Thursday, May 10, 2012

Curing my bad shopping habits: Part Two

Yesterday I shared with you how I had a shopping problem, and was spending all our savings on things that I didn’t need. 

We only have one income.  I am not in paid employment, so that I can be home with our preschool aged children as necessary.  My husband is a teacher, so he earns a reasonable salary (well above the average in Australia), but we still have to watch what we spend.   But herein is part of the problem: I don’t work so we only have one income, but because I don’t work I have extra time to go shopping.  

I had a budget.  I knew how much money we had to spend, and kept very detailed track of what I was spending.  But I kept overspending.  In every category, other than bills.  And the further each category went into the red, the more I felt I was fighting a losing battle and stopped fighting.  Bad move. 

We also had a free redraw facility on our home loan.  So each fortnight we’d pay a high amount onto the loan, and I’d pay everything by credit card.  When the credit card came due I paid it in full by redrawing off the loan.  Obviously, such a plan wasn’t working for me.

So I started paying cash.  I know that it helps some people keep track of their spending by having all of their transactions on a credit card statement, but swiping every time I bought something wasn’t helping me.  I put away my credit card and paid cash instead, and kept track of how much cash I was getting out of the bank each week.   Maybe I’m a more visual person, but seeing how much cash I started with and how much cash I ended with each week prompted me to be more conscious of where that cash was going.  It may help that a week is much shorter than a month, and so the pain of having spent all the money comes sooner when it’s paid with cash. 

I also stopped using our home loan’s redraw facility.   I opened two separate accounts: one for money for predictable bills and one for money to save for larger purchases and irregular bills (mechanic, doctor etc).  Long term savings, such as that needed to buy our next car outright and not on finance, still went into the loan.  Suddenly, instead of seeing our loan balance going up more than going down, I kept watching it go down and down and down.  This gave me great impetus to keep saving.

My budget used to have around twenty categories - loan, groceries, insurances, rates, clothes, entertainment, eating out, fuel, gifts: it went on and on.  My budget now has six categories: bills, home loan, kids’ and school savings, general maintenance (health, house, holidays, car), giving, general spending.   General spending includes everything that doesn’t fit into another category (fuel is included in bills, because we are fairly consistent in our fuel usage).  I still spend a little too much in the general spending category, but the amount I am over each year has been decreasing, despite cost of food increasing considerably in the same time. 

A simpler budget helps me keep my money organised, and using cash keeps my spending under (better) control.  What about you: do you keep a simple or complex budget?  Do you pay cash or credit?

1 comment:

  1. We do the credit card thing, but our whole life together has run on a monthly basis anyway thanks to the main income being monthly. So as soon as we were married I had to get used to buying groceries for a month. It wasn't until Jordan started solid foods that the shift slowly begun, because suddenly I was buying fresh food (milk, veges etc). It's kinda sad when I think about it that we didn't eat many fresh foods, but those years of buying monthly did teach me to budget for a month rather than a week, and so it helps with the credit card. The only time I've had to pay the credit card off before the month was up was when we were buying the concrete for our driveway. So the money came out of our renos loan, just via the credit card.

    It also helps us because we have the Virgin credit card, so get velocity points on literally everything we buy. We hardly ever use cash, however have learnt our lesson to always have some handy (like $3 to get in to Jordan's soccer game!) so we also have a bank account that we transfer money into if we know we're going to be needing cash sometime soon that I can withdraw at an ATM.

    I agree though that people do need that visual to really know when they're running low. The line of credit, or whatever it's called, where you use your credit card and pay it off monthly actually only works a very small percentage of the time - and the one who told us that was the guy setting ours up! He was warning us about how deceptive it can be, but because of being so used to a monthly budget anyway, it works for us. Some months though, I do go back through the statement and see we've somehow visited Hungry Jacks a lot more than I remember (I think I don't get told about half the times Justin takes the kids there after school) or I see I've gone to Coles quite a bit (usually for milk and bread and apples) and have spent well over $50 each time. Those Coles trips catch me. Like I said, I'm still quite used to doing a big monthly shop, but now having to go and replace milk, bread and apples that the kids each every day or at least every school day, I find myself there at least once a week and yeah, end up with a packet of Tim Tams or 3, or some other special.