Tuesday, October 30, 2012

Hurricane Sandy

Just a quick update letting you all know that I am safe and dry in DC! I lost power, but it is back on now. I probably won't post anything until tomorrow or Thursday. Stay tuned for pictures of my new studio. I'm heading over to inspect the place on November 1st!

Friday, October 26, 2012

Best of the Blogosphere: 10/26/12 Edition

Every Friday I feature a blog post in the following categories: Simple Living, Financial, DIY, Before & After, and Random. Here are this week's picks:

Best Simple Living: There are a few people I know (cough*Mom*cough) that could use this helpful de-cluttering advice from The Everyday Minimalist.

Best Financial: Compound interest is the best when it comes to your investments. If you don't believe me, ready this post at my pretty pennies.

Best DIY: I'm in love with this painted Ikea rug over at House Tweaking.

Best Before & After: Bravo, Casey, for this great organizational before and after! Via Waffling.

Best Random: The apartment of DC blogger Skyla (Sanity Fair) is definitely an inspiration. My new place will have the same kind of floors, a big window, and a walk-through closet. It is so much fun to see what she has done with her small space!

Thursday, October 25, 2012

Monthly Tracking: Join the Fun!

I started tracking my monthly expenses after reading Your Money or Your Life. One of the fantastic pieces of advice this book gives you is that it is important to understand where your money is going and how much you are taking in. Out of all of the spreadsheets I have created, this is by far the easiest.

I created my Excel tracking sheet based on the template from Your Money or Your Life, but I’ve edited the expenditures to match my spending habits. Others will have different expenses, but the important thing is to start understanding where your money goes, and tracking it definitely tells you.

To get in the habit of tracking my expenses, I started carrying around a small notebook. I write the date, then an “In” and “Out” column. Under each column I write down what has come in and what has gone out that day. I’ll then record the numbers in my monthly tracking Excel file when I have time.

Here is what my monthly tracking sheet looks like:

At the end of the month, I end up with a picture of my finances for that month. I then use this picture to calculate my Net Worth.

So why do I track my expenses?

That's easy: by tracking my expenses, it shows me how I am spending my money and allows me to see where I need to make a change. You can see that in this month, I spent $91.08 going out to eat/happy hours. I had set a budget of $60 for this, so I overshot that by $30. Oops. This tells me that either I need to update my budget and allot myself a little more than $60, or reign in my spending for the next month.
I don't always hit my goal, but at least I see where I'm not meeting my expectations. This spreadsheet also shows me that almost $300 is going to minimum payments on my student loans. Seeing this every month is another motivator for why I want that debt paid off. I could be putting $300 towards retirement or a trip! Alas, that money is tied up in student loan repayment.
I recommend that everyone track their expenses in some way. Set up a system that works for you and then stick with it!

Tuesday, October 23, 2012

New Apartment Update: Getting Closer!

In just a week, I will sign the lease for my new apartment! A studio of my own!

My excitement has made it harder to wait, but I've found that looking for decorating inspiration helps. I have a preliminary vision for what the two main rooms in the apartment will look like. The main room is fairly large and can be sequestered into a living area and a sleeping area. This is my floor-plan inspiration:
For color in the main room, cobalt blue has caught my eye lately. I think I can add some touches of this striking color to the black and navy decor that I already own. I do think I’ll need to throw in some other pops of color, but I won’t really know what that secondary color should be until I see the room all put together. Here is my cobalt blue inspiration:

For the kitchen, I’m going with black, white, and red. I have a few red kitchen items that I can put on display. I like the look of this kitchen:

I'm signing my lease on November 1st and will be able to take pictures of the empty apartment then. I'll post those in my next apartment update. Getting closer!

Friday, October 19, 2012

Best of the Blogosphere: 10/19/12 Edition

Every Friday I feature a blog post in the following categories: Simple Living, Financial, DIY, Before & After, and Random. Here are this week's picks:

Best Simple Living:
Urban Turf showcases what 275 sq. ft. housing would look like in DC. I love it!

Best Financial:
Check out this handy debt payoff tracker at Man vs. Debt.

Best DIY:
This could also be called Before & After, but how could I resist putting up this bizarre lamp-turned-cute from Young House Love?

Best Before & After:
This is some killer repurposing via Apartment Therapy.

Best Random:
Again, from Apartment Therapy. I'm so inspired to decorate with cobalt blue!

Wednesday, October 17, 2012

Budget Breakdown

In my last post I talked about how I modified the “Envelope System” for my own personal use. Today, I’d like to talk about how I customized a budget that I found on the blog Small Steps for Big Change.

