Accountability

I am finally over my illness enough to be a fully-functioning human being–woo hoo! I made my way to the gym this morning for my first visit since the New Year and started strength training, but more on that another day.

Today I want to talk about money.

image via Andres Rueda on Flicrk

As a carefree, fly-by-the-seat-of-my-pants sort of gal, fiscal discipline is not my strong suit.  The lack of monetary restraint mostly is my doing in our househould, so I’ve set out to work on myself in Financial Principles 101.   Over the past few weeks, this I’ve been working through some assignments for this course.

The first assignment I gave myself was to go through three months of bank statements and assign every cent we’ve spent each month into different categories (grocery, bills, rent, entertainment, unexpected maintenance/health expenses, pharmacy, and restaurants).  I made a handy-dandy excel spreadsheet, and put expenses into columns so I could find out how much we’re spending in each domain.  I averaged each column so I could get a ballpark figure of monthly expenses in those categories.  Then I ran a series of statistical regressions using SPSS software… (just kidding.  I wanted to see if you were all still awake, and to give a shout-out to Michele, my fellow stats geek).

My monthly spending has been downright spooky.

What I found was shocking. Although I don’t plan on discussing all our financial particulars, there is one figure I feel I must share because it blew my mind.  Namely: we (mostly I) spent over $600 each month in eating out at restaurants.  Six. Hundred. Dollars.  It made me a little queasy to think of our existing credit card debt we could have paid instead, or the fun trips we could have taken.

The scary thing is that I know we have actually spent less money than we used to on eating out lately because of all the cooking I have been doing.  I shudder to imagine what I was spending before I started the blog last September.

So, suffice it to say that I’ve known this has been a problem for awhile.  Obviously overspending on restaurants, too, is very related to the weight gain I’ve had over the past decade. I went a month without eating at restaurants last semester for Grown-Up University because of this exact issue.  But I had no idea how much I spent and how big of a problem it was until I crunched the numbers.

So this was a stunning exercise to see the amounts we’ve spent not just in this domain, but in all of them.  I can’t believe we’re over thirty years old and have never done this before.  But Knowledge is Power, as they say, and so I was able proceed with the next assignment for this course: setting a monthly budget and financial goals. As far as the budget was concerned, I (with my husband’s input) set reasonable amounts for each category for the upcoming month.  I tried to be generous in each category this first month so that we would be more likely to succeed; for example, I budgeted $300 this month for eating out.

This left us with a decent chunk of change to use to either save or pay off credit card debt.  I set financial goals for this month (how much to spend; how much to save) based on what I’ve been reading in Beth Kobliner’s Get A Financial Life: Personal Finance in Your Twenties and Thirties, one of my assigned readings for this course.  She covers everything from specifics of investing to the recent mortgage crisis, but the part most relevant to me at this moment is her section on financial goal-setting.

Essentially, she recommends these steps, in order:

1)      Pay off high-interest (credit card) debt before saving a dime (that is, assuming you have all the heath/auto insurances you need, and can pay your bills, which we most fortunately can).

2)      Start contributing a little to a retirement account.

3)      Save an “emergency cushion” equal to three months living expenses.

That sketches a clear road map for us.  Aside from the amount we automatically have withdrawn for my husband’s 401K (the amount the company matches 100%) and the little bit of savings we must have for an upcoming expense, we need spend every cent we can on paying off our credit cards.

So this month I have two clear financial goals: sticking to our monthly budget, and putting aside the rest (a designated amount) for essential savings and credit card debt. To help us stay on track, I am entering in all of our withdrawals into the spreadsheet every few days, and am happy to report that we are pretty much on track for the month.  After I see how this first month goes, I am hoping to sit down with my husband and set some long-term financial goals.

Not bad for a few weeks’ work, eh?

The Perfectionist in me would like to beat myself up about all the bad decisions I’ve made, the money I’ve wasted, and the time I’ve spent being ignorant.  Ms. Perfectionist would like to compare our situation with our financially savvy and fortunate friends who have been out in the working world some time (unlike us perpetual students) and have fat savings accounts and impressive investment portfolios.

Here is what the Wise part of my mind has to say to Ms. Perfectionist (while delivering a nice b&^ch-slap):  Suck it up.  Don’t focus on the past; you’re learning and moving forward with greater awareness and knowledge.  Besides, we are lucky.  We are insured, we can pay our bills, and we both have jobs.  As employed, Middle-Class Americans, we’re some of the most fortunate people in the world.  Gratitude is the most appropriate emotion.

On to the next challenge.

Questions for the readers:  How much do you spend each month eating out?  What has helped you most with budgeting and saving?  What are your thoughts on Beth Kobliner’s financial steps, and are these rules you live by (or would like to)?  Does anyone have a financial advisor, and is that something you’d recommend or not for people like us with few assets to speak of?