2009 Wrap Up; Looking Forward to 2010

This past year has been full of financial progress for us. First, as a couple, my boyfriend and I finally decided to combine our incomes and create a combined budget. Second, after many years of thinking about it, I finally opened a Roth IRA. Third, after 2 years of graduate school, I have started a full time position on a salary with benefits including a 401K. And fourth, as a couple, my boyfriend and I have set combined financial goals that we are achieving this year and plan to achieve next year.
Speaking strictly numbers though, here's how we did in 2009:

    - By the end of this year my boyfriend and I will each have 6 months worth of expenses in savings
    - I paid around $2,000 in interest on my student loans while they have been on deferment
    - We reduced our monthly grocery bill in half (translate into saving at least $200 per month)
    - We came to our senses and moved to a more affordable side of town and reduced our rent by $800 a month
    - We have both been investing 20% of our income 

As you can see our accomplishments this year included being smart with our money, paying down debt and increasing our savings and investments. Now that we have saved 6 months worth of expenses in case of an emergency, we are ready to focus on attacking our debt. This debt consists of a timeshare my boyfriend purchased a few years ago and my student loans.
So these are our financial goals for 2010:

    - Pay off the timeshare (roughly $6,000)
    - Pay off 90% of my student loans (you can tell that's a lot by looking at how much I've paid in interest this year)
    - Continue investing 20% of our income in both 401Ks and Roth IRAs
    - Keep all of our spending down to 55% of our income




Photo credit: jin.thai, flickr; a2zindianews, flickr

Know Your Numbers!

Many of us go through our daily routine completely oblivious to the numbers in our financial lives. Many people don't know their numbers either because they just don't care or they don't know just how important it is. Although it doesn't sound like much fun, knowing your numbers can be extremely empowering. From my experience, these are the all-important numbers in your life to know:

1) Income: Do you know how much you bring home every month? Every year? I'm sure everyone knows how much they make an hour or a year, but this figure is usually your gross income. This is the number your employer gives you when you're hired, or the figure you see when you get a raise. But this is not the same as your net income: how much you bring home after taxes, after 401K contributions. You may be surprised to learn your $50,000 income is probably more like $36,000 but it's important to know because you don't want to live a $50,000 life style when you don't really bring home that much.

2) Expenses: Do you know how much you spend every month or every year? How much do you spend on groceries every month/year? How about on gifts (birthdays, Christmas, Anniversaries,...), gas, vacations, or cable? Keeping track of your spending every month and then seeing how much you spend in these categories every year will help you view your spending from a very different perspective. After seeing just how much of you hard-earned $36,000 is used up on groceries every year, you may be inspired to take a second look at your grocery shopping habits.

3) Net worth: Keeping a budget or a spending plan is not enough to understanding where you are financially! Calculating your net worth can admittedly be very depressing (as it was for me) but it's also a great way to track your progress (although very slowly) and give you a motivational boost to pay off debt and accrue more assets.

4) Savings: How much do you have in savings? How much do you need in savings? It's easy to get around ever building up a good nest egg for a rainy day but like insurance, if you don't do it, you'll be sorry when you need it. So how much do you need? We've been working hard on building 6 months worth of essential expenses. If one of us loses our job, we will definitely be paying our rent, utilities and other essentials, but we won't be paying for cable or going out for dinner. Six months of essential spending is a good amount to save.

5) Debt: How much do you have in debt? How long could it take you to pay it off? Becoming aware of how much debt you have out there is not much fun, but like calculating your net worth, it can be a real motivational exercise. After you know how much you have in debt, you can start playing with the numbers to see how much faster you can pay it off.

6) Goal money: What are your financial goals and how much will you need to accomplish them? Are you looking to retire ever? Do you know your car will be useless in a few years and will require you to buy another one? It would be smart to save up for these events so if you know what your financial goals are: save for a replacement car, then you can start on achieving this goal by deciding how much you want to spend and when you want to purchase it. Eventually you will need another car and eventually you will want to retire, so you might as well start thinking about it and figure out the numbers.