Like all personal finance matters, money is deeply personal, which is why I never apply a one-size-fits-all approach. I loved the way Small Steps for Big Change developed her budget, so I decided to modify it for myself to keep track of my expenses. Here is my current budget for 2012:

Note that I have 4 major categories: Income, Savings, Bills, Expenditures. I’ve separated bills from expenditures because “bills” are required, but fixed spending (rent, student loan payments) and expenditures are items that are not fixed (food, restaurants). One could argue that food is a fixed expense, but for the purpose of my budget I’ve kept it in the expenditures section.

For the Income section, I have calculated the after-tax amount and ONLY use that amount when I budget for the month. Items that I have taken out pre-tax are my DC Metro Card, contributions to my work retirement account, and allocations to a medical flexible spending account (FSA). This is why you won’t see a line item for doctor visits or prescription medications in my budget.

The Savings section is comprised of those expenses that I am saving for. One is my retirement, so I list my monthly Roth IRA contribution here. Another is a trip to Germany that I will take next summer. I list both the Roth IRA and the Germany Trip separate from the monthly expenses. I do this because the money I am saving for those goes into two separate accounts.

Under Savings I also include a “Yearly Expenses” section. This was probably the most complicated section to come up with, and I have actually significantly revised it for 2013. I found that it took about six months of record keeping to notice what expenses are yearly and what expenses are monthly. An example of a yearly expense that I forgot about: my safety deposit box. That’s a line item that I have added in for my 2013 budget that is not listed here. Because this section got so complicated, I created a separate excel sheet for “Yearly Expenses.” I’ll address this separate spreadsheet further down in this post.

Next up is Bills. This is fairly straightforward. I’ve noted that all of these expenses come out of my checking account. I use my checking for these because this is where my paycheck gets deposited. Expenditures also come out of my checking account, and since I use an envelope system for these expenses, I take out cash from my checking the first of the month.

And that is it! You can see from this budget that I have $670.44 left over every month. Right now, all of that money goes towards paying down my student loans. That seems like a lot of money to have left over, but because I’ve discovered a few more yearly expenses and things I need to save for in 2013, the “leftover” amount will drop. Especially when I get my own place and my rent goes up.

Now back to the “Yearly Expenses” section under Savings:

You can see that I started keeping track in July 2012, so the record only goes until December 2012. This was a trial run and has helped me come up with my 2013 Yearly Expenses spreadsheet. Here, the gray cells are the amount I contribute each month to each future expense, with total on the far right. The white section is where I keep track of spending. The very bottom tells me how much I have left to spend. I've set up excel to do the addition for me, using a simple =SUM( ) formula. This works because I don't need to get three haircuts, buy gifts, etc. on one day. This money goes in and out throughout the year. I haven't yet come to a situation where I don't have the money in my savings account to cover the items I've listed here.

You will note that on my main budget page, I indicate which account will receive the money I need to deposit in order to pay for my yearly expenses:

I deposit the money into the savings account that I used to pay my credit card each month. This means that for these yearly expenses, I use my credit card. This works great for me - I earn mileage points by using my card and I don’t have to worry about not having money in the account to pay for it as I’ve already transferred the money in (on a bi-monthly and automated schedule). I record when I spend the money in my “Yearly Expenses” spreadsheet, but not in the yearly budget spreadsheet. The budget spreadsheet merely tells me how much money I need to put in to the account I use to pay my credit card. 

There you have it! How I keep track of my money - monthly and yearly. It is working well so far, but I have had to make adjustments along the way, just like I'm sure you will! This takes a while when you are first getting started, but once you have the system in place it is really simple and you will thank yourself for putting in the work! Because now, your money will work FOR you!

Monday, October 15, 2012

Envelope System Modified

I’ve been using the “Envelope System” since January 2012. I can’t remember where I first heard about it, but I do know that a friend of mine started using the system before I did. Her recommendation is what made me decide to use it.

The envelope system works like this: at the beginning of the month, you take out a certain amount of cash and divide the cash among envelopes according to categories. Then, once the money in the envelope is gone, no more spending for the month in that category. The key with the categories is that you must determine them yourself. At first, I had a bunch of categories: groceries, dining out, medications, gifts, travel, haircuts, etc...the list goes on.

After a few months I had a pretty good idea of how well this was working for me, and what I realized is that I had to remember to bring envelopes with me all the time and it really became cumbersome. For example, if I decided I needed to stop and grab some milk on the way home and didn't have my “groceries” envelope with me, then either I couldn't buy the milk or I would have to use my debit or credit card, which negated the point of the envelope system.

