I’ve created specific strategies that will help me reach my main financial goal this year: boost my savings. Since this is a 3 part series for this one goal, here were the first two parts:

  1. Part 1
  2. Part 2

Today, I’m focusing on another strategy that will help me meet that goal and find an extra $200 a month to deposit into my savings accounts. That strategy is a Cash Only system for certain expenses. My daily habits are now under control with the help of a finite gift card, but the more seldom luxuries, like eating out, need to be monitored more closely. Though I’ve been better about eating at home and making sure I eat something before leaving the house (this was always a problem – drinking sugary coffee, thinking I’m not hungry, then a few hours later crashing and burning only to find the closest fast food restaurant I could drive thru!).

Using a cash envelope system, I’ll deposit my budgeted amount into it at the beginning of the month then when it runs out, ce la vie eating out. Not only will it be better for me financially, I’m guessing it will also be better for my health. I’m also getting into the habit of drinking only water with a slice of lemon instead of ordering a drink, thanks to Sam, which saves a few bucks every time.

Two additional strategies that will help me meet my financial goal this year, and I’ll quickly sum them up in this part, are keeping track of additional income that comes in and making sure it ends up in savings and making sure I hold myself accountable. Being that my income is slightly erratic, some months are better than others. Instead of seeing that money disappear into the black hole of my checking account, moving it into my savings accounts will immediately save that extra cash ahead of time.

I’ve also just figured out how to measure my progress using a Financial Planning widget. I also came up with a plan to track my savings progress even though I’m tracking 3 accounts with a fourth one waiting in the wings – how I love excel sheets!

My other two goals this year aren’t as difficult for me to obtain, basically ride my bike more (which I’m tracking my progress already), and guest post more often. Watch for my quarterly summaries!

I’ve also joined The Saved Quarter challenge. Though my goal isn’t to save a quarter of my income, I’m setting attainable savings goals that I intend to meet.

Do you have specific strategies to help obtain your 2011 goals?

18 Comments

  1. Ronald R. Dodge, Jr. Reply

    Many people is a big fan of using cash, but for me, doing it via the cash system doesn’t work out. I have to be able to see out into the future, which if I do the cash envelope system, that doesn’t allow me to see out into the future. On the other hand, by me using my cash flow management worksheet that is broken down by day, that allows for me to see out into the future, and not only that, but by doing that avoiding future pains, I’m also able to use the credit card without going over. Why am I able to use the credit card without going over? The cash flow management worksheet brings out into the visibility of where we stand and what’s on the horizon.

    One thing about the cash envelope system you have to be careful about, you need to be sure you don’t get burned out on it and end up reverting back to your old ways cause of getting to restrictive or falling to human tendencies too early on (such as within the first 1 to 2 weeks of the 1 month time period you suggesting) only to be scraping in the last 2 to 3 weeks of the money as too many people on fixed income tend to do.

    The other thing, if you are working overtime at times and other times you are not, don’t expect to put 100% of your net overtime income to go straight to savings. One such issue, as you work more time, you end up having less time to do your other duties, which then you end up ordering out or something of that nature. As such, you do need to allocate a certain amount of that overtime money for a such purpose. If that OT also means working in extra day or 2, then you also have to account for the additional commuting expenses. However, I would limit such expenses to a maximum of 25% of such additional income, which means at least 75% of such addtional income should still be able to go to savings. Of course, I’m assuming total payroll taxes is already taken out of the additional gross pay before applying the maximum of 25% for other expenses that’s after tax based.

    Another rule of thumb I apply to budgeting, Apply between 5% and 10% of net income pay to entertainment expenses (All such expenses that’s not related to necessary living needs, to truely employment expenses, finance expenses on debt, or expenses related to investments). Of course, the finance expenses related to debt could be still tied to entertainment, but then maybe not. If you incurred the debt cause of entertainment expenses, then that debt and all such expenses tied to that debt is still all entertainment expenses. On the other hand, such finance charges like interest on a mortgage of a primary home that reasonably fit the needs of the household, obviously, that’s not an entertainment expense.

    Why do I apply between 5% and 10% of net income to entertainment expenses?

    First, from a psychological stand point of view, all work, and no play is no good. Psychologically, you will eventually get weary and break down if you don’t find stuff to releave your system of the stress that could be building up from working so much.

    Second, if you go too long without mixing in a litle fun with that work, then when you do treat yourself, you may very well well oversplurge and end up hurting yourself financially a lot more than you would have otherwise expected. That would be similar to someone dieting and scamping out, but eventually, they will get hungry enough to the point they well overeat and at the minimal put those same pounds back on, if not even more pounds because of them having deprived themself of it for such a long time and they can’t no longer get past that craving.

