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Posts Tagged ‘personal values’

Family, Faith and Finances

Had a great conversation with Rob Ekno about faith, family and finances on Rob’s radio program, In Your Face, which can be heard on Indie104.com.  Click here if you would like to listen to the conversation.

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Budget Basics #7 – Gaining Control of Your Spending

A budget doesn’t control your spending.  Only you can do that.  If used correctly, a budget can help guide your spending, but it’s your choice where the dollars flow.

There are things you need to purchase and money you must spend that is completely beyond your control.  You don’t voluntarily choose for a child to get sick or the washing machine to break down.  However, most of your spending decisions are a personal choice.

The way you gain control of your spending is to change the process you use to spend money. It also happens to be the most difficult, because it involves changing your behavior. 

I contend that you lie the loudest and most often when you lie to yourself.   Your ability to control your spending will be dependent upon your willingness to be honest with yourself, and if you’re married, to be honest with your spouse.  An honest assessment about your priorities, preferences, habits and personality are all important.

  • Priorities – You need to prioritize what’s most important to you.  Is it a car, vacation, house, jewelry, clothes, saving for retirement, etc?  You may not have it all, but you can have some of it if you are willing to forego certain items in order to save/spend for something else.
  • Preferences – Generic vs. name brands is a common choice with food and clothing.  I agree that there can be a difference in quality, but you have to decide if it’s worth the extra money you pay for a particular brand or label. 
  • Habits – Excluding major purchases, you probably have a lot of spending habits.  Are you a comparison shopper, or do you choose the first item you see or whatever has the coolest looking package?  Are you always crunched for time, so you eat out rather than packing a lunch or have take-out instead of cooking?  Changing habits can be difficult, but it can be the key to freeing up money for something that’s a higher priority.
  • Personality –If you’re impulsive, you may tend to buy on the spot, and maybe regret it later.  Feeling a little down… how about some retail therapy to lift your spirits?  Your personality affects the way you spend money.  The more you understand yourself, the better you will be able to identify and avoid situations where you are not making good financial decisions.

The discussions Lady M and I have about finances involve these topics.  We don’t get into the, “you spent how much on what” type discussions.  Communication is the key for us coming to agreement in how we prioritize and control our spending. 

I am a high pressure salesperson’s nightmare, because I do not make any major purchase on the spot.  I’m an analytical person, so I need time to think it through.  The worst financial decisions I have made came when I had to make a quick decision.  You know the line… buy it now or you may lose out.  I operate under the philosophy that if it’s gone when I come back, then it wasn’t meant to be.

Lady M is a lot more spontaneous than I am. She also has a real affinity for designer items.  Before I met her, I had no idea who Louis Vuitton, Kate Spade, and David Yurman were.  I might not see a difference between a $50 handbag and a $500 one, but she does.  If it’s important to her, then it becomes important to me, and to our budget.

 We have worked to understand and adjust for our differences.  Lady M knows that we won’t buy a car the first time we go to a dealership.  I know that our travels and vacations will include shopping (and sometimes buying) handbags and jewelry. 

By being honest with ourselves and each other about our priorities, preferences, habits and personalities, we have modified our behaviors to collectively control our spending, so we both win.  You may find these may be the key to controlling your spending as well.

Budget Basics #6 – Monitor Your Spending

I’m assuming that you created a monthly budget, which means you have decided what budgeting tools and technology you are going to use, created a budget and are tracking your expenses.   All of this work has been laying the foundation for you to really maximize the benefits of your budget. 

To start, you should be tracking your expenses and monitoring your budget at least on a monthly basis.  As close to the end of the month as possible, input your actual monthly income and expenses into your budget.  There should be a column which compares the amounts you budgeted with the amounts you actually earned and spent.  Budget software, templates and online services will do this automatically for you.  If you are using Excel or a similar spreadsheet, create a simple formula that calculates the difference.

Look through the categories and review the large discrepancies, positive and negative.  Significant variances can be an indication of an error, or they may have resulted from a change of events (i.e., an unexpected car or home repair).  Your primary objective is to have a reasonable understanding of the variances so that you can consider the implications for your future spending.  Was it an anomaly or something that will be recurring?  For example, if you spent $200 more on food, did you underestimate your food budget, or did you have a birthday party for one of your kids which accounted for most of the extra expense?

Having completed a complete budget cycle, you’re in a great position to prepare your next month’s budget.  Start preparing your budget for the coming month by looking at your budget and actual income and expenses for last month.  Give some thought and analysis to how your spending for next month will compare to last month.  If you know you’ve got to get new tires for the car or have a scheduled medical appointment, include these amounts into your budget.

There will always be something that is unknown and unexpected.  However, the more you work with your budget, the smaller the variances you should have each month.  Remember that your budget should be based upon your goals and priorities. By monitoring your spending and comparing it to your budget, you’ll be able to evaluate how well you’re spending to achieve your goals.

Controlling your budget and spending will be the next budgeting principle we address.

Budget Basics #5 – Track Your Spending

Accurately accounting for how you spend your money is an important step in the budgeting process.  Incorrect information will make it difficult to alter your spending habits to better achieve your goals. 

If you are struggling to pay your bills and manage your finances, accounting for your spending is extremely important.  It can also be helpful even if you have plenty of money.  After seeing how much you spend for certain things, you may decide to modify your behavior and reallocate your finances towards something that is more important to you.

Here is a simple personal example.  I do not consider myself to be a connoisseur of coffee, but I like it.  Starbucks’ peppermint mocha latte is probably my favorite.  Cost… $4-5 a drink.  I usually only drink them when they are featured during Christmas.  I know I can get one any time, but the caffeine, sugar and fat content is too much for my diet to handle year-round.   If I drank one every day, it would add up to about $1,400-1,500 annually.  Alternatively, I can buy a 2.5lb bag of whole bean Starbucks coffee at Costco for $20, which lasts me 2-3 months drinking 2-3 cups per day.  Thus, I can feed my caffeine fix at home for about $100 a year.

