Matt and I went on a road trip recently and as usual, we listened to a financial audiobook. This time, it was “The Millionaire Next Door.” Essentially, it says the people who are most likely millionaires are not those who drive expensive cars or live in the biggest houses, but they just might be your next door neighbor.

Being a Tightwad is Good

One concept that was touted over and over again was that millionaires are frugal. Most millionaires are self-made, they said, while about 14 percent inherit their wealth. I describe myself as a saver more than a spender, so this idea seemed obvious to me. There’s not much that you can buy that will increase in value after the purchase. So after shelling out a lot of money for expensive things, it negatively impacts your net worth and your ability to achieve financial freedom. By contrast, hyper-consumers may seem to be rich but they are stuck on a cycle of spending.

Budgeting is Important

It made me think of a new blog favorite, Gussy, who recently started her own business selling cute ruffle adorned bags and headbands. In describing the process of saving to go into business for herself, she said: “If you don’t tell your money where to go then it will disappear.” (I highly recommend her blogs about budgeting!) This statement really stuck with me. You see, Matt and I are fairly frugal — I would say we hunt out good deals and aren’t frivolous spenders — but we also don’t really budget.

So, you can say that I’ve been inspired to develop a budget. In the day-to-day, I don’t want to lose sight or get off track of our financial goals. This will likely mean re-evaluating some expenses, which can be a tough discussion for couples. We’ll see how it goes.

Do you adhere to a strict budget? I’d be interested to know as we work on developing ours.

As I have mentioned a few times before, the husband and I use an envelope system for groceries and all of our other expenses.  At first, it was really hard to stick to $80 a week, but now I find it to be more than enough.  It does keep us conscious of what we buy, though.  You learn what is a good deal and what is not.  I wanted to share a few things that I have learned along the way.  Oh yeah, and if you are squeamish about meat/fat pictures, I wouldn’t read the rest of this post.

Check the unit price

I have always heard experts say buy in bulk or store brand, because it is cheaper.  This is usually a pretty good rule of thumb, but it is not always correct.  Always check the price per unit or ounce. One time, I was buying oil, and I realized that it was actually more expensive per ounce to buy the large bottle versus the smaller one.  It was something like 6.8 cents an ounce for the small bottle and 8.9 cents an ounce for the large one.  It is not a huge deal, but it can add up over time.   If you are going to buy a larger bottle of something, make sure it is something that you will use.  There is no point buying a large amount of something if it will just go to waste.

Skip grocery shortcuts

Be willing to spend some time in the kitchen instead of using grocery shortcuts.  It is much easier to buy pre-cut carrot and celery sticks, but it is a lot cheaper to buy the full size carrots and celery and then cut down to size.  I have found this to be true with some meats as well.  Fresh chicken is usually cheaper than frozen, as are cuts that still have skin and fat on them.  You can cut off all of the skin and fat and then freeze the meat in bags with marinade.

I like to have chicken that is marinated and ready to go.  Spending some time in the kitchen to clean the meat and then freeze in a sauce or marinade is much cheaper than buying pre-marinated frozen chicken.

Buy in-season produce

We try to eats lots of fruits and veggies, but that can get costly.  If you are careful to buy what is in season, your fresh produce budget is dramatically reduced.  We ate a lot of watermelon last  month because it was so cheap. I am kinda sad that those days are coming to an end.  Sometimes you just need an apple or strawberry, but it will always be better to buy the stuff in season.

What other tips to you readers have?  Do you have any questions for me?

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I cannot  believe I fought the change for so long.  It has made me be more diligent with my couponing and sale shopping.  We have stayed under budget for some of these weeks as well.  This was nice when I was able to use that extra on a special week, like when shopping for our anniversary trip — you can bet I splurged on snacks at Trader Joe’s!

This change made our budget much better, as a whole.  Now there is no accidental $200 overdraw from the grocery fund.  We get what we get and that is all we can use.  This has led us to stay under budget in other areas as well and spend less than what we make.  We also sit down weekly to discuss our bills and finances.  These meetings used to end with my tears, but that is not the case anymore.  I mean, I still get touchy, but we are working better as a team.  We sit down and discuss what bills need to be paid in the next week and pay them together.  This means the stress of bill paying is not on just one of us.  These meetings also make us both feel like we have a handle on our finances.  Neither of us is clueless and neither of us is stressed out.  It does get tense, but as I said before, it’s getting much better.   Plus, I realized I can light candles all around the bathroom and end the meeting with a book, a glass of wine, and a hot bath!

Have any of you started using the envelope system?  Has it changed your life as well?  Share your budgeting sucesses (or not-so-successes) in the comments!

The Envelope System

We decided to use an envelope system, somewhat like the Dave Ramsey method; or, if you are April, you call him Damn Ramsey.  That is how I feel about the envelopes too, they are not my favorite thing.  Those envelopes though, they do save you money.  The idea, if you aren’t familiar, is keeping your allotted cash in an envelope so you can’t go over budget like you could with a credit or debit card.  I have been fighting putting our grocery money into an envelope for a long time. That was always an item that we “budgeted,” but it was not an envelope.  I liked the ability of using a card and being able to buy groceries whenever I wanted.  It has something to do with how I was raised!  I also like being able to stock up on things that are on sale.  Now we have too large of a stockpile and a habit of overusing our grocery budget.

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Matt and I finally decided to switch to cash.  This is a huge decision (it probably doesn’t seem like it, unless you use the system) that I am finally somewhat comfortable with.  This should curb my excess spending (no, we don’t NEED cereal bars) and keep us within our budget limits.  Hopefully I can come back in a few months and say, “Wow, that was such a smooth transition, why didn’t I do that years ago?”  I know this will make my shopping trips take twice as long, because I need to calculate out how much everything costs, but it should be worth it.

Have I left you wondering how much do we spend on groceries?  I think this is a number that varies depending on many factors, like family size, where you live, etc.  However, we “budget” $350 to $400 a month on groceries.  I am beginning to think this is excessive, even though my husband still eats like a teenage boy.  We are putting $80 a week or $320 a month into our envelope.  This might be one that we replenish every two weeks instead of on the first of the month.  Hopefully I do not go crazy with the budget, as there is no overspending when you run out of cash!

Do you use the envelope system?  How does it work for you?