The point in all this is that knowledge is power. You can go through life not having a clue how much you spend on groceries or not knowing if you have enough in savings in case you lose your job, but ignorance does not protect you against financial hardship. Just the opposite happens: ignorance promotes financial hardship. Don't be ignorant, know your numbers!

Photo credit: Pink Sherbet Photography, Flickr

Action is Key

There are many tips, advice, formulas, and rules of thumb when it comes to personal finance, but none of it matters without action. It is human nature to procrastinate and put things on the back burner if they're not a pressing issue at this moment in time, but doing this could be costly in the long run.It takes real motivation to act on something but sometimes the things that should be motivating enough, just aren't.

For example, it took me years to open an IRA. Yes, years. I'm 27 years old and I just opened an IRA 11 months ago although it had been on my to-do list at least 2 or 3 years.  Obviously the motivator was tax-free growth for my investments, but this wasn't real motivation. You see, thanks to my parents, I already had an investment account in a mutual fund so there wasn't any urgency to get started on an IRA. It wasn't until I read a few books that explained expense ratios and loads that I realized how much it was literally costing me to keep my money in that mutual fund.

Another example is my home owner's insurance. I have owned a condo for 5 years and I am literally just this week buying insurance for the it.  The thing is that it's a condo, so the structure is already insured and paid through my maintenance fee but everything inside isn't. Luckily nothing's happened to my place that would require insurance but 5 years of procrastination! I know, it's crazy. I've been rolling the dice. The only reason I'm finally purchasing it this week is because I was talking to my dad about not having it and he gave me the name and number of his insurance broker. It wasn't until I had a name and number that I pciked up the phone to get finally insurance.

The point in all this is that I get that procrastination is normal, but that's not an excuse for it. I never calculated how much money I wasted in high expense ratios at my old mutual fund but I know I lost money. And luckily nothing catastrophic has happened to my condo but luck only goes so far and it was just dumb not to have it. So when it comes to procrastinating on the things you know you should do, you need to find your own good reason to do them. Obviously the possibility of financial ruin from a fire burning down my condo wasn't a motivating enough reason for me. I just needed to overcome the burden of searching for insurance which as it turns out was easily done by me talking to my dad who then lead me to a broker that did all the searching for me. Easy as cake- after I took the necessary steps.

I Got the Net Worth Blues

According to the "experts", calculating your net worth is supposed to be a good exercise in order to take a snapshot of where you stand financially.Calculating your net worth is pretty easy. You add up all of your assets (the value of your house, car, investments, jewelry,...) and then you add up your liabilities (what's left on the mortgage on your house and other debts). You then you subtract your liabilities from your assets to get your net worth.

I really don't like looking at my net worth because it doesn't look good. I actually have a negative net worth. It's not fun admitting that especially because I'm usually really confident about my finances, but my net worth is part of my financial package so I must face it. My situation is that I owe almost as much as my house is worth and I have many thousands of dollars in student loans. Normally I would say my net worth isn't that dyer because it's only about a thousand in the negatives, but who am I kidding? I ran across a formula in the book The Millionaire Next Door that helps determine what your net worth should be. Here's the formula:

Net worth = your age times your income, divided by 10

After plugging in my numbers I felt sick to my stomach because the number was well above $100,000! I knew my net worth wasn't that good but I didn't know it was that bad! Ugh. Now, I'll try not to dwell on the disappointment of being so far behind because I know the purpose of this exercise isn't to make me feel bad, it's to put things in perspective. It's another motivator to GET OUT OF STUDENT LOAN DEBT AND PAY DOWN THE MORTGAGE. So next time I start to get sloppy about paying down my debt and keeping my spending under control, all I'll need to do is take one glance at my pathetic net worth to slap me into shape.