    Moral of the story, it’s okay to have a little fun, but plan it out so as it’s in a controlled manner and it doesn’t get out of hand. Even with going out to eat, think of 50% of that expense for entertainment and the other 50% of the expense as food. If you go to a more expensive place, it may have to be more like 30% food to 70% entertainment or even a greater disparity depending on the situation and pricing. A really fancy play may end up being more like 90% entertainment.

    As for going to savings from additional income, the income hits the cash flow management worksheet, which then the cash outflow is adjusted accordingly so as it’s backed to a so called 0 budget plan. For me, I leave a little room of cushion in the cash account, so as if something came up, I have that little room of cushion as a buffer, but other than for that, I follow the same basic principle as a 0 cash flow budget plan.

    Why do I stress cash flow so much?

    If you think about it, at least 98% of households bottle neck is the cash usage itself. As such, that cash usage (what is know as cash flow as it comes in, then goes out, comes in, goes out, like water to a house), that outflow of the cash must be heavily monitored and control similar to how a bottle neck such as a major digital printer for a magazine company would be a bottle neck cause so much stuff is going through that one press, and if it’s schedule isn’t monitored utilizing what works best based on it’s capacity and customer demands, then so much stuff will get backed up. Same with cash, if that outflow isn’t maintained, so much of the demand will just build up on that cash to the point it could end up getting you much further behind. This is the very reason why I utilize my cash flow management file pretty much daily. There has been times when I go a few days without even looking at it, but most of the time, given what I went through from 1992 through 2001, I’m looking at it more as an avoidance of having to go through that pain again. I don’t want to end up having to be a renter in ill health having to sweat it out during my elder years of those 95F 95% humidity days drinking 1.25 gallons of water with some salt in it per day just to stay hydrated as a result of not being able to afford A/C as what I had to deal with being in college, but only in college, I was in pretty good health and excellent physical health shape (which is the only thing that pulled me through during those initial 5 years). To put that water consumption into perspective, during the cold winter months, I was lucky to drink even 1 quart of water based drinks within a 24 hour time frame. Not cause of income, but cause my body didn’t need much water in the winter months.

    Summer time, I don’t pay much attention to my salt intake given I’m sweating it right back out, but winter time, I do pay attention to it cause I’m not sweating it out.

    • @Retireby40 – My only concern with going all cash is misplacing it! Or, spending it on things that it wasn’t budgeted for, then it’s harder for me to keep track of in Quickbooks. Thanks for the support!

  2. Wow..I’m not nearly this organized. I love my spreadsheets too but I more do a backwards look at my spending. My main goal is to spend as little time in stores or online shopping as possible. I delay, delay, delay.

    It’s funny reading about you riding your bike. It was 14F here this morning. I’m wearing 4 layers (my last one being a down vest)..The bike won’t even enter my thoughts until April the earliest.

    • @First Gen American – I also backwards plan, that’s how I came up with my initial budget. Now that I have a ballpark figure for somethings, like our habits and meals out, I can set aside that money before hand. I guess at my quarterly round up I’ll be able to share if my plan worked!

      As for biking, it’s been chilly and windy here, but chilly here is 50 degrees! I don’t think I’d be biking either if it were 14F! 😉

  3. @Barb Friedberg – It’s disciplined, alright. Now let’s just see if I can stick with it! But so far, so good. Though it is only the 6th day of the new year. 😉

  4. Little House –
    I think this system will do great. I usually get water to drink when I’m at a resturant or out someplace, and it saves quite a bit (although it saves more the more you go out). I think that the cash system could possibly prevent you from ordering exactly what you want off the menu (if you’re running low in your envelope) but overall I think it will work well. Good luck.

    • @Jeff – Thankfully, when I do eat out I usually share a meal with my husband. So, it may limit our choices, but we should still be able to enjoy our food! 😉

  5. Ronald R. Dodge, Jr. Reply

    @First Gen American

    When I was in college, my only VIABLE means of transportation was a mountain bike, including for grocery shopping and any other shopping I had to do. But then when you live on 4/9 of state poverty level and 2/3 of federal poverty level for a household size of 1, you make do with what you have to work with, even if that means biking in sub freezing temps in the snow (Yes, I have had to do that several times too).

    But then even the one time I caught the flu while in college (which was the same winter season as I had the flu shot, as the flu shot was about 2 months earlier), I still had to bike it into school with the flu and all in those freezing temps. That’s cause for each day that I miss a class, my final grade for each of the missed courses would drop by 1 letter grade. Therefore, if I had missed 4 days of school, I would instantly fail those courses.

