For the past two years, my husband and I have survived on a threadbare budget. We’ve said no to dinners out, to new clothes, to unnecessary trips across town. Whenever faced with the decision to spend or save, we always opted to put money away for a rainy day – we were convinced a deluge of biblical proportions was looming just over the horizon.

But as the years passed, no such deluge came. Instead of being flooded by rain, we found ourselves flooded by money. All the scrimping and saving we had done over the intervening years had allowed us to do all the things financial experts say you’re supposed to do: building up a six-month emergency fund (check), maxing out our 401(k) contributions (check), saving or investing at least 10 percent of our pre-tax income (check).

We were rife with money… but we weren’t having any fun with it. So six months ago, I loosened the purse strings. I made it rain money in my house. Booyah.

Going Overboard

The first few weeks after I stopped acting like Ebeneezer Scrooge, my husband and I went a hog wild. We spent $75 at a nice restaurant, not to celebrate a birthday or anniversary, but just because. I bought myself a new pair of jeans for the first time since getting pregnant with our oldest child… nearly four years prior. My husband purchased new tools, without a plan as to how he’d use them.

At the end of the first month of our new-found financial freedom, we reevaluated things. Although we’d still paid all our bills, maxed out our IRA contributions, and hadn’t dipped into our emergency fund, we’d failed to make extra payments on our existing debts (specifically, our car loan and my student loans). When we’d loosed the purse strings, the plan was to have fun with money. But by overspending, we’d gone back to where we were years prior, when money was tight: we were so worried about how much we had – or rather, didn’t have – that we weren’t having any fun anyway.

We had to rein it in.

Finding Balance

In month number two, we employed the allowance method. I gave my husband and I $50 each to do whatever we wanted. I expected him to spend it all on tools he wouldn’t (and didn’t know how to) use; he expected me to spend it all on shoes.

But we surprised each other.

Instead of blowing his $50 on a new power sander, my husband split his allowance into five allotments of $10 each:

• He used $10 to go out to breakfast with his coworkers before work one morning
• He used another $10 to enter a fantasy football bracket with some friends
• He spent $10 for new insoles for his tennis shoes
• He paid $10 to take our daughter to the children’s museum one rainy afternoon
• He used the last $10 to go out for drinks to celebrate his friend’s 40th birthday

Likewise, I also broke my $50 down into smaller amounts:

• I spent a total of $16 on four separate occasions to buy myself Starbucks before heading to the grocery store to shop
• I bought a cool new color of toe nail polish for $5 instead of paying $25 for a pedicure
• I used $10 to go out to lunch with my girlfriends
• I paid $7 to buy a six-pack of my favorite adult beverage to share with my husband while watching football one weekend
• I used $5 to participate in a Zumba-a-thon for charity at the YMCA

Faced with the decision to spend or save, I pocketed the remaining $7 to use the next month. I could also contribute to a CD. Check CD Rates here.

What We Learned

Without consulting the other, my husband and I both learned that $50 could go a long way. We employed many of the same budgeting strategies that had helped us build up our nest egg in the first place when it came to spending our monthly allowance money. It’s easy to learn how to save money – you simply reduce or eliminate your expenses and save as much as you can. I’d argue it’s harder to learn how to spend money, or, perhaps better said, to spend money wisely.

Several months have passed since we started the allowance system. Over that time, we’ve figured out what our “fun” financial priorities really are. To me, a $4 latte from Starbucks is priceless; it helps me relax during what can otherwise be a rather frenzied trip to the grocery store. To my husband, the $10 he spends every month to have breakfast with his coworkers before one of his dreaded weekend shifts puts him in a better frame of mind heading into work. I’ve never regretted the money I’ve spent on charity-related expenses, and I know my husband has never doubted the value of the money he spends on our children.

Reader, what are your financial priorities? What lessons have you learned when it comes to spending money?

I have a confession: I shopped on Black Friday.