Photo: stevendepolo, flickr

Budgets: Why We Need Them and Why We Don't (anymore)

Why we need budgets: In my mind, a budget is a tool used to categorize spending and limit how much spending occurs in those categories. I believe a budget is a useful tool for those who overspend or for those who have no idea where their money goes. I do not consider myself an over-spender, but before I started keeping a budget, I had no idea where my money was going.
I needed a budget because I was completely clueless about my personal financial life. It wasn't until I started my budget that I became knowledgeable about where my money goes. It's true that knowledge is power because the only way I've been able to bring my expenses down is knowing where my baseline is. For example, it was only after I saw how much we used to spend on groceries that I realized we could do much better.

Why we don't need a budget anymore: We already now know exactly where our money goes. As a couple, we have been keeping a budget for 7 months and personally, I have been keeping one for almost 2 years. After keeping a budget this long, we know exactly how much we spend in any given category every month and we generally stay within that range. Therefore, keeping a monthly budget at this point would be a waste of our time.

So what now? Do we never look at our expenses again? Nope. We need to figure out a new way of tracking our expenses that's less cumbersome than a traditional budget but just as valuable. It's going to take a little brain-storming and discussing with the boyfriend to figure out how, but tracking personal finances doesn't have to end with the budget.

How I Reduced My Phone Costs To Less Than $200 per Year

Yes it is possible to pay less than $200 a year for phone usage- and it's completely legal and practical. Notice I didn't write "cell" phone usage. That's because I use a combination of my cell phone and Skype to make this work.

Here's how it works: For $2.95 a month you can call anyone in the US (both cell phones and land lines) and talk as much as you want. There is a limit on the minutes but it's something like thousands of minutes- no way I could ever talk that much. For a small additional fee they give you a permanent phone number with the area code of your choice and you get voicemail just like a normal phone. The calls go through your computer so the computer must be on and your internet must be on too. If you miss a call while the computer was off or you were away, it lets you know when you get back online. I bought a headset and I call and accept calls like a regular phone when I'm home. I jumped on this opportunity because $2.95 a month is super cheap for practically unlimited phone use. And if I'm home, my computer and internet is always on so it's not like I have to take any extra steps to use the phone.
The second part of my plan was to significantly drop my cell phone minutes. Because I've always done the majority of my talking and long phone conversations at home, I could now just use Skype for most of the minutes I use. But I still needed a cell phone for the convenience of calling someone if I needed to while I was on the road, or if someone needed to call or text me about something, Plus I wanted a cell phone for the security aspect of having 911 available at my fingertips anywhere I am. After looking at all my options with T-mobile, I found the perfect plan. It's the prepaid minutes plan. I purchased 1000 minutes for $100 and got an extra 15% because I spent $100 and I have an entire year to use up those minutes. 1000 minutes divided by 12 months is 83 minutes every month. Of course I don't have to use 83 minutes every month and I won't get charged extra for going over that amount but that's the calculation I do to give myself an idea of how many minutes I should be using monthly. 83 minutes every month doesn't sound like much but remember, I do most of my talking at home anyway. When I'm not home is when I do most of my texting (which isn't much) and quick calls to verify addresses of places I'm meeting people or stuff like that.

If used the way I intend, my phone use will cost $135.40 a year (this doesn't include the small start-up fee for my Skype phone number and voicemail, it was something like $30). I've been using more than 83 minutes per month but not by much. Even if I have to renew my cell phone minutes a few months earlier than the year mark, I'll still be spending under $200 a year for phone use. I know this plan isn't right for everyone. Obviously, if you are addicted to texting or your friends are addicted to texting you (like some of mine are), then you will run through your cell minutes quickly. And if you have a smart phone and use it to go online, then this won't work either. But for those who don't need the internet on the go and don't need to text all day every day, this plan works great and can help you save tons.

(photo: david.nikonvscanon, flickr) 

Grocery Shopping Woes and Wins

I went grocery shopping at 2 stores today and although I didn't have to go in the rain this time, it was very time consuming. I actually spend about  3 hours from the time I left my apartment to the time I got home. Grocery shopping has been an issue for us since we moved to DC because we haven't been fortunate enough to have a grocery store near us. And because we do not have a car in the city, it's been hard to find a system that works.

