I was recently asked for my best tip on budgeting, and I immediately thought of how Mr. BFS and I prioritize almost every expense. Whether we’re talking about a one-time purchase or an ongoing service, we make sure that we are okay with where the money must come from to make it happen.
The First Craving
For example, Mr. BFS thinks we would both benefit from owning smart phones. Since we do receive $150 phone credits every 18 months and our current phones were getting to be about 2 years old, we looked into the cost last October.
Other than the one-time additional charges for the phones themselves, we’d also end up spending at least another $50 a month on the new data plans.
So we had to ask ourselves, are smart phones more important to us than something else we were already spending on? What were our priorities? What will have to get cut?
We had a few conversations and decided we would hold off for a while since our phones were doing okay and Christmas was around the corner.
Decision Time
Sadly, his phone has started having some major issues a few weeks ago and my battery won’t last more than a day. It’s like our phones are giving up. Since we now need new phones, we were forced to bring up the subject again. It would be pretty sad to use our phone credits for some regular phones and then turn around and pay full price for smart phones down the road.
After a few more conversations over the last 2 weeks, we have decided that having useful smart phones is even more important to us than contributing $250 a month to a vacation fund. Our current cell phone bill is about $80, so we will take out the difference between the new plan and the old one from our vacation fund contributions.
That said, if we can use our hobby jobs to make up the difference each month, then we’ll pay back our vacation fund, so I won’t need any debt advice from you guys lol. If our hobby jobs fall flat, then we’ll just have to deal with contributing less.
My View
I personally support this decision since we will have the extra expense covered no matter what. I enjoy looking at our budget and making sure we aren’t wasting our money on anything that doesn’t add value to our lives based on our own personal opinions. Prioritization allows my husband and me to use our expendable income in the best way possible for ourselves.
Do you have a prioritized budget or spending plan of any sort? Have you looked at all of your expenses lately to make sure your money isn’t being wasted on anything you don’t personally value?
Our main priorities are our bills. Those are the first things that get taken care of. This means rent, electricity, water, etc. Then our luxury bills. Car, cable, phone. We’re trying to save as much as we can, so we’re moving to a place with cheaper rent and included utilities. I’m probably going to get a new car that’s more fuel efficient but in the same price range. I’m trying to reduce our cable bill (tried cutting it but the Mr. isn’t having it). We only use our cell phones (smart phones also) but I also have a Skype phone number.
@20 and Engaged, LOL, my husband won’t give up cable either. I’m just lucky he hasn’t pushed us into a more expensive tier yet…
It sounds like you know exactly what your priorities are. What are you two saving for? The wedding? A house?
I have a budget which places savings (retirement, IRA & Roth IRA) as the first priority. That means it affects everything else. I choose not to have a smart phone not because of expense, but I do not need one.
@krantcents, yep, our priorities go:
1. Necessities like the mortgage and bills.
2. Retirement.
3. Padding.
4. Fun.
Crystal, Another justification to keep your smart phones is
that they can actually REPLACE other expenses. For example, you may
not need a home internet subscription (if you do your blog work
elsewhere), they can serve as a music device, and they can be a
massive time saver through organization. Sometimes we get so
focused on pinching pennies that we forget what our time is worth.
I love your ideas though, great post. Jane
@Jane Sanders, I’m glad you liked the post! Pinching pennies does get ridiculous when we forget to look at the big picture…
@Jane Sanders,
As far as pinching pennies, I’ll be the first to admit I do a lot of that. On the other hand, I’m not about to be jumping through a bunch of hoops just to get a so called savings that some service provider may be offering, and I’m also not about to use coupons for name brand stuff when I can get the same item but only as a non-brand name for even a lower price with the same or higher level of quality. One such example:
Diapers for babies
Markbreit (Sam’s Club version), low cost, no issues. Even in many cases including the poopy ones, they are much easier to take care of as compared to the other 2 listed below.
Huggies, they sag too much as they get used and go right on through. No good, very poor quality.
Pampers, too often times, their tabs rip off of the diaper too easily as you are putting the diaper onto the baby. No good, very poor quality.
Yeah, I could have gotten coupons for either of the 2 name brands, but they were still more expensive with the coupons than the Sam’s Club version was without any coupons. As such, the Sam’s Club version wins this debate in any way you look at it. Not only that, but why would I want to get such poor quality diapers, even with the coupons?
We are in the middle of looking at our budget with a layoff eminent. Husband has already made the commitment to reduce the cable bill – no more NFL package or Red Zone package (after the Superbowl of course). With the layoff, he’s come to the realization that perhaps these things are not necessary. LOL
I want a smart phone now, but my husband reminded me that I don’t use all the functions on my current phone now. The last thing I need is a more expensive phone where I don’t use the features. Thanks for the reminder to reexamine our budget.
@Felicia Gopaul @ College Savings, isn’t it weird that it takes a layoff for the men to give up their football packages?! Hehehe. Good luck with your reduced income. I hope you can stretch it to cover everything it needs to and some extra fun. :-)
@Felicia Gopaul @ College Savings,
I also had that fear of eminent layoff in 2009/2010. I was one of the lucky ones not to get laid off. The only items that saved me was my set of computer skills mostly on the software side, knowing how all of the different systems work, where and how the hardware stuff works, my work ethics, and how versatile I am with pretty much anything on the floor or in the office. No one in the company said anything about a lay off until towards the end of January of 2010. However, when I saw business as low as I did in the Summer/Autumn of 2009, I had this very eerie feeling that something major was going to happen and it was not going to be good for the majority of the plant. As it turned out, 74% of the work force at the plant got laid off.
Should I have been laid off, the only 2 items I could have possibly been able to either cut down or cut out would have been either my bowling (which I had already cut it back to just one night a week, and I never paid for the drinks at the bowling alley as I wouldn’t drink at the bowling alley other than water out of the water fountain) or our internet connection (In this case, maybe scale back, but still couldn’t cut out given the financial stuff online). The other item we also may have had to cut out would have been the cell phone. However, even with these items cut out, that wouldn’t have been enough to get us by. As such, we had worked long and hard to build the annually taxable investment account up to $12,000 by the end of 2009. After this eminent danger had passed on over, I did end up taking from it $4,500 from the account ($2,400 went to ROTH IRA and $2,100 went to a major car repair job). Even with those 2 take out, the account is currently at a value of $10,900. That’s right, the account only $1,100 lower, not the $3,300 or so as you may have expected the account to be lower by. Some of that may be by luck, but a lot of it also has to do how I have managed the account.
When it comes to budget time in August/September, that’s when I do my prioritizing, which given I been doing this for several years, each year, it has gotten easier and easier for several reasons.
Once a process is in place, it becomes easier to follow as one learn it much more easily and it becomes repetitious.
As the debt drops, eventually cash flow demands also start to lesson
As pay increases, generally, it would free up other things. However, that didn’t really hold true for the 2002 – 2010 years. In many of these years, as pay increased, the cost of so called benefits went up tremendously. Therefore, any pay raise we got, the cost of benefits ate up that pay raise and then some more beyond that. As such, what sort of pay raise was that in these years?
As for our order of prioritizing, which I have had to use it, it’s the following:
Necessary living expenses
Minimal Debt payments
Retirement Funding to max out matching policy
Balanced approached between funding the Emergency Fund and Reducing Debt
Additional Retirement Funding
Side note: A minimal of 5% of net pay up to a maximum of 10% of net pay is to be allocated to entertainment expense. Why do I set this range, if you assume you will incur no entertainment expense, from a psychological stand point of view, you will most likely at some point of time not only end up spending money on entertainment, but will end up majorly blowing it cause you kept it so restrictive to the point you can’t take it psychologically any more. Therefore, this 5%-10% of net pay for entertainment serves as a check on yourself. Of course, if you are making a lot of money, then that may be a different story. But if you are only making very little money, you still need some fun as all work, no play is no good for the human mind.