I know. A lot of people shopped on Black Friday. This difference is, although it was in the budget, I hadn’t planned on it. I had planned on staying put at my in-laws’ house and doing absolutely nothing except reading, eating leftovers and keeping the money in my wallet. But my husband and daughter wanted to take a little jaunt to go visit my mother-in-law who just happens to work retail. In an outlet mall. And her store? Is across the street from The Children’s Place.

The Children’s Place is a store that, for years, I was able to avoid. The clothes didn’t fit my daughter that well and they were more than we could afford.  Then, all of a sudden, the clothes did fit her well and we could afford them. Let me clarify: we could afford them as long as they were on sale (I have a great deal of difficulty parting with a $25 for a single pair of jeans for my 5-year-old).  And when you shop at an outlet store? Everything is always on sale.

So off I went, with daughter (and disgruntled husband) in tow. When we walked in we were greeted with the fact that everything in the store was 40% off and we had a 20% off coupon for purchases over $50. I knew we were going to spend over $50 because a) things like that happen and b) my daughter happened  to need a lot of clothes. In the end, I wound up purchasing 4 pairs of pants, 1 skirt, 6 shirts and 1 pair of pajamas for $70 (including tax, and we got a free stuffed monkey that normally retails for $9.95. Another perk of the over $50 purchase). I was pretty pleased with the deal.

After we were done at The Children’s Place, we went back over to my mother-in-law’s store. She works in an undergarment store and they were running a deal where bras were on sale for $16.99 if you bought 3. There was also a coupon they were handing out at the door for 25% off your total purchase. If you did the quick math, combining the sale price with the coupon meant that you could essentially get 4 bras for the sale price of $16.99. Anyone who’s ever needed to buy a bra knows that this was a great deal.

It took every ounce of willpower I had not to purchase those bras. I know that if I had mentioned it, my mother-in-law would have bought them for me with her employee discount but I don’t feel comfortable with that. Not only do I not feel comfortable with the concept of her buying me my bras, I don’t want her to use her employee discount for me. It’s a moral/ethical dilemma that I’m still trying to work on. But I digress…

I really wrestled with it because I recognized that this was a great deal. It’s not often that you can get 4 bras for $50. And recognizing that a deal really is a great deal is one of my basic tenets of shopping. Like most savvy shoppers, I try to save money where I can and this means using a critical eye on coupons and sales. I am aware that perhaps the clothes I purchased for my daughter was not the greatest deal that could have been had, but when I think about the fact that I saved approximately what I spent, it isn’t too shabby. Especially when I weigh it against the durability and length of time she will wear the clothes.

Another of my basic tenets that made me abstain from buying the bras was the fact that I always shop with a plan and a budget. Buying the bras was not in the plan nor was it in the budget. I could have used some extra money to purchase the bras, and perhaps I should have. But my overwhelming need to stay within my budget prevailed over the fact that I probably should have seized this sale. Sometimes I wish I wasn’t so rational.

I’m sure that this is not the last time I’ll be torn between a good deal and my need to stay in my budget. Perhaps I should learn to plan better. Perhaps I should have an emergency shopping fund. Perhaps I should learn to let go of my budget a bit. But all of this is a struggle for me.

How do you handle this type of situation?

The following is a guest post by Lisa @ Frugalist, a personal finance blog that brings you money-saving strategies and frugal living tips

Creating a budget is the best way to stay on track with your expenses – and to help you save money. Living a frugal lifestyle starts with a plan after all, and your budget is that plan: it’s your goals, and your history manifested in one place. Never underestimate the power of a budget!

