, but shopping at a discount store offset this. Another discount store along the same vein is Dollar General Market. Not a really large selection, but they have really good prices, and I enjoyed shopping there in VA. If you can buy most of your staples at a discount store like this, the savings will really add up!

I don't like grocery shopping. I love saving money, but I'm not partial to store-hopping 5 different stores a week to save money. Especially now that I have to buckle and unbuckle a little guy from a carseat for each store I visit :-). One thing I started doing right away when we got married was to read grocery store ads (they come in our Thursday or Friday mail) and pinpoint good sales. Because I have a Price Rite near me, I already get pretty good prices for most items, so I almost exclusively read the ads to look at really good meat deals. The best grocery store sales usually beat Price Rite, plus they have more cuts of meat. I will make a separate grocery store trip maybe twice a month (usually not that often), and only if I can save a decent amount of money by doing it.

I have approximate target prices for meat. I look for ground beef under $2/pound, whole chickens under $1/pound, and chicken breasts under $2/pound as target sale prices. This would obviously vary some per area, but I found this to be a good target in GA and VA as well. I also look for pork picnics and ham (butt portions - shank is not enough meat for your money) for under $1/pound - usually around 80 cents/pound. My target price for boneless pork is under $2/pound.

If I find a good deal, I stock up! I don't go and buy just one pound of meat on sale (the good prices are for the larger packages anyway). What a waste of time, energy, and a good sale. I buy 2 5# packages of ground beef at once, divide the meat into 1# portions, and freeze. If you freeze a whole large package, it will probably sit in your freezer forever. Freeze it in meal size portions, and it will be easy to thaw and use. And it takes about 5 minutes of your time! Same with chicken. Freeze 2-4 chicken breasts together, splitting a larger package. This way you get the better deal of the larger meat packages, while still only cooking for 2 people. If I have the time and the inclination (I usually do), I also cook up some of the meat before freezing. So I might cook 5 of the 10 pounds of ground beef, so I would have 5 individual frozen pounds of cooked ground beef and 5 individual frozen pounds of uncooked ground beef.

I found very quickly after we got married that a whole lot of our grocery budget was eaten up by meat! I had no idea how that was happening until I started looking at the meals I was making. Most of them were meals that I now call "hunk 'o meat" meals. I love meat, and I think meat is very good for you (contrary to popular opinion). Animal protein = good and animal fat = really good. But it's expensive! And most of the meals I was cooking had large portions of meat off to the side. I'd make mashed potatoes and green beans with breaded chicken fingers, and watch piles of chicken fingers disappear before my very eyes. We would sometimes average over a pound of meat per person per meal that way! That's really expensive.

So I started saving "hunk 'o meat meals" (chicken breasts off to the side, roast, hamburgers, etc.) for once or twice a week or so, and focused on a lot of creative ways to stretch meat. This only works if your husband is not a must-have-large-quantities-of-meat-at-every-meal guy. My husband requested meat at every meal when we first married (he's now fine with an occasional complete protein, beans-and-rice type of dish), so I didn't argue the point. Submission, et al ;-). But he was just fine if his meat appeared in casseroles. I'd make sure we had enough protein in the meal, but without consuming large quantities of meat. Two cups of chopped up, cooked chicken is plenty for a good chicken and rice casserole that will yield 4-6 servings. A beef or chicken stir fry with lots of vegetables and good seasonings can make a tasty supper, while not requiring more than a pound or two of meat for 4-6 servings. This tip single-handedly lowered our grocery budget dramatically. I didn't announce "Honey, we're eating less meat." I just did it gradually, and Adrian didn't complain. I later pointed out the change to him, and he was fine with that. While pregnant, I still was able to average 75-100 grams of protein per day.

Don't buy lunches at work. Pack a lunch! If you are making food for 2 people (yourself and your husband, for example), make 4 servings for each dinner. Before you put your supper away in the fridge, portion the remaining two servings into single-size containers to quickly grab as you head out the door the next day for work or school. Plan ahead and you're not caught in the last-minute rush in the morning. They're ready to go. I found that not planning ahead is almost always what introduced unexpected items (like lunches at a fast food place) into our budget.

