At first I contacted some people from Craigslist who apparently sell a lot of machines in our area. They asked how much I wanted for them and I didn’t have a good answer. I had no idea what they were worth outside of a very large range. I was confident that they were worth much more than I paid for them, but how much was unclear.

I began researching online for the machines. Ebay listings are probably not the best guide as they are very overpriced and usually professionally restored and in perfect condition. My machines are in very nice condition but all needed some repairs. So I sought out a repair technician to work on some of the machines to get them in better shape to purchase. The exception was the pinball machine. Since they are full of actual mechanical parts, I avoided repairing it and opted to sell it for less in exchange for not having to dork with repairs.

I originally purchased the three machines for a sum of $450 about five years ago from a company auction. The machines were a Sinistar machine ($50), a Lunar Lander ($150) machine and a Star Trek: The Next Generation ($250) pinball machine. I knew I had a great deal and originally intended on keeping all the machines forever, but that I could also make some money if I ever sold them.

I repaired the two arcade machines for a total of $331.20, including the initial diagnostic visit which cost me $42.20.

I sold the machines for the following prices:

Sinistar: $500

Lunar Lander + Pinball: $2000 for the pair (about an $800/$1200 split).

In the end, for an initial investment of $450, plus an additional $331.20 in repairs, for a total investment of $781.20, I wind up pocketing $2500, or 3.2 times my original investment.  Not too shabby!

When I worked as a contract software developer several years ago, I was paid weekly. This had some definite advantages such as never having to go more than a few days before another payday. However, I also spent a lot more money and could not properly manage my finances because the desire to “reward myself” with a treat or a night out on payday meant I was doing those things far too often. In the end, it was pretty challenging to coordinate a monthly budget plan with weekly pay periods.

Recently, I was paid bi-weekly, which was a little bit easier because there were not as many pay periods to account for in the budget. The problem with bi-weekly for the way we budget is that the paydays constantly shift around since a payday may be on the 15th one month, the 14th another month, the 12th another month, and so on. Additionally, your annual salary is broken up into 26 paydays. This means that for ten months of the year, you make less money than the other two. Often when those “bonus months” happen, the third paycheck is treated just that way, as a bonus that gets spent on things outside the budget. In order to avoid being tempted in that way, we have found that the best pay cycle that works for us is semi-monthly.

With semi-monthly, we get paid the same amount every month: 1/12 of our annual salary. We also get consistent paydays. I have usually been paid on the 15th and last day of the month at jobs which use a semi-monthly cycle. However, I have also seen the 1st and 15th and even 7th and 21st. The great part about semi-monthly is you take home more money per paycheck than bi-weekly (over 8% more in fact) and it is reliably consistent in timing. Since more or less all of our bills are monthly and due around the same day of the month, month after month, having a paycheck that mirrors this helps budgeting tremendously.

For example, in our monthly budget I was previously unable to make all of our major monthly bill payments as well as take out our monthly cash for our envelopes (Groceries, dates, clothes, etc.) I would have to wait until halfway through the month to pay something. With the semi-monthly change, my take-home pay is higher now and we can both take out the cash we need and pay all the major bills on the first paycheck of the month. This leaves the second paycheck for things like debt snowball payments.

I know most people have no control over when they get paid, but if you work at a small company, your management may be open to the idea of switching to semi-monthly pay periods. It’s great for budgeting and it puts more money in your pocket on a more consistent basis in line with your expenses.

That said, this first month we are going to go over the budget. The reason for that is there are five weekends this month and we only budgeted $300 which is $100 less than we budgeted per month in 2010. We will likely have to cover the last grocery trip with miscellaneous money, but should do alright in subsequent months since our average weekly spend is currently $66.62 per week.

After doing this for a couple of years, we have gotten to the point where this part of our personal finances is largely on auto-pilot. We do adjust the budget, but many months, there are no changes and we just copy the budget from the baseline column I set up for that purpose.

It is definitely recommended for people just starting out with budgeting to have real family budget meetings every month. If you get to the point where you’re used to the budget and your finances are on auto-pilot, that’s great, but don’t try and rush it.

A few discussion points about our budget here since this is the first time:

• We wanted a file that let us fill out our budget categories the way we wanted to and showed that we were staying within a zero-based budget. Our Excel file automatically tallies up the income and different expense categories and shows a zero sum if we’re doing it correctly.
• As I mentioned earlier, our budget includes a baseline column which is basically a budget for a typical month. Each month, we start out by copying the baseline budget into the month column, and making whatever adjustments we need to make for the month. After doing this for a few years and squeezing a lot of blood out of the turnip so to speak, few or no adjustments are required.
• We include many lines for paychecks, which is a legacy format from when we were DINKS (Dual Income No Kids) and had four or more paychecks in a given month, not to mention rental property income.
• There is an income category for “Found/Carryover”. We realized that the easiest way to keep the budget from getting all screwy with things like store returns, refund checks, or literally found money, was to treat it like an additional paycheck and deposit it on the first of the month, the following month and enter it in the budget as a paycheck.
• Our emergency fund is fully funded at our current level (6 months of expenses), so that is why that category has $0 allocated to it.
• We separate out cash envelopes (literally envelopes we carry cash around in that we get from the ATM once a month) and checking envelopes (virtual accounts we keep in Quicken, but use in the exact same way we would use a cash envelope, except that there is no cash.  The current breakdown works the best for us.  Some people use a lot more cash envelopes, and some use none.
• At the bottom of our budget, I added a little monthly bill checklist which each time I make a payment to one of our monthly bills, I put a little x in the box, so I know where I stand for the month.
• The debt snowball envelope is a virtual account we use for our Dave Ramsey Debt Snowball debt elimination method. Essentially, it’s all the money we have in the budget that is not budgeted to another expense, and is used to pay down the principal on our existing debt. Since we only have one debt left (the land mortgage) this is the extra amount we are applying to that debt for the month.
• For the month of January (and most months, since they all have a fairly similar budget) we have $7177.03 in income, $4007.91 in monthly expenses, with a debt snowball of $3169.12, meaning we are living on 55.84% of our income for the month and applying the rest to our debt.

I added a new piece of data, the average groceries purchased ($) per trip, in order to give an idea of how much we purchase in groceries (before discounts) on a weekly basis.

My wife was less thrilled with this week and only saving 27% on the groceries, but that was because she needed some large expense items which were not on sale.  Sometimes you just have to buy it when you need it.

1. I’m a big time impulse shopper within the confined of a grocery store, so if the goal is to spend less money, I should not be there.  Even if I’m just tagging along, my wife says the bills are noticeably higher when I’m with her, so I just stay home now and we save money!
2. My wife has gotten really good at getting great deals on our groceries for a fraction of the price through the use of coupons, The Grocery Game and good old fashioned practice.  She’s excited to tell me how much she saved when she gets home and I honestly enjoy hearing about it.
3. My wife stays home now with the little one and as funny as it sounds, looks forward to even running errands as an opportunity to “get out of the house”, while I stay home and play with the baby.  It’s a win-win situation.

I have always wanted to keep a blog, but never found the time to do it.  This year, when we sat down and discussed the goals we wanted to set for our family in 2011, I decided that one of my personal goals would be to create and maintain a blog about personal finance.  It’s a desire I’ve had for some time, and it was finally time to act.

After some discussion, we have set the following goals for 2011 which are directly or indirectly related to our personal finances:

• 1.) – Reduce the principal balance on our land mortgage to $100,000 by the end of the year (current balance: 178,906.12 as of 1/1/11), or sell the property. We have had the land for sale for a while.  We purchased it several years ago when we had intended to move into the country and build a house.  Life happened and a new job and new baby later, we decided that goal was no longer one we wanted to prioritize.  Unfortunately, the housing market crashed after we purchased and so the market for land has also been very soft.  We did find a Realtor who specializes in land sales, so we will see what he is able to do with it.

• 2.) – Create a blog about our personal financial journey and write two posts per week or more. The first step has been taken, and mypfblog.com was registered and I created my first post.  Now the challenge is to maintain it all year long.

• 3.) – Reduce $200 or more from the monthly budget and put this money towards debt reduction. This is pretty self-explanatory, and I’m happy to report that in the very first budget meeting of the year, we shaved off over $200 from the budget.  Now the challenge will be to not blow the new budget in the coming months.  January will be especially difficult because there are five weekends in the month, and grocery shopping happens on the weekends.

• 4.) – Achieve a $450,000 net worth by end of year. This will be achieved either through debt reduction if we cannot sell the land in 2011, or through cash accumulation if we do.  Quicken says that our net worth is currently $404,185 so this would represent an increase of 11.34% for the year.

• 5.) – Paint the house and do two bathroom renovations within a $6000 budget or less. We moved into this house at the start of the year in a combination downsizing effort and to move to an area we felt would be better for our new family.  We got a very good deal on the house we purchased, with a purchase price more than 10% lower than the next comparable comp in the neighborhood.  Part of the reason for that is the previous owners seem to have been very eccentric people with very eccentric tastes.  We are focusing on a combination of do-it-yourself painting (in some of the smaller rooms) and hiring a professional (in the common areas), and do-it-yourself demo, paint and tiling in the bathrooms with professional plumbers handling any plumbing repairs.

• 6.) – Track savings in the grocery category and average a 35% savings rate on groceries for the year. We have been members of a grocery shopping website (one of the sites that shows you the best deals and matches them with coupons) for almost five years now.  We have substantial savings and are able to feed our family of three on a very modest amount of money.  It occurred to me that while I know we save a lot of money doing this, we have never kept track of it.  I added this as a goal so we could have a better understanding of where that money goes.

I feel like these are good, challenging goals which will require consistent effort all year long, and I will blog about our progress with each of them.  If we are able to achieve all of them it will be a very good year for our personal finances.