Can Budgeting Be “Fun?”

April 20, 2011

Last night, I met with a couple in one of my classes and wanted to share their insight into what they were experiencing. They had come to my Budgeting (aka “Spending Plans”) class a couple of weeks earlier, and they shared last night that they were making solid progress.

They had not only gone home and talked about a household budget, Can Budgeting Be Fun?but they had put one together and had been having regular discussions about it. I was excited for them because I know how a household budget can affect the family finances.

When I asked them how they were feeling about the past couple of weeks, the wife shared that they were having “fun” working on their budget. Now, you have to understand that during many of my budgeting classes, I explain how the critical step missing in virtually all failed budgets (written financial goals) makes budgets “meaningful,” but that even I – a budgeting professional – don’t think of budgets as “fun.”

So, when she said they were having fun, I had to ask for clarification. I was doubtful, I must admit. But, as she began explaining how they were enjoying the process of working together on a budget and feeling more in control of their finances each day, I could actually tell that she really was enjoying the whole process.

Budgeting Brings Peace of Mind and Greater ControlThe feeling of lacking control when it comes to our household finances is very disconcerting for pretty much all of us. Regaining that control really can provide us with a sense of euphoria that will have us coming back to our household spending plan again and again. In that sense, then, budgets certainly can be and are “fun.”

How about you? What are the feelings you’ve had as you’ve taken back control of your finances? Please feel free to share.

Todd

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney

Raising Financially Savvy Kids-Part 1

April 6, 2011

Some of the inherent responsibilities of parents include protecting their children and preparing them to be responsible adults in our society. Teaching children the proper management of their financial resources helps to accomplish both of these goals.

If the children in your family are similar to my own (and I would bet there are far more similarities than there are differences), they probably do not enjoy being lectured by their parents, nor do they learn much thereby. So how else are they supposed to learn to be financially fluent if they don’t listen to what we tell them? Well, we show them.

Further suggestions will follow today’s blog, but here’s an easy, fun and effective way to teach children that money does NOT grow on trees and that it must be properly managed and controlled:

  1. Pull out the game of Monopoly or any other board game that has play money in real denominations. If you don’t have such a game, you can print some play money from www.printableplaymoney.net.
  2. Gather the kids around the table to “play” a game. Count on spending anywhere between 15 and 45 minutes for this activity. This game is best for children 8 or 9 years old or older, since they’re getting to the point of being able to grasp abstract concepts. You can tell them you’re going to play a game to show them how Mom and/or Dad makes and spends money every month.
  3. Explain the rules, such as, “We’re going to count out how much money Mom and/or Dad make every month and put it in the middle of the table. Our goal is to spend it on everything we need and then on things we want without running out of money.”
    At this point, you may choose to explain your feelings that you are sharing information that is only meant for your family, and that you are trusting the children not to talk to their friends or to extended family about how much money Mom and/or Dad make.
  4. Teaching children the realities and the value of household budgetingEnthusiastically and dramatically count out of the bills how much money your household makes every month. This should be gross income (before taxes and other deductions). Enjoy the look of astonishment on the children’s faces while it lasts. For many, any amount over $100 might lead them to think that the family is RICH!!!
  5. Explain that the first thing that comes out of the monthly income is Taxes. Remove from the pile of money in the middle of the table the amount of taxes you pay each month. To raise a financially responsible child, you should explain the benefits that come from paying taxes, including security provided internationally by our armed forces, security provided locally by the police and/or sheriff,  transportation infrastructure, schools, laws, health and human services, public transportation, and more. Avoid complaining bitterly about taxes, though it may be educational to explain how we have the right and responsibility to vote for representatives in our government who we hope feel the same way we do about how taxes should or should not be used.
  6. Next, explain that other amounts come out of your paycheck before you receive any money, including Medicare and Social Security (FICA), in addition, possibly, to insurance premiums and retirement account contributions. Remove the amount of your monthly deductions from the pile of money in the middle of the table.
  7. Teach children the importance of committing to saving for emergenciesNext, explain to the children that you have committed to paying yourself first, in case of emergencies, so that there is a specific amount that you put into your savings plan right off the bat. Let them know that this amount is non-negotiable, and that as they grow up, you expect them to do the same. Many children, even fairly young ones, may take comfort in knowing that their parents have a plan in place in case anything unexpected happens. Remove your monthly savings contributions from the pile.
  8. Then, ask the children if they think you should next pay for things you need or want? Explain what your survival needs are and remove that money from the pile. Typically, needs include shelter and security (rent/mortgage and their corresponding insurance and utilities), food and water (NOT including dining out), protective clothing (the very basics), and possibly medications or medical procedures.
  9. The next expenses to come out usually include things that make life comfortable and convenient, like transportation costs, child care, additional clothing, school activities, air conditioning in the summer,  etc. You may also include other obligations and loan repayments (credit card, student loan, signature loan, etc.).
  10. Continue to remove money from the pile until you’re left with “extra” money (usually pretty scarce). Remember to calculate the monthly amounts to set aside in order to take care of periodic expenses like vacations, car and home repair, holiday and birthday gift giving, etc. You may also consider including the children’s allowance or amounts they can earn through chores.

Going through this exercise every couple of years or so will help your children to realize that money is not an infinite resource, that it doesn’t grow on trees, and that their parents are in control of their finances. It generally has the added benefit of stemming the continual flow of the “gimmees” and the “buymees.” “Give me this” and “buy me that.”

Finally, letting our children “see” how important budgeting is to us will lead them to value it as well.

Have fun with this activity, and let me know how it goes.

