Budgets don’t work unless you first answer the question – why budget? A budget typically looks at historical data but a Spending Plan looks forward. Budgets don’t work unless and until you have a plan for spending and saving based on What Matters Most to you. Finally, budgets don’t work unless and until you make the commitment to actually do what you say you’re going to do. There are lots of reasons that budgets don’t work but the three things that will help you stick to a budget are 1. a clear sense of purpose, 2. a plan that connects you spending to What Matters Most to you, and 3. the commitment to live up to your purpose, your core values, and the goals that you set out for yourself and the people you love.
Budget Buster Case Studies
Jill’s Flexible Budget Challenge
Jill is a full-time student at UH working part time as a nanny for three families in Clear Lake, Texas. She works about 10 hours a week, but some weeks she is able to work 15 hours. Jill has a reputation for being very responsible and the families sometimes give her nice tips and Christmas Cash in addition to the standard $12.00 per hour for caring for their children, the dogs, fish, and the additional kids from the neighborhood who occasionally hang out with the teenage family members while Mom and Dad go out for their weekly date nights, Poker games, and business meetings.
Jill has a $9,500 student loan but doesn’t plan on making payments until she graduates. Jill has basic living expenses like rent, utilities, gas, car insurance, internet, food, etc. She really wants to start investing something for the future. She also wants to buy a new MacBook Pro (with Retina Display) for school. The problem for Jill is that she never knows what her income will be due to her irregular work schedule.
1 What advice can you give Jill to help her meet her goals? 2 Should Jill purchase a new MacBook Pro with the cool new Retina Display? Why or why not?
3 Should she pay off her student loan first or start investing the money instead?
The Lost Budget
Angela and Mysterious Dollar-Disappearances
Angela believes that it’s a good idea to name every dollar she owns. So every month, without fail Angela writes down everything she spends – to the very last penny – and enters it into Quicken. As the month progresses, she updates Quicken online every time she spends a penny. Then, at the end of the month, Angela reviews Quicken online to see where her money has gone. Unfortunately, every month she somehow manages to spend more than she planned on spending. She tries to figure out what went wrong, but it just never seems to make sense to her how the mysterious dollars disappear month after month.
- How would you solve Angela’s spending issue?
- Is Angela right in giving every penny a name? Why or
- Instead of updating Quicken online every time she makes a purchase, is there a better way for her to keep track of her money? If so, how?
Marital Budgets are Double the Fun
Steven and Rebecca’s Monthly Marriage Expenses
Steven and Rebecca got married six months ago, and they both nailed great jobs right out of college. Steven landed a marketing job with a financial services company making a starting salary of $40,000 take-home pay. Rebecca began her teaching career in first grade as a teacher’s aide for the local school district. Rebecca is making $10.00 an hour (after taxes) and she works 30 hours a week. After they got married, they each bought cool new cars, complete with car loans. Steven’s payments on his new truck are $526 per month, and Rebecca is leasing her new Honda Accord for nothing down and $326 per month for the next 3 years. They are also thinking about buying a new house with a monthly mortgage payment of $1,725.00. After figuring in all the monthly expenses, they realize that getting married almost doubled their expenses.
- If they continue their spending habits, what will their financial state will be in the next two years or so?
- Should Steven and Rebecca make any changes to their spending plan? If so, what?
- If they didn’t purchase a home right now, how would their financial life look in two years?
- Are there other options that Steven and Rebecca have for transportation instead of making payments on two new vehicles?