Don't be afraid to say "no" to meals out with friends. Be real and up-front about your budget limitations. Chances are, one of them will appreciate someone else taking the lead in encouraging fun-but-not-pricey get-togethers. Or save those meals out for very special occasions. It's okay to treat yourself, just budget it, and make it a rarity, not a regular occurrence. Invite your friends over to your house for a meal instead of going out!

Don't sacrifice health to save money. Ramen noodles is a very short-term savings plan - NOT WORTH IT. What you eat has direct consequences for your health, sometimes short term, sometimes long term. Make sure the food you eat provides nutrition, not just filling calories to pad your wallet. I keep a relatively strict grocery budget, but I have my no-compromise areas. We eat almost exclusively real food, not the fake yuck like margarine, fake cheese, spam, etc. Our health is worth it, and our medical budget thanks us.

Substitute more economical ingredients. You don't have to follow a recipe to a "T." If a recipe calls for a particular brand or flavor of a tomato sauce, and you have a cheap off-brand, put that in instead! See if you can approximate the flavorings from the original sauce with some of the spices you have on hand. If a cookie recipe calls for nuts, consider omitting them, if they aren't a vital part of the recipe.

Speaking of nuts, ingredients like nuts tend to go on sale at Christmas time. Consider setting aside a little extra grocery money to buy a pound or two of nuts, real vanilla extract, sugar and flour, and other things that are really cheap before Christmas, to last you through the rest of the year.

Anticipate large purchases. On weeks when you don't purchase meat (because you have enough saved up from a large purchase), make sure you save some of that week's grocery money in case meat is really cheap the following week, and you can then purchase a few week's worth at once.

Ditch or reduce the disposables. I was shocked at how many paper napkins I went through when we were first married. Sure, they're really cheap, but a few packages a month can really add up long-term. I would grab napkins or paper towels for just about any little chore. I finally stopped buying paper towels (they were so expensive!) and limited my paper napkin use by keeping the napkins in a not-so-immediately-convenient location. If you want to go hard-core, use cloth napkins ;-). They work way better, are no trouble to clean (I do not iron mine!), and save lots of money in the long run. And those old-fashioned rags work great in place of paper towels ;-). Just ask your grandmother if that was considered “hard-core” when she was growing up ;-).

Use Tupperware instead of Ziploc. Or reuse your Ziplocs. I freeze a lot of meat, and I can go through Ziplocs like nobody's business, so it's not economical for me to treat Ziplocs as one-use items. I either wash and reuse Ziplocs, or I try to use Tupperware-type plastic containers instead. I purchased several economical plastic containers from Wal-mart that I use to freeze meat in, and I can reuse these over and over again.

You don't need lots of specialized kitchen appliances, matching furniture, and lots of matching dishes. Seriously, start basic. You can build things up. Save up for that Kitchen Aid mixer or that nicer set of pots and pans, or buy some now and some when you can afford it. I remember having dinner with some newlyweds some years ago. They had a nice house and some nice things, but they knew where to set limits. Their dining room was empty. They simply couldn't afford to buy a nice dining room set at the time, so they waited. We had a total of 7 people at dinner that night in their kitchen, but their nicer dish set only accommodated 6 people, so one of us ate off another type of plate. That was okay. They've been married for a while now, and I bet they have a dining room set and more than 6 matching plates, with no permanent psychological damage from all that deprivation ;-).

Don't expect to have the same standard of living that you grew up with. Your parents spent years working to get where they are. They probably started with very little too. Ask them. They probably had less furniture and a lower paying job than you have as newlyweds. Ask them what they had to go without. You may be surprised. Our parents' generation thought budget sacrifices meant not owning a car; our generation thinks budget sacrifices mean not owning two cars or having to share a cell phone.

You don't need a large place to live for starters. Consider renting for a few years until you can afford to buy. Remember, you don't have the same standard of living as your parents. They probably started cramped, and they probably spent a while saving for a downpayment on a house. You know, back before banks handed out mortgages and caused major bank crises as a result (but I digress). Even if you "qualify" for a mortgage, it doesn't mean it's necessarily a wise option at the time. Building equity is not worth putting yourself in a house larger than you can afford or locking yourself into a really high interest rate because you have little-or-no down payment. We are currently living in a 2-bedroom townhouse with 3 people (me, hubby, and 18-month old son), and we do not regret this choice. We think it's well worth it to save up at least 20% down towards a house before buying. The interest rates drop dramatically at that point. Yes, it's cramped, but that's more because we have addictions to book buying and fabric buying :-). We figure we'll only end up with more stuff and more kids (we hope!) over the years, and now is the best time to live small and save big.

