Thursday, April 5, 2012

The Money Saving Mom's Budget Review

When you're trying to reach a financial goal, there are basically two ways to meet it: increase your income and/or cut your expenses. In reality, you have to do both. If you just increase your income, your expenses could increase at the same time, leaving you back where you started. If you just cut expenses, eventually you will run out of expenses to cut.

The Money Saving Mom's Budget: Slash Your Spending, Pay Down Your Debt, Streamline Your Life, and Save Thousands a Year by Crystal Paine of Money Saving Mom focuses mostly on the reducing your expenses and not so much on increasing income. So while it is certainly necessary to cut expenses, the book does not give a full picture on how to best meet your financial goals.

Now, don't get me wrong, I am a fan of the Money Saving Mom site. It lead me to couponing in the first place. In 2009, my husband found out that he would be losing his job in a matter of months.  I reacted by tightening up my already-frugal ways and started looking for more ways to save money.  An article I read about a family surviving on their savings while unemployed led me to Crystal's site.  As I read the posts there, a light bulb lit up over my head: I could coupon (which I had never really tried before) to save more money!  I got going and found I could buy lots of food for just a little money.  My desire to share what I was doing with the world led me to start Frugal Follies. (And as it turned out, my husband started a new job about a month after he was let go from the previous one, so we ended up just fine.)

This book is definitely chock-full of ideas to save money, primarily on food and drug store items.  But first, the book covers goal-setting.  I love the idea of having short-term, mid-term, and long-term goals, written down and reviewed regularly.  And that was another thing that drew me to the Money Saving Mom site: when I first started reading, Crystal and her husband were saving to pay for a house in cash.  Wow!  Each month, she gave an update in percentages of how much they had saved.  It was very motivating to see her savings add up, and it made me want to save more as well.

After covering goal-setting, the book goes on to removing clutter from your home.  What?  What does that have to do with saving money?  Crystal says that if your house is in chaos, your financial life will be too.  I can see this, because just a few weeks ago, I was opening some mail from my health insurance provider that I hadn't opened when it arrived a couple of weeks before.  In the envelope I found some reimbursement checks - I had been charged too much by a doctor.  Holy cow, had I waited just a little longer to open that envelope, the checks would have expired, and I wouldn't get that money.  So I see some truth in her argument.  Cleaning up the clutter will definitely be a more important goal for us!

And then, the dreaded B word - budget.  Instead of just creating a budget, she suggests that you ease into budgeting with a three-month process.  I liked that.  I sorta keep a budget - I plan out where money is going each month, and I have a tight food budget, but I don't budget specifically for categories like clothing and eating out.  So I just might!  I also liked that Crystal sees that many people need a credit history to get a job, and she gives a method to create a credit history without going deeply into debt.  This is one place where I disagree with Dave Ramsey, of whom Crystal and I both are fans.

She then explains how to use coupons to save at the grocery store, and also gives general explanations of how to play "The Drug Store Game."  I'm familiar with this, so I didn't learn a lot, but I can see that if you were a coupon newbie, this would be an excellent introduction.  It would have been nice to have more details about the drug stores' policies, but these change rapidly and would make the book dated.  Still, she could have had a link to posts on her site explaining the details of each drug store's method.

The book also gives some great tips on saving money on food without using coupons, purchasing clothes and other home items, and how to earn small amounts of money.  But it doesn't tackle the big purchases: cars, homes, insurance, heating and cooling, appliances, and so on.

And, in any event, I tend to read financial books not for the tips, but for the backstory of the author.  And her story of living in a basement apartment is a compelling one.  According to her, while her husband attended law school, they had an income as low as $650 per month at the time and were debt-free. Rent was $500 per month, and they tithed 10%, or $65 per month.  So that means that for everything else, they only had $85 per month.  How did they afford car insurance, life insurance, renter's insurance, and health insurance (not to mention food and gas for the car) on that kind of budget?  Was staying debt-free more important than having these essential insurances?  What would have happened had they had a car accident, a fire, a health emergency, or a death?  Refusing to take out loans in this case was extremely risky, in my opinion.

Later, when their financial situation was much better, Crystal and her husband set a goal to save $100,000 for a house in 5 years.  That means that on average, their goal was to save around $1700 per month.  This is pretty aggressive for most folks, but by getting extra jobs, selling lots of stuff, and cutting expenses down to the bone, a large number of people could do this.

But she says that after the first year, they barely made the payments.  Her blog says that they had saved 33% of the amount, or $33,000, in the beginning of 2009.  By the end of 2009, she had saved all the money.  That means that they saved $67,000 in the year.  While cutting expenses may have contributed to the amount that they saved, clearly a very large income was the main way to save that amount.  I would guess that most of the Money Saving Mom readers don't make that much in a year.

Don't get me wrong - I'm not begrudging her family's large income.  I'm just saying that The Money Saving Mom's Budget should have focused more on earning a large income as a way to meet your financial goals.  If Crystal and her husband had made only $50,000 per year, no amount of cutting would have enabled her to save $67,000 in one year.  But as I said at the beginning, earning a large income alone is not enough - you have to be able to hold on to it, too.  And clearly Crystal and her family were able to do both.

In any event, I enjoyed the book, despite that Crystal's backstory raised more questions for me than it answered.  And I definitely learned a lot of new ideas from this book.  I guess I should stop blogging and get going with the clutter cleaning!

(Disclosure: I received an audio copy of The Money Saving Mom's Budget for review. Please see my disclosure policy for more information.)


Anonymous,  April 5, 2012 at 2:30 PM  

I know Crystal and have known her since before the wedding. Many of the things that you find flaw with in the story for those who know her and her family know how things were really paid for and it is not for me to say however, I personally do not allow others to pay my way in life so that I can pay cash for a home, or so that I did not have to borrow for school. I pay my own way and do not expect other's to pick up my slack.

Crystal is a nice person but the entire story does not mesh and one day the truth will all be let out of the bag.

I bought a large number of the books as a favor to a friend I gave them as gifts to others however, everyone I know who read the book take issues with Crystal and her family due to the fact that the stories do not mesh.

I wish her and her family all the best in life. However, I see her on her way down and when you rise as she has the fall can be quite harsh.

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