Initially we used a service that delivered our groceries right to our kitchen. I absolutely loved it. I thought it was one of the best parts about living in a city. But having groceries delivered to your house means you pay slightly more for some of the items you buy and it means you pay a fee of around $8.00 plus tip for the delivery person. The other method we used initially was to rent a car. We joined a local car sharing program called Zipcar which charges to use one of their cars by the hour. You can usually rent a car for around $8 an hour so it was even cheaper to rent a car than to have groceries delivered. Still, paying $8 just to get groceries is kind of ridiculous so we started walking the mile to the nearest grocer store and sort of making a day out of it every other weekend. We would hit up about 2 or 3 grocery stores that were within a few blocks from each other to make the trip worth our while.
Since we moved about 2 months ago to a new neighborhood I've been taking the metro or bus to that same area with the 3 stores and then metro-ing back home. This entire trip takes way more time than I want to spend grocery shopping. I could just go to one store and come home in about an hour but I figure if I'm going to be going out there already, I might as well make the most out of my trip. I've started going grocery shopping every week just so I can catch the best deals offered every week. Maybe I'll go back getting groceries every other week, or since I'm going every week anyway, maybe I'll just choose one store each week to visit. Either way I can't keep spending 3 hours grocery shopping every week. Ugh, I'm exhausted just thinking about it.

Anyway, I did continue on my stock piling mission today. Safeway had a special on peanut butter: $0.99 for a jar. I bought 4 (the limit you could buy) so I think we should be good on peanut butter for the next 6 months at least. I was also extremely proud of myself because I scored 6 cans of Progresso soup for $0.63 each. Giant had them on sale for $1.00 and I had printed a coupon that took off $1.10 if you buy 3. I did really great at Giant actually. My total before the sales and coupons was $25.47, and after the savings, I walked out paying $12.01. That;s more than 50% off!!!!!! :)

(photo: Dan4th, flickr) 

I Know This Sounds Crazy...

But we're developing a plan to semi-retire by age 40 and completely retire by age 50. The goal is to have the OPTION to semi-retire. Obviously, if we absolutely love the work we're doing at age 40, we'll still do it, but it will be nice to have the peace of mind that if we wanted to, we could cut back our hours by half, or if one of us didn't want to work and the other did, then that would be fine too.

The idea to do this came after reading this article on retiring early, but what solidified this in our heads was the book, "Your Money or Your Life" by Joe Dominguez and Vicki Robin.This book gave me a new perspective on how to evaluate the way I spend money bu determining how much fulfillment I get from it. It also gave me the tools to calculate how much we will need to retire and how to track our progress. In fact, we have a large graph on the wall in our apartmentthat tracks our progress toward financial freedom.

Our time frame is around 12-13 years. The plan is to pay off our debt by the time we're 30 and then focus on investing everything we can for the next 10 years. Then when we're 40, my hope is that we will have almost enough to completely retire. By spending wisely and bringing down all unnecessary spending that really doesn't provide us with much fulfillment, the goal is to live off of 50-60% of our income for those 10 years (and invest the other 40-50%). That way, by the time we reach 40, we can cut back our hours by 50% and make enough to maintain our lifestyle. During the 10 years between 40 and 50, we will not need to invest any more money because we will have enough in there that it will grow all by itself so that by the age of 50, 4% of it will be able to sustain our lifestyle. :)

That's the master plan. Isn't it beautiful?

Now I know nothing goes according to plan and it may not turn out this way at all. We will probably have a kid, we may want to buy a home, and we may not be able to live on 50-60% of our income. But that doesn't mean we can't have goals. By having this big, long-term goal, we can then define our smaller, short-term goals. There are many details we have to sort out and we will need to adjust the plan along the way but that's ok. As long as we know where we're going we'll eventually get there.

 (photo: heydrienne, flickr)

The evolution of our budget

Like most things, our budget has undergone some changes in the past and will need to undergo more changes in the future. This constant evolution occurs because we are constantly changing and requiring different methods to keep us on track.