The Traditional Way

If you are using paper and pen, a spreadsheet, or a no-frills program of some type to make your budget, you’ll want to pay attention to the key word in this subheading: traditional. Many budgets aren’t quite as “automatic”and high-tech, but that doesn’t mean they’re less valuable; traditional budgeting techniques have their own advantages. Here are the basic steps to creating a traditional budget:

1. Beginning Steps: You should have an idea of the numbers that will go into the budget. Take a few moments to identify the down and dirty numbers that will be in your budget – your car payment, house payment, insurances, income, and any other debt. Write them down for easy implementation.
2. Categorize: Start making categories and subcategories for all of your expenses (and one or more for income). For example, you might include “fuel,” “insurance” (or in one “insurances” category), “payment,” and “miscellaneous” in the “car” category alone. Do the same for food, entertainment, savings, and so on.
3. Format: Depending on your method, you’ll need to put everything in the right format. Most budgets will be month to month, so you might want to plan for this progression. This will allow you to look back at previous months to see how you are progressing.
4. “Others”: As this is a simple guide to creating a traditional budget, there are “other” items that you’ll need to approach. Make sure you’re integrating everything finance-related in your budget, such as investments and short-term and long-term goals. You’ll also need to backup the budget in some way, just in case something happens.

Modern Methods

Many people prefer to use more modern ways to keep a budget. You can easily get a free, web-based program to use on your computer. Mint and Adaptu are two easy to use options. Also popular are the budgeting software programs, like Quicken or Turbo Tax. Alternatively, you can choose a strong and interesting option in the form of a mobile device app (smartphones, tablets, etc.) Many of these programs and apps are extremely simple to set up: after entering the categories and limits, you are ready to start entering transactions as they happen. The nice thing about these programs is that so many options are automated, such as reports, graphs, charts, and other items, which are created for just for you.

Whatever your choice is in this arena, make sure you find a system that works. Some apps and programs are extremely involved, allowing you to enter all transactions for every account you have (credit cards, checking accounts, investment accounts, etc.). You might opt for a simple budgeting app on your smartphone where you simply enter what you buy and compare it to your income.

Overall, creating a budget isn’t too difficult. Regardless of your method, find a way to keep everything that you want to track in order. As you begin to keep you budget, you will likely show several items that can be approached in the goal of saving money.

Do you use a budget plan? If so, what’s your method? Have questions about creating a budget? Ask them here! Leave a comment below.

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Your first step is complete- you’ve created a budget (and if you haven't created a budget, what's wrong with you? Create one now). Now what? I suggest verifying the monthly amounts in your budget. At this point, those amounts you entered in your budget are really just educated guesses (I’m talking about the discretionary amounts in your budget). To verify those amounts, you need to keep track of every single dollar. Period. There is an updated Budget Template form here, including fields for you to input what you’re spending so as to keep track of it.

Step One- Keeping Track: For one entire month, every time you spend anything, write down how much you spent in the ACTUAL AMOUNT SPENT column provided in the Budget Template. Keep updating that number every time you spend money in each category to reflect the total amount you’ve spent on that item up to that point of the month. If you spend money on something that there isn’t a category for, then write the category name in one of the blank boxes provided at the bottom. It’s helpful to keep receipts and other documentation to refer back to.

Step Two-Compare: At the end of the month, add up all of the columns, to include the PREDICTED AMOUNT and the ACTUAL AMOUNT SPENT columns, as well as the predicted and actual income columns. Take the the total amount of income you actually received for the month, and subtract from it the total actual amount you spent for the month. If the number ends up being negative, then you miserably fail at life and should probably just give up (Disclaimer: Go Be Rich does not endorse suicide). Put that negative number in the OVER BUDGET BY box. If however, that number was positive, give yourself an "atta boy!" and put that positive number in the UNDER BUDGET BY box. This is your surplus for the month.

Step Three-Adjust:  Look at the individual categories whose budgeted amount doesn’t really match the actual amount spent.  On the categories that have gone past the amount budgeted, consider adjusting the amount, and compensate by cutting back on other categories, or by supplementing from other categories you didn’t spend as much in as you thought you would.