So I devised a new system. I decided only to use the envelope system for groceries and happy hour/dining out expenses and that I would always keep these envelopes in my wallet. If I needed to buy something else on any given day I would use my credit card, having already transferred the money at the beginning of the month into the account from where I pay my credit card. I determined the budget beforehand, so I know exactly how much money I need each month for these expenses (such as gifts and haircuts). I may not use the money each month, but when I decide I need to buy a gift, I know I can charge it to my credit card because I've already allocated money towards this expense. I find that this benefits me in two ways: 1) I’m gaining points on my credit card and 2) with my budget already dictating a certain amount of money that goes into the credit card account, I have the money there to pay the card off every month.

The way I use the envelope system works for me because I keep track of what I spend and I budget for the month and for the year on certain items. It may work differently for others. Dave Ramsey has a basic tutorial on how to get your envelope system started, as do numerous other personal finance blogs. I hope my short explanation gives you insight on how you can modify the envelope system to work for you!

Friday, October 12, 2012

Best of the Blogosphere: 10/12/12 Edition

Best of the Blogosphere showcases the week's best posts from other bloggers (in my humble opinion, of course). Every Friday I feature a blog post in the following categories: Simple Living, Financial, DIY, Before & After, and Random. Here are this week's picks:

Best Simple Living: Free People Blog shows how to make a 2-Ingredient Air Freshener. So simple!

Best Financial: Chris at Simple Family Finance went the extra mile and did a cost/benefit analysis of maintaining a vegetable garden. The verdict? I'm convinced that having a vegetable garden is worth it, personally and financially.

Best DIY: This is an oldie but goodie: Amanda at Wit & Whistle provides a tutorial for how to stencil text on fabric. I've decided this will be one of my first DIY projects in my new apartment.

Best Before & After: This week, Apartment Therapy featured a stunning living room makeover. The "after" shot was definitely helped by some natural light and a good photographer, but I think the blue really lightens up the room. Bonus points for the pops of yellow.

Best Random: This post blew my mind. No need for a fancy herb cutter - The Kitchn shows us how to chop up fresh herbs with a rocks glass and a pair of scissors.

Thursday, October 11, 2012

Net Worth Explained

Yesterday, I showed a friend of mine this blog, and she sent me back an enthusiastic email about the topic and praise for a few of my posts. But - she had one question: “How does one calculate net worth? I have investments, life insurance, etc. I think I'm still in the hole though, because of ridiculous student debt.” Amen, sistah, on the student loan debt! Welcome to the (not-so) exclusive club.

I realize I didn’t go into great depth about how I calculate net worth in the post where I announced that I finally had a POSITIVE net worth. I’ll address the specifics right now. NOTE: I've simplified the spreadsheet for the purpose of this post. My own document is slightly different.

Calculating Your Net Worth
From our friends over at Wikipedia, net worth “refers to an individual's net economic position; similarly, it uses the value of all assets (long term assets) minus the value of all liabilities.” In mathematical terms, net worth = (assets - liabilities).

Therefore, in order to calculate net worth, one needs to add up all of their assets and then add up all of their liabilities. Let’s tackle assets first.

Assets are any accounts or items that have value. If you needed to come up with $1,000 tomorrow, where would you get it? A savings account? A checking account? Sell some of your belongings or take out money from your retirement account? For the record, I advocate that you NEVER take a loan out on your retirement accounts. However, that account is still considered an asset and it must be included here. I also don’t include the maximum amount in a cash advance you could get from your credit card - that is not an asset because that money does not exist in liquid form until you take out a loan for it.

So, let’s review. The following are examples of assets: savings accounts, checking accounts, retirement accounts (401k, Roth IRA, Traditional IRA), valuable belongings (i.e. cars and electronics), and other investments (money markets, stocks, bonds, etc..). Here is an example of my “assets” column in my net worth spreadsheet:

Now on to liabilities. A liability is anything that you OWE. The most common of these are loans - student loans, car loans, a mortgage, and the most evil of them all: credit card debt. I do not include monthly payments such as rent and utilities on my liabilities because those have to be paid monthly and will not go away. I wouldn’t be opposed if someone chose to add a line item for their monthly rent as that is, in effect, a liability similar to a mortgage payment. Right now the only liabilities I have are my two outstanding student loans. Here is an example of my “debts” (aka liabilities) column in my net worth spreadsheet:

Now that I have a total number for both my assets and debts (liabilities), I find the difference between the two, which is my net worth. Here is what this looks like in Excel:

From these calculations, I have a positive net worth of $572.56!

