|Savings: Making a money-smart spending plan
|By Pat Curry
passion is traveling. She's been to more than 40 countries, and even took her
mother with her to Italy for cooking school.
wasn't born with a lot of money, and she didn't win the lottery.
has a spending plan. You might call it a budget. She doesn't.
A money coach
and author, Knuckey says she doesn't even use the word "budget" when she counsels
people because of its negative connotations.
word 'budget' says self-deprivation," she says. "The way I approach, I talk about
creating a spending plan and start from, 'What do I want to make room for?' Start
with what you'd really like to spend and how you can create that space. It's not
about being frugal. It's about saying, 'What's most important to me and how do
I get there?' "
OK, so you can say budget, but
think spending plan.
Just like eating right and
exercise, just about everyone understands the value of a spending plan or 'budget'.
But unlike nutrition and exercise, most people don't get an education in money
"Most people don't budget properly
because they're not taught to," says Howard Dvorkin, president of Consolidated
Credit Counseling Services in Fort Lauderdale, Fla. "There are no courses I know
of, especially in the high school level. A lot of families purposely don't talk
about finances; I think that's extremely detrimental."
the right track
All the experts say that the place to start is to track
every expense, even snacks from vending machines and change put in parking meters,
for a month. The process itself is time-consuming at the outset, but it's not
difficult. On one chart, write down all your income. On another, write down all
your expenses, broken into categories for fixed expenses like the house and car
payments; flexible expenses that vary each month, including the phone and electric
bills; and discretionary expenses, such as gifts and recreation.
the two lists, see where the gaps are, and adjust accordingly. Now, be surprised
at what you find.
"Obviously, this is theory
and easier said than done," Dvorkin says. "Tracking every nickel is a big process
and a lot of people don't do it. You can make the best budget, but if you don't
track it, what good does it do? In my house, every month, we compare the actual
to the budget. It's not fun. My wife hates me for it. But you have to track what
But writing down where the money
actually goes can be a major eye-opener for many families.
lot of people say after they do the tracking, they didn't realize the little piddly
things really add up over the course of a month," says Barbara O'Neill, a certified
financial planner and family and interim extension specialist in financial resource
management at the Rutgers Cooperative Extension Program.
even had people tell me it was the impetus to quit doing something, like smoking
or playing the lottery. When they saw it was such a large amount, they realized
that could be the extra $100 a month they were looking for. They had never thought
of it as $100 a month, it was just a couple of bucks a day."
one, two and three
Knuckey says she asks people to follow three rules
-- live within their means, take care of their future and "maximize their pleasure,"
which could mean different things to different people.
"It might be sending your kids to college, buying a certain sports car or taking
a vacation," she says. "It doesn't have to be frivolous; it just has to be in
line with your values."
different expenses today than in the past. Twenty years ago, most households had
one phone and long-distance phone calls were for special occasions. Today, it's
not uncommon for families to have two or more phone lines, plus cellular phones
and pagers. They might have a cable modem or DSL, plus the cost of their Internet
service. What used to be a $30 to $50 monthly expense can easily run more than
Computers, with software and peripherals
such as printers, modems and scanners, are another line-item that didn't even
exist on our parents' household budget sheets. The easy availability of credit
and online shopping have made it easier than ever to spend beyond our means.
with high-tech expenses have come some Internet-based resources. Quicken,
the money management software, offers a MyFinances section on its Web site to
track all your financial information. Most cooperative extension programs offer
family financial planning information; the Rutgers University program has a set
of tools at its Web site to help families plan out their goals.
Curry is a freelance writer based in Georgia.