Cutting Back

How to Be a Budget Fashionista
by Kathryn Finney

(Page 2 of 2)

You have two basic choices to improve your budget: You can either increase your income or decrease your spending. I suggest doing both. In Chapter 2 I'll show you ten ways to infuse cash into your bank account. I've used several of these methods to put dollars into my bank account. Dough-raising methods 3 and 4 (selling items to consignment stores and selling on eBay; see pages 23-27) were particularly effective in infusing much-needed cash into my budget. However, the easiest way to tilt the budget scale toward positive is to cut back on your expenditures.

The table below demonstrates how cutting back on simple items like trips to the local Starbucks and purchasing lunch every day can save you tons of money — enough to help fund a new wardrobe.

Building Your Own Budget

In any good relationship both partners must be committed to building and growing the relationship. In order to build a committed,

loving relationship with your finances, you must first investigate your own feeling toward money. Suze Orman, the financial guru, states in her book Financial Guidebook: Put the 9 Steps to Work, "Financial freedom begins not in a bank or even in a financial planner's office, but in your mind. It begins with your thoughts." Right on, Suze. So put your thinking caps on and ask yourself the following questions:

• Do I forget to balance my checkbook and rarely review my monthly statements?

• Do I spend more on clothes and accessories than I do on a savings plan?

• If I lost my job today, would I be unable to pay my essential bills?

• Do I consistently use credit cards to purchase basic items like groceries?

If you answered yes to any of these questions, then developing a budget is crucial to help you create a savings plan that is shopping friendly. Developing a relationship with an accountant can help you to manage your finances. You may also want to contact a certified financial planner (CFP). CFPs are financial professionals who have taken additional courses and passed a ten-hour examination on advanced personal finance — related topics such as life insurance,

securities, and taxes. Although they charge a fee, CFPs can help fashionistas who need that extra push to make the budget cuts necessary to become a budget fashionista. To learn more about CFPs, visit the Certified Financial Planners Board of Standards, Inc. (www.cfp.net).

Steps to Building a Budget

1. Print out or ask your bank for your statements from the last three months. Gross salary is great, but you need to know exactly how much is put into your bank account after taxes (net earnings).

2. Gather all credit card bills from the past three months, organizing them in order of high to low interest rate.

3. When developing your budget, make sure to include all credit card purchases. Credit card money is real money.

Make creating your budget an event! Play your favorite CDs. If you love rock and roll, put on some Rolling Stones and roll right through your budget planning. If you like R&B, put on Destiny's Child and get organized to pay your bills. Jazz lovers, let Coltrane help you speed your way through your financial planning. Once you have the music, make yourself a little cocktail. There's nothing like a cocktail to help you get through any financial-based depression.

Tracking your budget is much easier if you use a spreadsheet program like Microsoft Excel or a personal financial program like Quicken or QuickBooks. You can purchase a version of the software at any Best Buy or Circuit City store, or you can buy online at eBay.com and save a few bucks (make sure it is a legal copy). Either way, these programs make it easier to manage all your accounts in one place. This is important because it allows you to see what kind of a dent you are making, if any, in your debt. Also, it allows you to link your budget to your bank account.

The Budget Fashionista Explains:
How to Save When You Really Want to Spend

One of the hardest lessons for a fashionista transitioning into a budget fashionista to learn is how to save when you really want to spend. After a few years of marriage, my husband and I decided to build a little equity by purchasing our first house, which meant we were operating on a strict budget, something that wasn't exactly my strong suit at the time. What should have been a pretty easy task turned into a battle of epic proportions: Equity vs. Armani. Tax breaks vs. Lenox plates. A 20 percent down payment vs. 20 percent off at Bloomingdale's.

Whether you're saving for a house, a new car, or a much-needed vacation, the tips below will help you curb your spending and increase your savings:

1. Place an address label over debit and credit cards with statements to remind you of your goal. Try statements like "What would Suze Orman do?" "Equity is love," "Closet vs. house," or my personal favorite, "You ain't Oprah." Every time you reach into your wallet to use the card, your saying will remind you not to spend.

2. Launder your money. At the beginning of each week take out all your spending money — I mean everything in cash (including grocery money) — and hide your wallet in your dirty clothes hamper. When it's time to you do your weekly laundry, it's time to take out more spending money.

3. Window-shop from a distance. Drive to a mall that is very far from your home to go shopping and bring only $10 in cash with you.

4. Shop with an annoyingly cheap friend. This is a particularly effective approach if the person is the type of cheapie who makes comments like "That costs only $2 to make" and sighs every time you select something from the racks.

5. Freeze your credit card. This old savings trick really does work, but make sure you won't need the credit card anytime soon. I once had a very nasty incident thawing out the credit card in the microwave. Let's just say that credit cards aren't made of microwavable plastic.

Another way to save money is by saving your spare change. When I was a child, my father would often give me change from his pocket. I used to put this extra money into my Mickey Mouse bank. Although the Mickey Mouse bank is long gone, I continue to put pocket change in a little bank. Yes, I know it sounds corny, but your spare change could fund a pair of new shoes or help lead to an early retirement. At the end of each month lug your growing stash to the bank and deposit it in your shopping savings account to use at your whim. Whatever you don't use earns additional interest until you do use it.

Copyright © 2006 by Kathryn Finney. Excerpted by permission of Ballantine Books, a division of Random House, Inc. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.

About the Author

My name is Kathryn Finney and I'm the Budget Fashionista. I was born in the heartland of America, where as a budding fashionista, I set fashion trends despite -30 degree weather and a Wave Noveau curly perm (a.ka. fancy Jheri curl). I moved to the east coast to attend college and after eight years as a serial shopper, budding politician, and Ivy League-educated epidemiologist, I was totally broke. How broke, you ask? Let's just say my first born child will be named Visa Student Loan.