Of course we didn't always have a budget. When we first moved in together we kept our money separate; my income was mine and his was his. We used to divide the bills between us so that every month we would both pay about the same amount. For instance, he would pay the rent and I would pay the rest of the bills including groceries and going out expenses.
After moving to DC, I went to grad school and barely made any money and my boyfriend got a wonderful job that supported us both. For 2 years, his income paid for all of our bills so things were pretty simple. But because I did have part time jobs here and there, we agreed that I would pay for my own personal bills (cell phone, metro, going out food). This is when I started keeping track of my expenses with a budget. There wasn't much to keep up but after I graduated we decided that in order to achieve our financial goals faster we would combine our income (on paper only, we still have separate accounts) . So we began to do a combined budget where we estimated our expenses for the month and then attempted to fall at or below that mark. Of course this is not as easy as it sounds, especially when two people are involved. So over time our "budget" has turned into a document that simply tracks our expenses. The column that lists the amount we hope to spend has become meaningless and we actually ignore it now.

Should we even bother with this "budgeting exercise" every month? I don't know. At least it tracks what we spend and at the end of the year (which will be 6 months of us combining our income) we can look at our spending patterns and trends and decide if we need to make any adjustments. (My poor boyfriend will think I'm punishing him by doing this but I promise it'll be ok ,babe!) In the mean time we need to figure out if keeping a budget will benefit us or if we should turn to another method. I've heard many people say budgets don't work because they are like a diet: you stick to them for a while but then decide it's not practical and do what you want in the end. We are definitely not sticking to a budget although we're not frivolous with our spending.

The thing is I prefer to have structure in my financial life. I'm much more comfortable when I know exactly where we are in our "alcohol budget" so we know we can absolutely go out for drinks this weekend. My boyfriend, on the other hand doesn't see the point in tracking every penny because we're doing fine financially.
Bottom line is we're due for a budget change. Somehow we will need to come up with a system that works for both of us and keep trying until something sticks.

(photo: scoobay, flickr)

Little Things Add Up

In our efforts to spend less and save more, we have started to limit our consumption and waste. I'm not sure how much these little steps have actually saved us but I have no doubt that they add up. Here are some of the things we're doing:

1) We make our own laundry detergent. I know I could probably get great deals on store-bought laundry detergent but I seriously doubt I'll ever pay around $0.50 for 16 loads of laundry. Plus home-made detergent is a lot less toxic than store-bought and since we re-using the same gallon sized Gatorade as our detergent container, we don't go through multiple plastic containers from store-bought detergent. It works really well and doesn't have an annoying scent. Here's the recipe I use modified from the one at this website: http://tipnut.com/10-homemade-laundry-soap-detergent-recipes/
1 gallons Water (hot)
1/2bar Soap (grated)
1 cup Baking soda

1 cup Borax

• Melt grated soap in a saucepan with enough hot water to cover. Cook on medium-low heat, stirring frequently until soap is melted.
• In a large pail, pour 1 gallon hot water. Add melted soap, stir well.
• Then add the baking soda and borax, stir well again.
• Use 1/2 cup per full load, 1 cup per very soiled load.

2) We reuse plastic baggies. I have just recently started doing this about 2 weeks ago after reading about it in a book but my boyfriend's mom introduced me to it years ago. I used to think it was kind of gross but I just realized it's not. I turn the baggies inside out and use a soapy sponge to scrub it, I rinse it then let it dry inside out. Then after it's dry I flip it right side in and throw it in the drawer. I'm not sure how long I'll wash the same baggie but so far they're doing just fine.

3) We make beans from scratch. It does not take any actual knowledge to make beans from scratch, you just follow the instructions on the bag. It's not labor intensive at all. You empty the bag into a big bowl of water and I usually cover them and let them sit over night. Then I'll rinse them and throw them in a pot full of water and cook them on low for a few hours. If you have a crock pot then you can leave them in there while you go to work. Sometimes if I'm feeling like I want gourmet beans I'll throw in a couple cloves of crushed garlic and salt but usually I don't add anything at all. Then we'll eat the beans for dinner and whatever's left over (usually a lot), we'll throw in little Tupperware containers with water and freeze them. When I know we're going to have beans for dinner, I'll take out the beans in the morning or throw them in the microwave to thaw them out. It's so easy and soooo much cheaper than buying canned beans.

