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This week’s book review is Right on the Money by Pat Robertson.

The first thing many readers would probably want to know about Right on the Money is the amount of spiritual influence found in its pages.  Author Pat Robertson gained fame as a televangelist, founding the Christian Broadcasting Network and hosting The 700 Club.  Right on the Money is not at all preachy.  While Robertson’s beliefs are certainly evident within the book (particularly in the introduction and the chapter on families), the book reads much more like it was written by a true financial expert with strong spiritual beliefs rather than a preacher who also knows something about finances.  Robertson balances his actions (”In my financial planning, giving takes precedence”) with the caveat that you may have different priorities and should tweak his generalized advice to your particular situation.  In one part, he specifically states that an implementation strategy is intentionally omitted, since you’ll need to tailor that to your situation.

The book starts with a concise summary of how the financial crisis occurred. So few people realize the chain of events that led to our current economic state that many would be well serve to read the book just for this point. I liked this book right from the start.  To paraphrase an early excerpt: “Ignorance is no excuse….nor has it served finances well.”  I couldn’t agree more.

Robertson advocates using the

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A weakness in many budgets that allows money to be lost is the failure to track cash.  Adding the ability to track cash in Quicken (and other tools) is easy to setup and quite useful.

Why Should You Track Cash?

Cash purchases may be hiding an inefficiency in the way you spend your money.  Without visibility into where your cash is going, you might not realize the wasteful nature a particular spending habit.  Tracking all of your other spending down to the penny may be for naught if your cash slush fund is where the waste in your spending can be found.  I used to have a category in my budget for “Cash Withdrawals.” I used that category for withdrawals from the ATM.  In reality, the cash should have been allocated to the category it was used for.  My old system basically allowed my cash to be uncategorized spending.  I may have appeared to be following my budget for Dining Out, for example, but if I was using cash to pay for lunch, I might have actually been over budget.  To solve that problem,

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A fellow personal finance blogger, Mrs. Micah, has declared February to be Where’s My Money Going Month.  She’s challenging her readers to track their spending for 28 days and participate in the ongoing discussion on her blog.  I have a guest post on her blog, describing why tracking my money is more important than ever.

In addition to that contribution, I thought I’d share with you where my money went in 2008.  I track every dollar I spend and have found the practice to be quite enlightening.  Even though I don’t have as much fat to trim now that I’ve been doing it for a few years, it is still worthwhile.  Looking at my top expenses for the year is also very informative.

The chart below shows my 10 largest expenses for

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Portion sizes have gotten so out of control that you often get enough for a small family when you order an individual entree. Sure, you can take leftovers home to eat the next day, but I’d rather not have to pay so much to get more food than I really want. In the past, I’ve said that I would gladly pay more than half price to get half as much food when I eat out.

That’s why I was so excited to hear about T.G.I. Friday’s Right Portion, Right Price menu. Restaurants have traditionally only offered smaller portions and prices at lunch time, if at all. The Friday’s program is all day, every day. I hope that other restaurants follow this innovative idea. I don’t eat out much, but when I do I would definitely consider going to T.G.I Fridays to get just the amount that I want at a more reasonable price.

The advertisement announcing this program isn’t available on YouTube at the moment.  I’ll add it to this post when and if it gets added there.

All too often we look at things from their monthly cost instead of the larger, more important picture, of total cost. There were times when these were the same thing. Stores once offered payment plans on purchases that effectively amounted to the 0% interest offers of today, without the associated catches. Offers to accept $5 a month until you had paid the full cost of some mail order item graced page after page of newspapers and catalogs in the early 1900s. Once interest, or the potential for retroactive interest (as is often the case in today’s 0% offers), comes into play, the difference between monthly payment and total cost can be quite large.

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Being frugal should not be confused with being unable to spend. In fact the opposite is true. Carefully monitoring your spending, following a disciplined budget, and saving in as many ways as possible allows you to spend more in the areas that are important to you.

Since budgeting reduces unnecessary and wasteful spending it leaves more money available for discretionary purposes. Choosing the areas where you will spend that extra money is part of the fun of being frugal.

Looking at this topic another way, by being frugal most of the time, you create a situation where you can spend a little extra some of the time.

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There are many reasons why my finances are in good shape. In coming up with a list of those reasons, I noticed that a few were key to my getting ahead. I call these my wealth accelerators because they have had a dramatic effect on my net worth. Without these I would still have a positive net worth, but it wouldn’t be anywhere near where it is. Your wealth accelerators may not be the same as mine, but I suspect that many of these are common to most people.

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In part 1 of this post, I gave an overview to the envelope budgeting method. In this post, I present a few ways to implement the essence of that method, in a way more suited to the modern world.

The main problem with envelope budgeting in the modern world is that we have become a cashless society. Imagine trying to keep track of expenses, credit cards, online bill payments, and the many other ways we deal with money by using a cash based system.

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The envelope budgeting method is a tried and true, if not somewhat outdated, way of tracking your finances. Before going into how to use this method in the modern world, I thought I’d present an overview.

In order to fully appreciate the method, let’s return to simpler times when cash was king. When you got your paycheck, you’d cash it and use that cash to pay for your expenses. Instead of just having one pile of cash and pulling from that pile to pay for all expenses, the envelope budgeting method was developed.

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How many times have we heard budgeting advice simplified down to “cut coffee out of your daily routine”? Sure, it’s sound advice and I’ve probably even made that recommendation myself from time to time. It’s true that cutting back on small, repetitive items can have a large impact, but it’s often easier and more effective to focus budgeting efforts on larger items, what I call the heavy hitters. Reducing costs on more expensive items not only has a larger effect, there’s typically more margin available to be cut.

This philosophy is similar to one outlined by authors Marcus Buckingham and Curt Coffman in their book First, Break All the Rules. They stressed the value of managers spending as much time as possible with their top performers rather than wasting time on under performers. The same idea applies to your budget: Spend as much time and effort reducing your largest costs. You can cut back on coffee all you want, but doing so won’t have nearly the effect as reducing your largest costs (like housing, insurance, and food) by the same percentage.

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