Step Four-Review: So basically now you can see where each and every one of your dollars goes on a monthly basis. Did it open your eyes a little bit, to see once and for all exactly where all of your money goes? For those really ambitious ones out there, you could take this concept to the next step and track your expenses for a full year like I’m doing, at the end of which you could average out what you’ve spent and create a new budget for the coming year. There'll be an upcoming post on this very subject later.

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It seems people in America like to eat. They like to eat a lot. I like to eat a lot. Thus, they (and I, unfortunately), spend a lot of money on food. However, it is possible to eat lots of good food and not break the bank. Here are some ways I’ve found that work out pretty well:

1.       When you and one other person eat out, order a small appetizer, 2 waters and one meal to share. Not only is this healthier, you’ll walk out for about half the price of a normal dinner, and considering you probably don’t finish an entire meal on your own, you’ll still feel full (does not impress potential girlfriends, by the way).

2.       As far as pizza goes (and I know my pizza), consider skipping the brand-name pizza Hut or Papa John’s in favor of Little Caesars or Papa Murphy’s. One large pepperoni pizza from Little Caesars will set you back only $5 dollars, and one huge, very filling large pizza from Papa Murphy’s runs about $8 dollars.

3.       Visit your favorite restaurant or convenience store’s website to check out what freebies they have available. For example, an awesome gas station/convenience store in the Midwest, Quik Trip, sends you coupons for one free item every month, provided you give them your E-mail address. Many restaurants will provide you with a coupon for a free item on your birthday, such as Coldstone Creamery… and let’s just say that it can be your birthday several times per year if you work it right.    

4.       Simply Google “grocery coupons”, and site after site will appear, all full of various types of coupons available for printing and taking to your local grocery store.

5.       The way to save money on food that nobody really likes: Leftovers.

6.       Grocery stores usually have severely discounted holiday-specific food items the day after a holiday. The day after Halloween, my local Wal-Mart had all Halloween candy and accessories 75% off.

7.       Make meals at home. Yes, I’m suggesting you actually cook something. Try to make it fun though by cooking with a girlfriend/boyfriend, spouse, or your children. In the end, by buying cheap ingredients rather than the name brand ones, a complete meal at home can be much cheaper than going out to eat.

8.       Don’t order soft drinks at restaurants, no matter what. You can always find a vending machine for at least half the price of what they charge you at a restaurant. You know all those free refills you get? They aren’t exactly free when you’re initially charged $4 for a soda.

9.       Buffets are always cheap for the amount of food you receive, which is usually all you can eat.

10.   Restaurants that offer free food are the holy grail of cheap meals. For example, Olive Garden gives you an unlimited amount of free breadsticks and salad to munch on while you’re waiting for your meal, and trust me, you can fill up on just breadsticks and salad. Some others include Texas Road House, On the Border, Playa Azul, and Outback Steakhouse. 

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So as of April 27^th, the little red Honda has officially found a new home in the wonderful Midwest state of Oklahoma.  For those of you that don’t know or haven’t heard, I’m currently in the process of killing off all of my debt and monthly expenses (as violently as possible, of course), that I possibly can, one by one, in the wake of a recently increased salary.

In one fell swoop, I eliminated $13,463 dollars of debt

I also erased $363.66 from my monthly expenses.

Check out my updated Financial Situation.

As much as I hated to see that car go (hey, I know it’s a Honda, but it was still fun to drive…), I immediately felt better about owning only one vehicle as soon as I got back to my apartment and found only my Dodge Dakota waiting for me.

It was a weird sell though. I had put the Honda on craigslist a while back and got no bites whatsoever, and then out of the blue this middle-aged woman calls me up, saying she wanted to come pick it up tomorrow, for exactly what I was asking, sight-unseen. She was really only calling to set up a time and double-check on the exact amount so that she could get a cashier’s check from her bank. She asked no questions about it whatsoever. Granted, my ad on Craigslist was overly-descriptive, but come on, who just buys a car like it’s a gallon of milk?

