Forget
budgeting -- get a '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 consumer sciences educator 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.
|
