Although we’re only technically a few weeks into summer, it is almost back to school time for the kids. The kids start 1st and 4th grade on August 9 and this year, for the first time, we have decided to set a budget for our back to school shopping. Quite a bit went into this decision and so I wanted to share with you how we went about creating our back to school shopping budget.

School Supplies
The kids’ school will have a back-to-school supply list that each student needs to purchase prior to the start of the school year. This includes items like tissues, paper towels, pencils, crayons, etc. All of these supplies are pooled together and not reserved for our kids, specifically.

Unfortunately the state’s public education budget keeps getting cut and so these expenditures are a necessity. I don’t mind helping out because if we don’t buy these supplies, as parents, then teachers foot the bill. So we took this into account when setting our back-to-school shopping budget and decide to not include these items in the overall budget and instead just incorporate them into our monthly household budget. In other words, the kids won’t have their funds for clothing, shoes, etc reduced by the mandatory school supplies list.

What to Include?
Now that we’ve decided one thing that wouldn’t fall under the kids’ individual back-to-school shopping budget, we had to decide what to include. Since we live in a warm weather climate, back-to-school clothes consist primarily of shorts. Jeans or pants aren’t usually worn until late October and inevitably the kids will have outgrown whatever was purchased in July and August. So this year’s back-to-school shopping budget will include the following items:

• Shorts and skirts
• Short-sleeved shirts
• Novelty socks
• Hair accessories
• Shoes

We will have a separate clothing budget for cool weather clothing – long sleeved shirts, pants and jeans, and jackets.

Determining the Budget Amount
When determining how much you should spend on back-to-school shopping it is important to look at several things: your income, your debt load, the age of your children, etc. Our kids are young and so clothes are less expensive. Our debt load is high but our income is also high. So our basic dollar amount may be higher than some and lower than others but the percentage of our overall monthly income is low. The amount we’ve set for both kids, combined, is about 5% of our take home pay.

As is the case with everything related to budgeting and personal finance is that the personal part of the equation is huge. While the decision is personal, it is important that you research all of the factors in this article prior to setting your back-to-school shopping budget.

No related posts.

If you’re interested in watching The Dave Ramsey Show but don’t have the Fox Business Network or you’ve gone gazelle intense and cut the cable, you can catch certain episodes on Hulu. Here’s the most recent episode from May 25, 2010.

Related posts:

1. Who is This Dave Ramsey Guy Anyway?
2. Dave Ramsey On How Much House You Can Afford

If you’ve heard the phrase “sinking funds” and wondered how it pertains to personal finance, this is the blog post for you. A sinking fund is simply a pool of money that you use to save for a specific expense. For example, if you own a car then you know that the car will need tires every 50,000 miles (or so). This isn’t a surprise expense. This isn’t an emergency expense. However, it can quickly become an unplanned expense. However, a sinking fund takes out the unplanned aspect and allows you to save for new tires on a monthly basis instead of freaking out when it is time for new tires and you don’t have the cash to pay for it.

Let’s look at an example using numbers:

New tires – $1000.00 (nice tires)
Annual mileage – 25,000 (you drive a lot)
Time to expected expense – 24 months
Savings per month – $41.67

So if you are planning to spend $1000 on tires every two years, you can set aside $41.67 per month into a sinking fund. This way, you can fully fund your new tire purchase with cash without touching your emergency fund, using a 90-days same as cash offer, or putting it on a credit card.

Where to Put the Sinking Fund Money?
Now that you have a better idea as to what a sinking fund is, you may be asking yourself where to store the money. Some people store the money in a cash envelope in their house and others store it in an interest-bearing checking account. I store my sinking fund money in an ING savings account. I choose ING because the money takes 48 hours to get to and I’m less likely to use it for an impulse purchase. Impulse purchases is one of my bad money habits and so for me, it is important that this money be out of reach from an impulse purchase perspective.

Although I have several sinking funds, I only have one physical sinking fund account. The account may have $1000 in there but a portion of it may be for the new tire sinking fund while another portion is for Christmas shopping. I keep track of how much I have in each of my individual, virtual sinking funds via a spreadsheet. So a monthly deposit of $200 to the sinking funds ING account may be earmarked for five different sinking funds. It may sound a little confusing at first but it is easy once you do it a few times.

Common Sinking Fund Items
Okay you know what a sinking fund is and you know where to put it, now on to what kind of sinking funds you need. This is going to vary by family and really puts the PERSONAL into PERSONAL FINANCE. Some families may be able to cash flow an oil change and tire rotation every 3 months while other families need to approach it from a sinking fund perspective.

So here is a list of some common sinking fund items that you can use to get started with your sinking fund accounts:

• Auto Repairs & Maintenance
• Tires
• Homeowner’s Insurance (not paid monthly)
• Clothing
• Vacations
• Birthdays and Other Celebrations

You can have as many or as few sinking funds as you need. Regardless of how many you choose, sinking funds are a great way to plan for expenses that aren’t unexpected but aren’t usually a part of the typical monthly budget.

Photo: alancleaver_2000

Related posts:

1. Suze Orman on Personal Finance in 2010 – The Back to Cash Movement
2. Where Should You Put Your Short-Term Savings?

I have a few key financial goals for 2010. These goals can be separated into the following categories: reducing spending, paying off debt, and savings.

Reducing My Expenditures
As my name implies, I’m a “Big Spender” – shopping is one of my weaknesses. However, I’m not the traditional female shopper. Aside from my love of Coach purses, I spend more money on electronics and other gadgets. I also enjoy shopping for my children. I’m going to work on reigning in my frivolous spending in 2010. I love bargain shopping so I’m going to be more methodical in my hunt for bargains and buy what is needed, not just what happens to be a good deal at the time.

In addition to cutting back on luxury items, I’m also going to work on cooking more from scratch and eating out less often. This is not only a way to cut my monthly budget, it is also healthier for all of us.

Paying Off Debt
Unless we see a huge and unexpected financial infusion this year, we will not be able to pay off all of our consumer debt in 2010. However, I’m going to plug away at my debt and any non-planned monies will go directly to the debt snowball. In order to expedite this process, I’m committing to no new debt this year. Wish me luck!

Savings
Although I am basing my get out of debt plan on Dave Ramsey’s teachings from his book The Total Money Makeover, I’m not following his plan precisely. I will be continuing to put money away into retirement and emergency savings funds throughout the year.

No related posts.