I realize there is a time and ambiance factor.  It takes a few minutes to brew your own cup of joe, but it’s probably less time than waiting in line at most coffee shops in the morning.  Then there’s the ambiance.  There is something tantalizing about stepping through the doors of a coffee shop and smelling the aroma of a fresh brewed pot.  But for me, it’s not worth the extra $1,000 per year. 

This is simple example of why I think it’s important for you to track your spending.  Dropping $5 at Starbucks is not that big of a deal.  However, when you add it up over the course of a month or year, it turns into real dollars.  For me it’s brewing my own coffee, but it might be something different for you. 

Now that I’ve given you a bit of a rationale for tracking your expenses, here are a few pointers of how to do it.

Your bank and credit card statements will track a lot of things for you.  Checks, online banking and automatic bill payments will cover most of your major recurring expenses.  Your bank and credit card statements also record every time you swipe your debit or credit card.  One key point here – save your receipts.  While spending at some merchants will be obvious, others will not.  Wal-Mart, Costco and a number of other major supermarket chains also sell gas and medicine.  Receipts will allow you to differentiate whether you are spending on food, gas, clothing, medicine, gifts, etc.  Since your statements often come weeks after your purchases, it’s easy to forget what you bought on a particular day.

Although we continue to move towards a cashless economy, you may still pay for some items with cash.  You should have a system to track your cash expenses.  I would recommend an inexpensive application for your smart phone, or a pocket-size notebook that you can write down your expenses. Tracking your cash is very important if your budget is tight or you pay for a lot of things in cash.  Simply throwing all cash expenses under miscellaneous may not give you an accurate picture of where your money is going.  Cash is where a few dollars here and there add up to a significant amount over a month’s time. 

How detailed do you need to be?  There is no universal formula, but here is a quick rule of thumb.  If you thought it was important enough to create a category, then track spending for the category.   If not… what is the use of the category?  As you progress you may adjust your budget by condensing or expanding the categories.

Remember, the key to a budget is to help you make wise decisions.  Maintaining meticulous spending records that have no impact on your spending is a waste of time.  Conversely, improper tracking of your expenditures will distort the reality of where your money is going and hinder your ability to make good decisions.  In a nutshell… good information = good decisions.

After you have created a budget and tracked your expenses, now what?  Monitoring your spending.

The Treasures of Life (The Value of Money – Part VII)

Have you ever heard that there are more important things in life than money?  If so, then what is more valuable than money?  If you can’t answer the question, how do you know that money isn’t the most significant thing in your life?

Three things have much greater value than money in my life – faith, family and friends.

I have very strong convictions about my faith.  You don’t have to agree with my theology, and I respect your right to be wrong… just kidding.  Seriously though, I do believe my faith is real and true.  If I don’t really believe my religious convictions are true, then I’m essentially saying that I believe in a lie.  However, I also respect your beliefs and convictions even though I may not personally agree.

It’s my faith in the true character and nature of God that I know will see me through anything I encounter in this life, and usher me into the next.  It’s been a difficult couple of years for Lady M (my wife) and I. My faith has helped me deal with life, people and situations when I didn’t understand or have a clue.  At times, I just needed to remind myself of the Biblical verse Romans 8:28, which states that in all things God works for the good of those who love Him, who have been called according to His purpose.

Family is the next most important thing to my faith.  Over the past two years, I have truly come to appreciate the value of a good and supportive family.  I can lose everything and still be okay, so long as I have my family.  Conversely, I also know that I could have all the fame and fortune in the world, but it would be worthless if I sacrificed my family to attain it.  Careers will end, kids will grow up, and friends will come and go.  Lady M will be the one thing that remains… until death do us part.

Your family history may be destructive and painful.  Families can be a great source of strength and encouragement, but they can also inflict some of the deepest wounds you’ll ever experience.  If that is your story, I’m sorry and truly wish it were not the case.  I have no simple solutions to overcome your past.  All I can do is to offer you hope that you can build the family you never had.  Learned behaviors and patterns may be hard to break, but I have seen other people do it and know you can too.

Friends follow close behind family.  I believe we all have an innate need and desire for relationships with other people.  Maybe it goes all the way back to the beginning when God said that it was not good for man to be alone.  The victories and successes of life can become hollow if you don’t have anyone to celebrate with and share the good news.  Furthermore, if you stumble and fall, it can be difficult to recoup and regain momentum without someone to help you.

You can choose to live life alone, but I think you will miss out on so much by going solo.  All relationships take effort, and people will disappoint you.  They are human, and so are you.  Friends can hurt you the way that complete strangers can’t, but like family, they can also bring you greater love, appreciation and joy.

I have a Successories print that’s been hanging in my office for over a decade.  Under the picture of a little boy it reads, “Priorities – A hundred years from now it won’t matter what my bank account was, the sort of house I lived in, or the kind of car that I drove… but the world may be different because I was important in the life of a child.”  I admit it’s a bit cheesy, and I’m dorky.  However, it can also be a good reminder of what’s most important in my life. 

Call them priorities, values or the treasures of life.  When it’s all said and done, so many things that I expend my energy upon won’t matter.  Money may keep me alive a little longer, but it can’t make me live forever.  All the treasures and possession I accumulate in my life will one day belong to someone else.  With that in mind, I want to invest in treasures that will last a hundred years and beyond.  For me, that’s my faith and the lives of other people. 

What is it for you?