Along those lines. . . use the "Was this necessary 50 years ago?" rule. This helps me consider whether a budget item is necessary or a luxury. It's okay to have luxuries, if you can afford them. Most budgets, even tight ones, can squeeze in a few luxuries. You just have to decide which ones will go and which will stay. To do this you have to first decide which ones can go. Consider the possibility of eliminating: a second car (public transit an option?), a cell phone (or at least a second cell phone!), cable TV, magazine/newspaper subscriptions, eating out regularly, etc. These are luxuries! They were not considered necessities 50 years ago, but luxuries. Choose your luxuries wisely and savor them :-).

Piggybacking off the previous tip, enjoy your luxuries. That's right, pick a few luxuries and enjoy them. It's okay to enjoy that carefully-chosen magazine subscription, or that occasional night at a nice restaurant. Decide what you can afford, and then enjoy with abandon. This motivates you to stay on track with the rest of your budget.

Use the "How much will this cost me per year?" rule. A $4 cup of Starbuck's coffee isn't that expensive on occasion. But if you imbibe frequently, consider the long term costs. Twice a week works out to be $416/year. Once a day works out to be $1460/year. Ouch! That could make or break your budget. If you can't kick the habit, consider cutting back. We also work this for monthly expenses. $45/month for a cell phone isn't too bad (though my frugal heart still beats rapidly at the thought), but that works out to over $500/year! We downgraded to a basic, $25/month plan on cell phone, and that saves us $240/year!

Look into downgrading plans. We thought we were pretty serious budgeters and had squeezed unneeded services out of our budget (except “splurge” money), but then we started looking seriously at some of our monthly expenses. We were paying $100/month for combination internet and home phone service ($50 for each service). I called our service provider to see if they had any downgrade options (they often don't advertise them, but will tell you if you ask). It turns out that for half the price of the phone service, the only “damage” we incurred was no unlimited long distance calling and no voicemail (we added back in voicemail for $5/month). With a bit of long distance on our cell plan, this wasn't a problem. That was an easy $25/month less for phone service, working out to be $300/year at very little inconvenience. And for half the price of the internet, our upload speed could be lowered (our download speed remained the same). We haven't noticed a difference at all. Another $300/year at no pain, just because we thought to ask. That's $600 less we have to pay our phone provider per year!

Dave Ramsey (my favorite financial advisor) likes to say Act your wage. If you don't have the money, don't buy it. If you make $30,000 per year, don't act like you make $70,000. Realize that maybe that European vacation will have to wait several years, and your dream home, too. Gourmet food items or designer drapes may be beyond your standard of living (at least as a regular budget item). Work with what you've got, and don't be ashamed.

Dave Ramsey also says to spend every dollar. Nope, that doesn't mean to empty your bank account every pay cycle (stop getting excited!). It means to plan where each dollar will go. If you don't have a plan for each dollar, those extra dollars from each paycheck will get magically frittered away. Trust me! Budget, budget, budget! Create a budget and stick to it. Determine where any extra money for a paycheck will go. For us, we started right away to use any extra money (even if it's just $20) to put in savings. It starts building really fast!

And continuing with that train of thought. . . Save! Money problems usually happen because of either over-spending or because of poor planning, or both. Unexpected large expenses will come up. Your car will break down, you will break your arm, or your kitchen table will break on you. You need an action plan to deal with this. Have an emergency fund. $1000 will cover most unexpected expenses that aren't catastrophic. Build this up as soon as possible and work to keep it there.

Read Dave Ramsey's Baby Steps. Seriously. Having an emergency fund is step #1. But you need to read them all. They have been very useful in keeping us on track with our financial goals. We know we aren't just socking away money for no reason. We have outlined a list of our incremental financial goals, and we can work towards them systematically. Better yet, read some of Dave Ramsey's books, like Total Money Makeover (I've followed him casually online, but I hear his books are fabulous).

