Savings: Making a money-smart spending plan
By Pat Curry • Bankrate.com

Deborah Knuckey's passion is traveling. She's been to more than 40 countries, and even took her mother with her to Italy for cooking school.

She wasn't born with a lot of money, and she didn't win the lottery.

She 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.

"The 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 management.

"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."

On 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.

Compare 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 you're spending."

But writing down where the money actually goes can be a major eye-opener for many families.

"A 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.

"I've 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."

Rules 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."

Families have 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 $200 today.

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.

Along 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.

Pat Curry is a freelance writer based in Georgia.