4) I use the dryer to dry 2 loads at once. we just moved into a new apartment that doesn't have a washer and dryer. So we have to use the machines in the building. At first I noticed that the dryer was pretty powerful because one load came out super dry- much better than my last dryer. So I tried 2 loads and it dried those well too. Then I pushed my luck and tried 3 loads- this failed miserably. Almost everything was still wet. So now I know, 2 loads for the dryer. This saves us $1.25 each week. It doesn't sound like a lot, but remember, it's the little things...

(photo: the green field blog, flickr) 

Starting to stock pile!

I went to Safeway and Giant today in the rain! Or should I say in the mist. Yes, it mists in the city. It's very weird (I'm from Florida where when it rains you can feel it). Anyway, we were out of all produce so I had to go grocery shopping today. I went to Safeway where I bout 6 non-dairy milks(Soy Dream and Rice Dream) for $1.50 each. We usually can't find any for less than $2.00. I had also bought 6 of these milks the other day too so I guess this is technically my second shot at stock piling. I think we go through 2 milks per month and these non-dairy milks do not need to be refrigerated until the're opened so they have a pretty long shelf life. Then I went to Giant and bought 6 tubs of Smart Balance. They were on sale for $2.50 and I had 3 coupons for a dollar off of 2. So I paid $2.00 for each instead of the usual $3.00. Apparently you can't freeze Smart Balance but we usually go through one tub a month (I think) and the expiration date for them is a while from now. I also saw chocolate chips on sale for a dollar cheaper than normal so I bought 4 packs. We usually don't go through many chocolate chips around here but I do crave homemade chocolate chip cookies every now and then.

All in all I think I just purchased six months worth of:
Milk: paid: $18.00 , saved: $15.32
Butter: paid: $12.00, saved: $5.92
Chocolate chips: paid: $11.16, saved: $3.20

Total paid: $41.16
Total saved: $24.44

Groceries Part 3: looking to the future

I have been so proud of myself the last few months for saving half on our grocery bill that I can't stop telling people about it. But I've been slowly realizing that I'm only making a dent in the grocery bill. Apparently, stock-piling is where the true money-savings lie.

Here's what the "experts" recommend: When there is a crazy sale going on for a particular item you would normally, instead of buying just one or two, buy a ton. The strategy here is to only purchase most of the items you buy at a deep discount. So when you buy a ton of that item, you're buying enough to last till the next time it's on sale. This way you never buy it for full price.

I haven't been stock piling yet but I guess I did try once. About a month ago Safeway had a coupon in their circular for pasta (I can't remember the brand) at $0.59 each. Normally pasta sales are 10 for $10 so this coupon was a lot cheaper than their normal sales. The coupon let me buy up to 6 boxes of pasta at a time, so I did. I have no idea when this sale will happen again but I think if I was smarter, I would have gone back, picked up another circular at the front of the store, and purchased 6 more really cheap boxes of pasta. Because this is the only example of my attempt at stock-piling I was really excited to have so much pasta. This means I made A LOT of pasta dishes so we ran through our "stock pile" of pasta really quick.

So now that I understand what I'm supposed to do: stock pile, then I can start to make a conscious effort to slowly build it up. I remember reading somewhere that it takes about 3 months to build a complete stockpile. I'm going to start this week with butter. We use Smart Balance which is on sale at Giant for $2.50. I have a Giant coupon from months ago and when I was at my parents last week, I cut out a few (my parents get 2 local newspapers delivered) Smart Balance coupons. So my plan is to my around 6 tubs of butter and freeze the excess (I just learned recently thanks to my boyfriend's mom that you can freeze butter). Maybe next week I can stock up on something else that we use and then maybe some day we'll have a decent stock pile to brag about.

Groceries Part 2: the new way

Although the old way of doing the groceries had worked for us for a few years, we both came to the conclusion that we could go about it smarter. Believe it or not, we were spending $400 every month on groceries- for just 2 people! I know prices are a little more expensive in D.C. but $400/month was still over the top.

