This & That: In Charge of the Money Edition

P Wrote: I have a pretty good job, but I’m living pay cheque to pay cheque trying to pay debts that I’m so far behind on. I want to know what to do because I can’t seem to save any money because what I make goes to rent and utilities and there is nothing left for me and my family, which is so hard to deal with. I have seen how you take couples and help them get on the right track financially so I would like to know if you could help my wife and I escape from this huge problem? I have been so stressed due to this mess that I’m in. I haven’t even been able to take my wife on a well deserved vacation or anything because of our finances, and I can’t rely on my family for a loan because I just don’t want to ask. Can you please help us?

Gail Says: The first step would be to do a spending analysis to see where your money has been going. Have you done that yet? If not, gather six months’ worth of bank and CC statements and do it. Track where every penny went. Using the average numbers you come up with (whatever you spent in total on groceries, divide by 6 to see your monthly average) make a budget. Does it balance? If not, what are you going to cut?

 

K Wrote: I want, so badly to get out of debt and am going home tonight to complete the Building a Budget worksheet. My question is, is our bank account is in overdraft of $900. So, I feel like we are never going to get out of the overdraft black hole. Do I enter the overdraft as a current debt that we owe, so that it’s a fair judgement of what we actually should put in the jars?

Gail Says: Yes, treat the OD as a debt, with a high priority for payoff. Make sure you’re not just pulling numbers out of the air when you make your budget. Look at what you’ve been spending so you can see what you have to change. Good luck!

 

L Wrote: L Wrote: I’m am really committed to following a budget, but need two questions idiot proofed for me.

The first is about the automobile “jar”. Is a car loan payment and car insurance a fixed expense and the automobile weekly allowance are for gas and maintenance? Or are the entire payments/insurance/gasoline/maintenance supposed to be covered by the variable weekly jar? My loan & insurance is $940 a month, with gas & maintenance being about $50 a week.


The second is about my income. I have four children; two have disabilities and qualify for the disability credit and assistance for children with severe disabilities. My EARNED income is $43,000 a year. With child support, child tax credit and disability, I receive another $43,000. My problem is this. As my children are getting older, I realize that my income will eventually (8yrs) will be cut in half. As it is now, I am living pay to pay and get consolidation loans regularly to get back on top. I am panicked that the time is coming when my finances will be cut in half, and I’m not even managing now! At this point (41) I have contributed zero to my retirement. I don’t know what to focus on first, and whether I should be making a budget based on my projected income in 8 yrs, or whether to focus on debt, or RRSP contributions. I also have RDSP’s for both children that I opened but have put zero in them. I feel guilty thinking about putting money in an RRSP for me and not their RDSP. Gah! My head is spinning!

Gail Says: You’re absolutely right, the car loan/insurance are fixed expenses and do not go in the jar. As for your income, you should have 2 budgets: 1 for you and 1 for the kids. Manage the money separately. If you will find a less expensive place to live when the kids head off on their own, then take the difference between what you’ll pay individually and what it’s costing now from the “kids’ money.” If not, you’ve got to learn to live on your $43K baby, that’s all there is to that. BTW, if you don’t save anything for retirement, you’ll be living on less than half YOUR current income so you should start practicing now!

 

B Wrote: We’re finally trying to get our finances in order and am reading your book to help us. We are presently working on our 6 month spending analysis, but have a couple of questions.

If I enter my purchases from my credit card onto my spreadsheet, but then am also entering the money we put towards paying off the credit card (debt repayment), are we not counting the funds twice? I’m just wondering if it would skew the results.

When doing my analysis, I’m assuming I should also take into account the things we put money aside for each month? i.e. we have 2 cars and one we make monthly payments for the insurance but the other we pay once a year (we didn’t have time to save up for the second one). So the one we pay once I year I keep track of in a spreadsheet and put money into the ‘account’ (column) every month. We also do this for a few other things like property taxes and savings for car repairs.

Any advice would be helpful. We’re really trying to get on top of things and want to make sure we’re doing it right.

It really is eye opening. We’ve only got one month entered thus far and I knew we ate out a lot, but didn’t realize just how much. Entering each transaction really makes you think about whether it was worth it!

Gail Says: You don’t count your debt repayment as part of the spending analysis. The spending analysis lets you see where the money went — to what items and activities. The debt repayment plan is about getting the debt gone.

The spending analysis does not usually include planned spending. It’s supposed to be a snapshot of your average spending over those six months. So what I suggest is that you hold off on including planned spending until you get to the budget stage. For now, just do the spending analysis to see what you learn about where your money has been going (like that eating out). When you get to the budgeting part, then you can include your planned spending.

 

S Wrote: I am about to start our spending analysis worksheet. It’s amazingly shocking looking back! Anyways, do I still calculate the 6 month average even though we were in the middle of relocating to another city and/or our bills/utilities were more than normal?

Gail Says: The higher bills will skew the numbers so use the “normal” amount for things like utilities or do the analysis using a six-month period that doesn’t include the move.

 

S Wrote: I have been following your plan very closely and have my Emergency Fund on its way to a 3 month salary savings. However I struggle with knowing what is actually an emergency. I have a break down car fund going, a yard work fund going, a kids fund going, reno fund going, a vacation fund going etc. I feel like I have money stashed in so many places that I get confused as to what should actually be where. What in your opinion is deemed as an emergency? My septic field needs replacing unexpectedly which will cost around $10,000 and I only have half of it saved in my house fund. Would I be taking the other half from my Emergency fund? Feeling a little scattered.

Gail Says: Typically an emergency is loss of income because of illness, disability, loss of job (or hours of work) or death. Everything else is planned spending and you save up for it as you are currently doing. But sometimes the thing you have to pay for arrives before the money is completely saved. If you take the money from your emergency fund you must make it a priority to put it back. Or you could “borrow” from your other categories and then rebuild your car, yard work, reno and vacation funds.

 

P Wrote: We are family of three: my husband and I and a 4 year old girl. I always cook at home and maybe once a week we go to a restaurant. We spend $800 dollars per month on groceries and my husband is very, very upset and asked me to lower the budget to $400-$500 dollars. My question is: how much our family could consider budget for groceries?

Gail Says: How much you spend on food is a very personal thing and can vary dramatically by season and by region (where you live). I suggest you sit with your husband and do a meal plan for a week and then send him to the grocery store to do the shopping.