The next day, several hours before we were to meet at the bank (so that I could pay the loan off and they could give her a lien release),she called saying she was flying in from Ponca City, Oklahoma (a 2 hour drive from where I live), and that she would need a ride to the bank.

Immediately my thoughts turned to the Craigslist Killer. Why I jumped right to a murderer instead of a scammer I’m not sure… possibly an unstable psyche.

Anyway, turns out this lady had got her Father-in-law to fly her down in this little single-prop plane, and she was going to drive the Honda back to Oklahoma. All of the sudden it made complete sense. Yup, I had been scared that a little middle-aged woman was going to kill me. Go ahead and laugh.

After sitting in the bank for something like 3 hours, it was all said and done, I had eliminated 61.2% of my debt.

All that remains now is about $2,300 on my credit card, and the $6,000 I owe on the Dodge Dakota, and then I will be among the proud, lucky few Americans that have absolutely no debt whatsoever (and yes, I include mortgages in debt…not that I have one).

I might even call into the Dave Ramsey show and do one of those crazy “I’m Debt Free!!!!!” screams. Or maybe not.

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Maybe I’m risk-adverse. Maybe I’m ultra-conservative. Maybe I’m just paranoid.

Yeah, we’ll go with the paranoid one.

Apparently I’m paranoid about all of the emergencies and unexpected things that can possibly crop up in one’s life that will require large amounts of money to rectify.

This realization comes from a recent chat I had with a fellow co-worker. This guy has a very different outlook in about every possible area of life than I do, him being much more easy-go-lucky and care-free than I, to the extent that he really doesn’t know where he’ll be tomorrow, let alone a year from now.

The differences in our philosophies on life became really apparent when we broached the subject of money. Being in the military, I know exactly how much this guy makes, and I have a very good idea of what his bills and expenses look like every month, which is why it surprised me when he said he basically lives paycheck to paycheck. So I asked him…

Me: “So where does all your money go?”

Him: “Oh, I just buy a lot of s*#@ I don’t need.”

Me: “Why don’t you just put some of that money away every month?”

Him: “What for? I don’t have any need to”

Me: “What if something happens, like your car breaks down?”

Him: “Eh, I’m not worried, I’ll figure it out when it happens.”

I’ll figure it out when it happens…

I’m pretty sure I had a heart attack, an aneurism, and possibly a mild seizure when he said this.

I just simply can’t fathom not having a very healthy buffer every single month between the amount I need to pay my bills and the amount I get paid, let alone not having a nice little mini-nest egg saved up solely for emergencies.

So for the sake of being paranoid, let’s look at some of the simple little things that could go wrong…

1.       Losing your job: Kind of hard to “figure it out when it happens” when you have no more income coming in whatsoever… and yes, even these military gigs can go up in smoke just like that.

2.       Car gets creamed: If you’re car stops working, needs money to get working again, and you have no money, doesn’t that mean you’re screwed? Oh, and doesn’t that car get you to the place you make your money at?

3.      Your pet gets sick or hurt: I don’t really think Fido’s gonna be cool with waiting around until your next paycheck to get his broken leg looked at or those vital shots that’ll keep him alive and kickin’.

4.       Your House Stages a Mutiny: Air-conditioner craps out in 100 degree heat. Heater explodes in -10 degree weather. Dishwasher spits out cutlery at anyone walking by. Clothes washer sucks your clothing into alternate dimension. There’s a lot that could go wrong.

5.       Zombie Apocalypse: Shotguns, 2X4's, some nails, and a good hammer will need to be purchased… and maybe some hand sanitizer.

Okay, so obviously I’m exaggerating and in a bit of a cynical mood (during which I enjoy a bit of dark humor), but come on, anyone can see why it’s not only smart, but responsible, and really a part of being an adult, to sock away at least a little money occasionally, let alone think about saving for that day when your joints refuse to carry your body into work anymore (usually called old age).