I'm not sure where I got new ideas for how to do the groceries, whether it was from a blog, a podcast, or a book, but they have worked wonders. I've been doing a few new things.

1) I started a price book. I know I got this tip from a book I read called "Your Money or Your Life". The purpose of a price book is to get an idea of how much things are and how to spot a good price. So you take a notebook and divide it up by each letter in the alphabet. On each page you will create columns for the name of the grocery store, the date, the item, the size and brand of the item, the price, and the unit price (you can find templates online to print out). You then write this information down in the notebook while you're in the grocery store, or you can do it when you get home by looking at the receipt and the groceries you bought. This takes a little bit of time, but after a while you will get an idea of how much things are. Remember in Part 1, we used to do groceries without really looking at prices, not anymore. After a while (a couple months) you will start to notice patterns in the price of an item at a particular store. So pasta may go for $0.69 at Safeway every six weeks.

2) I look at the weekly circulars for the grocery stores in my area. I don't actually have a grocery store near me (the joys of living in a city), but I do have metro access to several different chain grocery stores. It's actually worked to our benefit to not have one store that we shop at because it leaves us open to go to the store that's having the best sales that week. So what I usually do is go online and go to the store's website and pull their weekly circular and I'll take a giant legal-sized pad and a pen and I'll write down the name of the store and list each item that I want to buy and the price. With my price book, I can tell if an item that's advertised as being on sale, is truly on sale.

3) I develop a meal plan. I LOVE to plan things so making a plan for what we'll be eating the next week or two is actually fun for me. First, I go shopping in my kitchen. I walk a few feet into my kitchen, look in the refrigerator, in the cabinets, in the freezer and I take note of what I already have. Then I look at the sales I've written down from the circulars and I begin to write down dinners I can make with what I already have and what's for sale. I try to write 2 weeks worth of dinners on the same piece of paper that I wrote the sales on. Then I write down my grocery list (on the same piece of paper). I use my meal plan to decide how many of a certain item I will need. So if I'm going to be making tacos and pasta with a side salad in a week, I know I'm going to need 1 onion and maybe 3 tomatoes. This way I'm not just guessing how much produce I will need and risking it going bad.

So you can see we've pretty much done away with the running grocery list. Following these methods have definitely helped us not only save money, but save time. I have an entire 2 weeks worth of dinners to pick from every night. I know I have all of the ingredients so I'm not metro-ing to the grocery store and we're not getting take-out because we don't know what to make for dinner. I've been doing the groceries this way for about 3 months and we are now spending around $200 every month! As I keep learning about how to save money on groceries I'm improving my strategy. Next time I'll talk about the direction I'm trying to go in with buying groceries because I think it will help us save even more.

Groceries Part 1: the old way

Lately I've been readjusting our grocery shopping methods to try to get the most bang for our grocery buck. When we first moved in together we came up with a system of keeping a running list on the refrigerator door. So as we ran out of something, we would write it down, then we would take the list with us to the grocery store and buy what was on the list. This worked really well for us because we wouldn't forget things to buy (because we had a list).

Although this worked on the surface, underneath there were many problems with this method. First, we weren't very disciplined to sticking with what was on the list. The items on the list were the things we knew we were going to buy. But everything else in the store was optional. My boyfriend actually enjoyed going to the grocery store because it was a place to find new things to try. Of course anyone will tell you going to the grocery store and viewing it as a free-for-all is not a good way to save money.
Second, we would buy the items on our list regardless of the price. We might switch brands or buy generic if we bothered to look at the price, but either way, we would buy it if it was on the list.
This brings me to the third problem. Remember, the only reason the items were on the list was because they had been in the refrigerator, not because we planned on using them. We often bought things (produce) that would go bad before we got around to eating them. You know what we'd do after throwing them out? PUT IT ON THE LIST!

Now that we have financial goals and try to give purpose to the money we bring in, we have had to pay attention to the money we spend. Next time I'll share what our newest method is and how we've cut back our grocery budget by half.