FPU Week 3: "Cash Flow Planning" and Some Great Deals

We're starting our third week on Financial Peace University today and we have had some great successes.  Especially yesterday!  But I'll outline that in a moment.

First thing I wanted to talk about is budgeting.  I mentioned it briefly last time, but let me tell you, IT REALLY WORKS. The most important thing in these first few weeks of budgeting is to get your mind right.  You have to stop thinking of your spending as 'expenses.'  (By the way, this example is coming from me and not really something Dave Ramsey explicitly teaches you, as far as I know.) But, rather think of your spending as 'investments.' I mean everything.  Even the smallest purchases.  The easiest example I can think of is a loaf of bread.  Every single thing you purchase with money has a dollar value assigned to it.  For the sake of example, let's say you buy a loaf of bread for a $1.00 (I know, cheap bread).  That bread you just purchased now has a worth of $1 attached to it.  That's not to say that you can take it down to the bank and cash it in for a dollar, but to you, it is worth $1.00.  Now, the 'normal' thing to do is just consume the bread without thought and go out and buy more, right?  There's always more bread at the market!  And, it's only a dollar!  Well, no.  That's not how we're thinking anymore.  Instead of considering that bread an 'expense,' it is now an 'investment.'  An investment is something that we put our hard-earned dollars in to expecting some sort of positive return.  In the example of the bread, we want that bread to last as long as possible and get a better ROI, or 'return on investment.'  If we get the bread and eat the entire loaf in one day, we're fat and happy, but we got a very bad ROI.  The next day comes around, we're starving and have no bread, so we go out and spend another dollar.  Not good.  That eats into our budget like you wouldn't believe, and if we aren't budgeting, we don't even know how bad it is! 
But let's consider another way.  If our $1 bread is now an investment, we are going to attempt to 'stretch' that bread out as long as possible, hence, 'stretching our dollar.'  So, instead of eating it all up in one day, we're going to slice a couple of pieces off and make a sandwich.  Next day, we'll cut some up and make garlic bread out of it, and so on and so on.  We may not get to eat as much as we want in one day, but our investment is now nourishing us for a week, instead of one day.
The other half of this is that the bread will spoil if we go too long.  So, we must balance maximizing our use of the bread with getting it used before it goes bad.  If any part of it has gone bad, it is unusable and we have lost some of our investment, and therefore lost money.

So how does this relate to budgeting?  We now use our money for things that we will get the maximum ROI out of.  Instead of buying crap food every other day and using up our budget, we plan, coupon, and buy in bulk.

A word on buying in bulk:  I'm a big believer in the warehouse stores (we generally use Sam's Club), but you can bust your budget in there real quick if you're not careful.  Our general rule is to purchase staples, or items we use at least a few times a week, and if there's some gotta have deal, we'll get that too.  But, if you go in there to buy everything you need, since it comes in bulk and you will be spending more up front, you can easily rack up a $400 bill if you're not watching yourself.  Then you better pray all that food will last you through the month since you used all your grocery money on 52 cans of green beans and a 30 lb. barrel of cheese puffs.  Go with a PLAN. 

Strategize your purchases.  It may sound boring, but the first time you work the plan and you see that dollar value at the end of the receipt that tells you how much you saved, you will commit right then and there to never buying without a plan again.

I use the term 'plan' instead of 'shopping list' because saving grocery money depends on a lot more that just the shopping list.  All plans have a shopping list, but not all shopping lists are plans.  Think of it that way.  I read circulars, use my shopper's card, coupon (only on items I'd be buying anyway), go on double/triple coupon days, set aside a decent amount of time to get it all done, and then make my shopping list and stick to it.  The grocery line on your budget will be one of the largest, but it is one where you can find the most savings.

Ok, so here's a good deal I've found:  We went to Sam's Club over the weekend to stock up, and since you can easily spend a couple of hours in there, go during lunch time.  They have a meal deal at their little cafe for $1.50 that is a Nathan's hot dog and a 32oz. refillable drink.  Easy and cheap lunch, and all the other items are low-priced, too.

Success Story:  We also went by Kroger to get some non-bulk items and through our planning we bought $100 worth of groceries for $67.  Awesome.