Of course, if the zombie apocalypse occurs before then, you might not have to worry about reaching old age. Come to think of it, I guess money wouldn’t be too useful anymore either.

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One of the things I’m beginning to realize over the past few weeks is that a $4 dollar cup of coffee a day isn’t really that horrible. I used to think that people just didn’t realize how much money they ended up spending through all of those little purchases made on a daily basis, and to be fair, that coffee, if drank 5 days a week for a year, would cost you at least $1000 dollars (The Latte Factor):. However, a person could skimp on the coffee for a whole year and still ruin all of that savings in one fell swoop by a weekend trip to the electronics store.

I use the example of an electronics store because that’s exactly what I did a while back. I was completely anal about saving every penny I could on a daily basis, but I had this massive urge to go out and buy a new desktop computer (on credit) at Best Buy. I got home, set it up…and realized that I’m now more in the hole than I was before. Don’t get me wrong, I’m happy with it, but I could have made do with the laptop I already had in exchange for a little daily gratification through a simple cup of coffee.

The point is, maybe its okay to let up a bit on the small, daily purchases, as long as discipline is exercised when it comes to the large purchases. Possibly my urge to buy a computer came from denying myself a small outlet in the form of the occasional coffee or fast food trip. Or maybe I just really wanted a computer.

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Imagine a new, crisp, hot-off-the-printing-press $100 bill in your hand. Pretend for a moment that someone gives you one of these bills one time per month. What would you do with it? While it may not seem like much, there are probably more ways than you thought possible for that $100 dollars a month to change your life.

1.       If the $100 was invested every month at 8%, then by the wonders of compound interest, in 35 years you would have $230,917.

2.       You could take a class that would teach you a skill that could then be used to start a business, resulting in much more than the $100 a month.

3.        Debt could be paid off sooner, thus eliminating costly interest payments and freeing up more money for investment.

4.        Donation to a reputable charity each month could possibly help change the world

5.       Use it for a date night once or twice a month with your spouse…because nobody's happy when your spouse is unhappy.

6.       Use it to do something fun with your kids a couple times a month and bond in the process.

What else could you do with just $100 a month?

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I was recently browsing some other financial blogs when I came across an article on Consumerism Commentary concerning what the author will teach his children about money. While he had several good points, many of which I will someday teach my children (far, far in the future), there was one that he didn’t mention that I don’t think a lot of parents consider;

how to exercise restraint when receiving large sums of money.

Let me tell you a little story as to why I feel this way. The setting of this story was Technical School for the Air Force. For those who don’t know, Technical School is typically directly after Basic Training. You get paid while in Basic, but aren’t allowed to spend any of it as your every movement is controlled, however, once you arrive at tech school, where you continue to get a steady paycheck, you are granted progressive amounts of freedom, until after a short amount of time you can leave base and do whatever you want.

Now consider the fact that most of these “trainees” are 18 years old, straight out of high school, never lived on their own before, and never had more than a couple hundred dollars in their bank account at any one time. What do they do when they get their bank statement and see at least two grand sitting there, completely within their power?

They go absolutely, positively, completely freakin’ crazy.

By far the largest expense was electronics. I had never seen so many PCs, Xbox 360s, PS3s, top-of-the-line smartphones, and flat-screen TVs in any one building ever before. Many even purchased brand-new cars. In fact, there were local car lots devoted solely to new military members, the owners of which were all too aware of the spending habits of the newly wealthy recruits.

How I escaped these hazards is beyond me, but if I had to give one reason, it was probably picking up my father’s habits with money. I don’t believe I’ve ever seen that man spend a dime on impulse, and while I wasn’t taught specifically to hold on to lump sums of money, I always heard a familiar, cautioning voice in my head whenever I contemplated making a large purchase (or any purchase really), causing me to pause and really consider it, after which I nearly always realized I didn’t actually need it.     

This makes me wonder if the recruits who consistently blew their paychecks were also reflecting the attitudes their parents have towards money.