Todd

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney

Santa’s Not Comin’ to Town Quite Yet

November 15, 2010

I’ve always thought that Thanksgiving gets the short end of the stick when it comes to fall holidays. Christmas seems to invade stores almost as soon as kids are back on the school playgrounds after summer. Maybe that’s why I love Thanksgiving some much. It hasn’t been (and hopefully never will be) commercialized. Hopefully it stays the most home-centered of gatherings of our society.

Additional Thanksgiving expenses on decorations, travel, and entertaining can add upStill, just because it’s not been co-opted by Madison Avenue doesn’t mean we don’t, as a nation, spend a lot of additional money on the holiday. Thanksgiving generally means extra expenses in:

  • Travel: If you’re flying to your destination, you’ll generally spend anywhere between 10% and 50% less if you DON’T travel the day before Thanksgiving and the Sunday AFTER Thanksgiving.
    TIP: Consider flying out TWO days before the holiday and coming home on Friday.
  • Meals: Often, a portion of the extra money we spend on Thanksgiving meals can be recouped by enjoying leftover turkey sandwiches for a week or two afterwards.
    TIP: To make leftovers easier to deal with, separate them into smaller portions, place them in freezer bags, and pack into the freezer. That way, you won’t have to pull huge portions out of the freezer to use all at once.
  • Decorations: After travel, decoration expenses can be considered to be the most expensive “optional” expense of Thanksgiving. Whether it’s new Thanksgiving-themed plates and serving dishes, front door wreathes, pewter turkey-shaped napkin holders, or other household ornamentation highlighting the joys of fall, a spendthrift household could easily lay down an extra $200 or $300 each Turkey Day in making their dinner more festive.
    TIP: If children or grandchildren are available, use their pictures or artwork to decorate the house. Back a small photo of a family member with some construction paper and tie them around the napkin as a holder.
  • Entertainment: More and more families are deciding to spend the afternoon or evening of Thanksgiving at the movie theater. Whether Hollywood pushed for it or reacted to it, the demand is definitely there. That’s why many blockbuster movies often debut on Thanksgiving Day or that weekend.
    TIP:  Games at home can be more affordable and usually much more interactive, but if you insist on going to a movie, make the decision to skip the high-priced treats. After all, you’ll probably still be feeling as stuffed as the turkey was just a few hours before.

Have a wonderful, safe, and happy Thanksgiving Day and holiday season!

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney

What It Means to Be Rich

August 23, 2010

Today, I read a good blog post about the 3 Ps of True Wealth (http://bit.ly/9WxV8l) and felt to add some of our own insight into the concept of wealth and riches.  People, Passion and Purpose make up Jason’s 3 Ps, though all of them revolve around building relationships and the people with whom we interact day to day.

What it means to be richI added a comment regarding what we teach about being rich. In a way similar to the 3 Ps standing for true wealth, being rich involves setting personal goals that require money and then making your money work for you in order to reach those goals.

Being rich is not an amount, an income, or a lifestyle. It’s not about showing off. It’s not about envying and wishing. It’s about doing what’s important to you. Accumulating money, unfortunately, serves as a pseudo-goal for too many people.

“I want to be rich” is a phrase we hear far too frequently. Having a lot of money is a relative concept. For someone living in poverty, a few hundred dollars could be a lot of money. For a recent college graduate, a lot of money might be a $40,000 annual income. For others, it might be $1,000,000 lottery ticket (Please!!! Don’t get me started about the lottery unless you’re truly willing to listen).

The reality, though, is that if we were to set a financial goal to have or earn a certain amount of money, we would find that amount insufficient to satisfy us once we reach it. It’s not how much money you earn or have that counts so much as how much you keep. By “keep,” I mean hold onto in order to reach your own truly satisfying personal goals.

A goal needs to be specific (in outcome, time frame, and amount of money needed), but it needs to be, most of all, motivating. What is it that truly inspires you? Relationships? Accomplishments? Charitable work? Respect? Admiration? Knowledge? Time with family or friends? Experiences? Ask yourself, “When all is said and done and my time on this earth is over, what do I want others to remember me for?” How’s that for a question to get you thinking?

Whatever your goal may be, write it down and keep that goal on top of any spending plan (budget) you every work on. Post it on your fridge. Tape it to your bathroom mirror. Carry it in your purse or wallet. Look at it regularly and recommit to it every day. You’ll soon find that you have little care for spending your money on “stuff” that you’ll now see as frivolous. Saving for an important goal will become fun and exciting.

Once you have your motivating goals in place, it’s then time to act like you’re rich already. But remember that the rich don’t work for money (duh!). Act like the rich by making your money work for you (savings, investments, lending). You may not have hundreds of thousands of dollars to act like the rich, but first of all, you have to get rid of the Hollywood stereotypes of the rich. Most millionaires do NOT drive luxury vehicles, don’t live in mansions, don’t have butlers and maids, don’t take vacations every month, don’t fly in personal jets, don’t frequent trendy boutique shops, and don’t call attention to themselves with what they wear, drive, or live in. That sort of ridiculous spending is targeted at members of the middle class who think that they can spend their way into the upper class. Seriously? How can you spend your way up the wealth ladder?

Most millionaires earn their own wealth through running their own business or being careful with their own money and investments. They are conscientious about and control their own finances. They make they’re money work for them, not the other way around. When they do spend, they spend with purpose. And that purpose is what we’re talking about today.

What’s your purpose? What do you want to accomplish and do in life? How much money will that require? Does it really involve a $500/month car payment and designer clothing? Does it require the biggest home mortgage you could possibly qualify for?

Goals goals?

Goals are the Key to Financial Success and Personal SatisfactionWrite them down! Write them down!  Write them down!

Goals that are not written down are just wishes, and except in fairy tales and the movies, wishes are earned, not granted.

Best wishes for financial success in reaching your own goals!

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Education@NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney