Beating Broke

Have a Holiday Spending Plan: Don’t Dread January

December 7, 2011 By MelissaB 19 Comments

Holiday shopping is in full swing now, and you may be feeling the financial pressure. Shane recently quit his job and is working on a tight holiday budget. My husband and I are in the midst of being gazelle intense, so we don’t have much extra money for gifts. Yet even though we don’t have much money to spend this holiday season, I feel great about what we are giving because we are not overspending. We can truly afford what we are giving. Instead of overspending, we are empowering ourselves by spending exactly what we are able to spend. Follow these tips to rein in your holiday purchases this season:

-Freeze the credit cards.

Literally. Put them in water and freeze them. Better yet, put them in peanut butter as we did. Vow not to use your credit cards this month. There is nothing worse than opening your credit card statement and staring at the large number you now owe. The presents have been opened, the holiday is over, but you still owe for the holidays. If, instead, you put the credit cards away, you have nothing to dread come January.

-Set a budget and fund it with cash.

Determine exactly how much you have to spend and withdraw that money from your bank account. Pay for every purchase with cash. Feel the pain as you part from the cash. Acknowledge what you are spending, and feel empowered that you are sticking to your budget.
If you want to shop online, get a debit card. Just avoid using credit cards.

-Shop the bargains

There will be plenty of deals to come this holiday season. Stay focused on the deals and only buy items you can get on sale. Take advantage of buy one get one free sales such as buy one toy of a certain brand, get the second toy from the same brand free.

-Buy sets

For children, especially young children, buy toys that come in sets such as a baby doll with a stroller and a high chair. Take those out of the package and break them into three different presents for the price you paid for the bundled gift.

-Look in unconventional locations

My children get presents from Santa and from me and my husband. Since they were little, the toys that get from us are often gently used. I shop garage sales throughout the summer and hide gifts away. This year my three year old will get a new in the box baby doll that I picked up at a garage sale for $3. My son will get a wooden box with five different games in it that I found at a garage sale for $5.

Obviously you may not have time to go to (or even find) garage sales now, but you can shop children’s resale stores for quality toys at a steep discount.

They say ‘tis better to give than to receive, and that is true more so when what you give is what you can afford. Why not enjoy watching your family open their presents this Christmas without worrying where the money will come to pay for everything in January. It is possible. Beating Broke and I are both proof of that.

photo credit: aussiegall

Buying a House: How Much Can You Buy

December 1, 2011 By Shane Ede 10 Comments

This post on behalf of Emortgage Calculator

One of the more important parts of buying a house, is not over spending on the house that you plan on buying. Despite all the headlines during the recent real estate boom and crash, people are still trying to buy much more house than they can reasonably afford. When they do that, any little setback can be a disaster to their housing situation. Think about it; if you’re already stretching to pay the mortgage, and you lose your job or have some other major expense, will you still be able to pay the mortgage next month? Probably not. And that’s where the trouble begins.

Many will say that you shouldn’t buy a house where the mortgage payment accounts for more than 40% of your income. Some will include the escrow and utilities into that equation, some do not. Being the frugal fellow that I am, I suggest you shoot for a far smaller number than that. If you want to truly be able to afford your house, the mortgage payment, including escrow (but not utilities), shouldn’t exceed 25% of your income. If you really think about it, do you really want to pay any more than one quarter of your income on just your house? How will you afford anything else, let alone pay down debt?

There are several ways that you can estimate how much house you can buy. Your lender will tell you how much you can buy and still qualify for the loan, but that’s a terrible way to go about it. They are only interested in completing the loan, not whether you can pay for it for 30 years. Many of the real estate websites will have a loan calculator on their sites as well, which can give you a pretty close estimate. If you’re in the UK, the Emortgage Calculator can help you estimate those costs. Most calculators will ask you a few simple questions. How much is the house worth (value), how much will you borrow (loan total), how long will you borrow it (Term), and at what interest rate (Rate). Using those numbers, the calculator will amortize the loan, and return the estimated monthly payment on the mortgage. Use that number, plus an estimated escrow amount (roughly 20-25% of the payment amount makes it a safe estimate), and you’ve got a number that you can use to determine if the house is too much house for you. Then, you can continue on with shopping for a house.

A few other notes. Yes, an “interest only” loan gives you a much smaller payment amount and may seem like a good way to get into a house that you otherwise couldn’t afford. But, you’re only paying interest for that period. When the interest only period ends, so does your affordable payment amount. Then, you’re stuck with a much larger payment, and all of the principle of the loan. Same goes for an “ARM”, or “Adjustable Rate Mortgage”. The payment is nice and low before the first adjustment period, but when that adjustment happens, the payment can go up by a good amount. Avoid both and stick with the conventional 15 or 30 year mortgages. You’ll be glad you did.

photo credit: woodleywonderworks

We Conquered Black Friday

November 28, 2011 By Shane Ede 16 Comments

With the recent changes in my employment, it’s become pretty darn important for us to not only keep to our budget, but to reduce our budget as much as we can in order to keep from sending our finances into the whirlpool of red ink that is broke.

One of the ways that we’ve got to cut back, because of the time of year, is in our Christmas present shopping. We’ve already come to the agreement with our extended family that we wouldn’t be exchanging presents with them. However, with the wonderful consumerism myth that is Santa Claus, it’s a bit more difficult to completely cut off the kids from any presents whatsoever. With that in mind, we decided that we’d still be getting the kids a few things, but would have to take advantage of as many great deals and coupons as we possibly could. And, you all know what that means.

As a general rule, I avoid the masses of people that throng to the Black Friday specials. I don’t have the patience for all those people rushing around the aisles, searching for that one last electronic door buster special, or digging through the mountain of cheap DVDs in the middle of the aisle. But, when you’ve got to save some money, sometimes you’ve gotta take a few risks. 😉 Late Thursday night, after all the turkey had been eaten, we went through the flyers for the stores and decided on a few things that we should pick up to give to the kids.

Luckily, for us, our kids are still young enough that they are satisfied more by quantity, than by amount, so it’s easy for us to buy a few bundled items and pack them individually and still come away with as much present opening satisfaction as we would have otherwise.

We took the tips that I wrote a week or so ago, and put them to good use. We went into the day with a detailed idea of what it was we were looking for, and where we were looking for it. We had a list of what we wanted to get, and a budget to spend on that list. If the stores were out of something, we didn’t substitute with the similar, more expensive, item that was conveniently set up next to the empty shelves.

And, we conquered Black Friday. We stuck to our list, only buying one extra item. We not only kept to our budget, but we beat it! When we were done with our busy morning of shopping, we had everything on our list, and we’d spent less than $150! Christmas will be a little lighter under the tree than it has been in previous years, but I’m pretty sure the kids will be happy with it, and we’ll all have a great time, like usual.

Now, we just have to avoid the impulse purchases that will come today in all the Cyber Monday emails and ads, and we’ll be all set. 😉 But, we conquered Black Friday, and that’s something!

How did you all do this Black Friday? Did you go out and shop with the masses? Did you stay home and polish off the turkey leftovers?

photo credit: joiseyshowaa