  6. Ronald R. Dodge, Jr. Reply

    @Barb Friedberg

    As you can tell, I use Excel quite extensively. But then it also has in it 11 worksheets as all 11 worksheets are used. This financial file I use more or less serve as my financial advisor cause it tells me what to expect and if I don’t follow through with what it’s showing, there’s a pretty good bet bad things will happen as the file would indicate. Having been through that severe major financial hardship in the 1990’s (Pretty much the decade long), I don’t want to ever go back into that boat, so I report to my financial file and it reports back to me.

  7. Ronald R. Dodge, Jr. Reply

    @Little House

    That’s the one reason why I don’t really do the cash route as far as having cash directly on me. Too easy to spend that way with no good way of tracking it as far as where it was all spent at, vs with the CC, it’s still tracked and very easy to download too. Not only that, but too many things can happen with cash vs other protections are in place with the use of CC. The only exception to using cash are the few items that either don’t take CCs or charges extra for the use of the CC.

    Guess a lot of people think I’m a fool for using CCs, but then using CCs is more or less like using fire. If you use the CC properly and don’t over use it, then it really does help you out in the long run. On the other hand, if you over use it, it will severely hurt you in the long run. Fire is like that too. If you build the right size fire within an appropriate place, it does the job it is suppose to do, but if you build it too big or in the wrong place, it will severely hurt you (I.e. lose of home and possibly even deaths).

    Some say it’s better to use the DC, but with my own personal experience of the fraud against our DC when it had happened and all of the things I had to do in the particular order at the mercy of so many others, no way am I going to go that route again. People like Dave Ramsey say DCs have the same protection as CCs, bull pucky. As far as I’m concerned, there are none on the DC based on the experience I went through.

    Anyhow, I realize each household has to figure out what works best for them based on their set of circumstances, experiences, personality traits, and human behaviors. Therefore, there is no one right system, but regardless of the system used, it does need to have checks and balances in place that works for the household.

    The only thing to remember though, even according to EBRI data (www.ebri.org), only 1 in 4 people retire relatively comfortable. Some of that may be hard times, but I believe a large majority of it is cause most people failed to plan, so they didn’t retire relatively comfortable. I lived strictly on Child SSDI for a period of 4 years and that was no fun either literally in survival mode. Of course, that’s just one of the reasons why I got the laser brain operation done to get rid of the epileptic seizures permanently as I didn’t want to live on Child SSDI for my entire life only in survival mode with a high risk of dying from them seizures as a result of brain cells getting killed out each time I went into a seizure (which as time progressed, the frequency of those seizures just kept increasing), as those brain cells as far as known to us humans do not regrow back in like all other cells in our body.

  8. I have found, like you, if I don’t earmark erratic money that may come in, it slips right through my fingers. If it goes right in savings, I don’t miss it. Good luck this year! I will be joining you at The Saved Quarter’s Challenge.

  9. Ronald R. Dodge, Jr. Reply

    @Little House

    Now days, I don’t do it much either, but then these days I have a financial choice. Back in the 1990’s, financially, I didn’t have a choice as I couldn’t even afford to take the bus system at the discounted rate. Back then, it was $13.00 per month for the discounted rate by bus and now days, it’s $39.00 per month for the discounted rate.

    I’m not sure what was the coldest temp I biked in back then, but I suspect it was somewhere around -10F/-23C going at about 15 MPH on the mountain bike. But then I also biked in the snow, which even this day, I would still only use a mountain bike for biking in snow, not a road bike as a road bike doesn’t have enough traction on the tires to be able to handle the snow. These days, when I do bike, it’s normally when it’s 40F or better on the road bike. When I’m on the hills, I’m still averaging about 15MPH over the distance vs about 18MPH on flat land. Even for going up the hills in our area, while most cyclists on the bike club seem to indicate they are only going about 4 or 5 mph up the hills, I’m going between 8 and 11 mph going up the hills. Part of that is the bike, but given many them also have road bikes, the bigger part is the fact I have a lot of muscles in my legs to push me up those hills.

  10. Cash has made an impressive difference for me in the past year. I haven’t paid any fees to use cash, have not overdrawn my account, have not paid interest, and haven’t worried if I have enough in the account to cover something. I use the envelope system and have gotten disciplined about my finances in a way that I never was before.

    Good luck with your goals this year, and staying disciplined!

    • @The Saved Quarter – I’ve never been a cash person, so this is new to me. However, I’m already experiencing problems with my cash plan! 😉 I think I’m going to have to go with cash for only one purpose and with one envelope. The multiple envelopes are getting confusing and I’m just not good at keeping track of the cash!

  11. My partner and I really enjoyed reading this blog post, I was just itching to know do you trade featured posts? I am always trying to find someone to make trades with and merely thought I would ask.

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