I’ve also decided to calculate the percent change, but that isn’t a requirement for determining your net worth. Here is the Excel formula for that if you wish to use it: =(this month's net worth - last month's net worth)/ last month's net worth. Or in this spreadsheet: =(C19-B19)/B19.

And there you have it! I hope this was clear. As Forrest Gump would say, “Mama always had a way of explaining things so I could understand them.” I hope I did half as well as Mama with this post!

Tuesday, October 9, 2012

In Defense of Food - Simple Food Rules

I like Michael Pollen’s In Defense of Food so much that I wrote down a few of his simple food rules on a note card  I keep this in my food pricing diary. I read it as a reminder when I am grocery shopping - it helps me remember what kind of food I want to put into my body.

Here are the rules I wrote down about shopping:

1) Avoid food products containing ingredients that are a) unfamiliar b) unpronounceable c) more than 5 in number and d) have high-fructose corn syrup

2) Avoid food products that make health claims

3) Shop the peripheries of the supermarket and stay out of the middle (b/c fruits and veggies are on the peripheries!)

4) Get out of the supermarket whenever possible (i.e. head to the Farmer’s Market)

Here are his rules about eating:

1) Pay more, eat less

2) Eat meals

3) Do all your eating at a table (Mom & Dad - you failed at this one)

4) Don’t get your fuel from the same place your card does (Again, Mom & Dad - no gas station meals, please)

5) Consult your gut

6) Eat slowly

7) Cook and plant a garden (oh if only I had the space for a garden...)

I do pretty well on most of these, although it is actually rather hard to find certain products with less than 5 ingredients, even at Whole Foods (i.e. my beloved graham crackers). 

Ultimately, I'm a bit disturbed that this way of eating is NOT the norm in our society. I know I don't always abide by these rules, but simplifying my food choices and paying more attention to the actual meal is something I'm striving for.

Friday, October 5, 2012

Best of the Blogosphere: 10/05/12 Edition

Welcome to the first edition of the Best of the Blogosphere! I read a lot of other blogs about simple living, decorating, and personal finance, which gave me the idea to consolidate the week's best posts into a weekly round-up. Every Friday I will feature a blog in the following categories: Simple Living, Financial, DIY, Before & After, and Random. Here are this week's picks!

Best Simple Living: The guys over at the minimalists have a great list of gift alternatives. Give experiences, not stuff. 

Best Financial: Ginna at my pretty pennies gives a good reminder of why I am so focused on paying down my debt. Work those Baby Steps!

Best DIY: The lovely blog IkeaHackers features my favorite Expedit hack yet!

Best Before & After: Design Sponge features an amazing one this week. This fugly bathroom is turned light and airy - magic!

Best Random: A friend sent me this random link from stumbleupon. I use a lot of these tips, but it is always fun to revisit some great ideas. Can someone please teach me how to fold that fitted sheet, though? I never get it right.

Tuesday, October 2, 2012

Path to Minimalism: DVD Collection

For years, DVDs were the go-to Christmas gift. I rarely knew what to tell my parents to get me when they asked, so I usually ended up giving my mom a list of DVDs and books I wanted that year. My book collection is much smaller right now, largely due to the fact that I have kept a lot of them at my parents’ house. Apparently, my books fill an entire bookshelf that my mom just moved into my old room. Oops...but that isn’t the focus of today’s entry. DVDs are.

So here we go...my reason for downsizing my DVD collection is two-fold. I hate the TV stand I have. Yes, I picked it out and still like the look of it. But is is SO damn heavy and collects an insane amount of dust! When I move in Novmber I want to sell this thing and buy something sleeker and lighter. Since I want a smaller TV stand, I need to cut down on the amount of DVDs I have.

I started out with a large pile:

Now the hard part - deciding what to keep and what to sell. Here are my two commandments for this project:
“Thou shalt not get rid of Tom Hanks movies.”
“Thou shalt not get rid of TV series collections such as LOST, Friends, The Office, etc...”

Since I don’t have cable, I thoroughly enjoy revisiting my favorite TV shows. I’m not getting rid of my favorites, nor am I getting rid of any Tom Hanks movies, because, well, I LOVE TOM.

Following these two rules, I was able to put aside 16 DVDs to get rid of:

I’ve listed my DVDs on glyde.com and have only sold one so far. Perhaps it is time to put these on Amazon or craigslist? If I still don’t get any takers, then I might just have to give these babies away via Freecycle. DVDs really aren’t worth that much anymore!

Final collection:

Slight improvement!