Don't forget major budget items! I was a bit naive in the budget department when we got married. I'd never been required to regularly pay a whole household of bills, or keeping track of major budget items. When we set out to create our first budget, we forgot some major columns. Like clothes. And gifts. You know, minor things ;-). Just as a general idea of the types of columns that are helpful, our main budget columns are rent, phone/internet, cell phone, gasoline, grocery, tithe, natural gas heating, electricity, AAA (a real money-saver with two used cars!), car insurance, life insurance, renter's insurance, World magazine, "splurge" money (for things like buying books or eating out or buying books or buying books), travel, household needs, car (repairs, maintenance, etc.), clothing, gifts, and ROTH account. After we set aside money for each of these, all other money gets put right into savings, so as not to tempt us.

Budget for yearly expenses by saving a little from each paycheck. Notice for our budget columns, I list several items that do not come due every month. AAA is a yearly expense and car insurance is twice-a-year. But we set aside money from each paycheck so it doesn't come as a surprise each time. So for AAA, we take the yearly fee and divide it by 26, since we get paid every two weeks (26x/year), and that's how much we set aside from each paycheck. It works beautifully, trust me. Then you don't have a last minute panic attack when you realize oh-my-goodness-the-several-hundred-dollar-car-insurance-is-due-in-two-weeks.

Budget for one-time purchases. It's okay to deviate from the standard budget on occasion for special, one-time purchases. After we paid off our student loan, we knew we really wanted to get a piano. After all, Adrian is a fabulous piano player and he'd been content to live without a piano for over 2 years! We want Hans to grow up with a piano available for listening and playing. A nice digital costs $1000 or a little more. We have that money in our savings, but we wanted to save up slowly, as we built up our 6 months expenses (once again, refer to Dave Ramsey's Baby Steps), so we've been setting aside a little from each paycheck. Delayed gratification is not a bad thing, and it makes the reward all the sweeter. After several months, we hope to finally purchase a piano in the next few months, and it has been worth the wait! We can make this purchase without jeopardizing our emergency savings or going into debt and while staying on a budget.

Oh, and another thing about budgeting. Remember how I said to save some? That means you don't create a budget that uses every last penny on anticipated expenses :-). Assume you will have unexpected needs like the hot water heater breaking (which would hopefully come out of your emergency fund, but expect the unexpected). And also remember, your gross income is not the amount you will receive. If your income is $40,000/year, do not expect to be able to actually spend all of that ;-). You will probably never see 10-20% of that. Pesky things like worker's compensation, unemployment, social security, health premiums, etc. will insure that your salary is shared with others ;-). Account for this when you budget. If you don't know what your take-home paycheck will be, assume 80% of your quoted salary, and you can always be happy if it's more than that :-).

Don't be ashamed of hand-outs. Don't go begging for them and mooching off other people, but if a kind couple approaches you because they remember how hard it was for them when they started out, gratefully except their old washer and dryer or that faded-but-still-usable coffee table or loveseat.

Oh, and speaking of hand-outs, sign up for Freecycle and haunt Craig's List. Seriously, you can get a lot of great stuff for free on Freecycle, if you're willing to sort through all the e-mails. And Craig's List can have some great bargains and a free section. Thrift stores can have some great tide-us-over-until-we-can-afford-nicer-stuff furniture.

Most importantly when you're creating that budget, remember that the money isn't yours in the first place. Thank God for giving you use of it, and remember to tithe off your gross salary (tithe is by definition 10% of your firstfruits) as an act of gratefulness, obedience, and trust. God does provide, and He can most definitely provide for you on 90% of your salary if you trust Him at His Word. Test Him and see if He does not open up the floodgates of heaven with blessings.

And remember, God blesses you that you might bless others. Don't be afraid to give. If you see someone in need, and you have the money, be willing to “splurge” a little for the sake of showing Christ's love to someone else. Perhaps that means helping out a friend who is unemployed, or an extra offering (above your regular tithe) to support a mission trip or a food pantry. Give with abandon because Christ gave with abandon.