Thursday, March 3, 2011

Money Management Part Two - Getting the Big Picture

"So, how did you make out with your spending journal?"  Jane asked as she and Jill watched their kids in the back yard.  Their husbands were were manning the grill as their two families enjoyed the late summer afternoon at Jane and Richard's home.

"It was.... interesting."  Jill laughed.  "Enlightening.  I had no idea how much money we spend... on nothing!"  She shook her head.  "In some ways, to be honest, it's a little discouraging.  I can't understand how we didn't see any of this before.

Jane squeezed her friend's shoulder.  "Don't beat yourself up over it, Jill - we've all been there.  The difference is, you two have taken the first step to getting off the treadmill.  You're making baby steps, and sure it will feel slow for a while, but you'll hit your stride.  Don't worry."

After their meal, they settled the kids with a movie and popcorn and retreated to the kitchen to continue their financial talk.  Jack came prepared with their journal and a grocery bag full of paper scraps.  "What's this?" asked Jane.

"This?" he asked.  "This is all the receipts for this month.  Even though I was more than a little embarrassed by it, I wanted to share this with you.  This represents a lot of spending.  And I have to admit, I'm not sure what to do about it right now... was it this bad for you when you started out?"

"Ooooh, yes." Richard nodded.  "Worse, probably.  I was on the road a lot for work and did a lot of eating out; Jane and the kids did a lot of takeout while I was gone, too.  Neither one of us really had any kind of game plan for how we wanted our money to be spent.  Sure, we had so-called 'goals'... pipe dreams... but no idea of how to reach them."

Jack sighed.  "I know that feeling."

"So - how did you make out?" Jane asked.  "What did your journal tell you?"

"It told us that we have a lot of leaks in our dyke and not enough thumbs to plug them all!"  Jill answered. "I'm really hoping you've got some advice for us tonight!"

"Well, now... let's take a look, shall we?"  Richard flipped through the journal and smiled.  "Wow, you're a numbers person, aren't you?"  The journal was full - but it was neatly summarized on the last page.

Jill smiled.  "Well, I do have a bookkeeping background.  I do remember a thing or two."

"This will make it easy for us tonight," Richard told her, "but let the pages and pages of little numbers be the ones that speak to you the loudest.  That's where you'll have to do the real work."

He laid out the journal, opened to Jill's summary page.
605.17  Food
827.00  Mortgage
150.00  Property Tax
106.25  Utilities (Heat, Electricity)
263.33  Other Bills (Phone, Internet, Cable, Cellular)
225.00  Household (including furniture, supplies, repairs, lawn care, etc)
280.00  Car Payment
66.67  Automobile Costs (Gas, Repair, Licenses)
167.00  Health/Dental Care
83.33  Clothing
320.25  Recreation/Hobbies/Entertainment
62.50 Gifts
83.33  Miscellaneous
1,369.51  Payroll Deductions (Tax, EI, CPP)
677.00  Debt Payments
373.05 Charitable Giving (10% of  net)
(figures are based on the 2009 Canadian Survey of Household Spending and my own personal financial records)

"Okay... food - that's just groceries?"  Richard looked at Jill.

"Yes - I put things like eating out down under Entertainment."

"Perfect.  Now, housing costs... $1083.25 for your mortgage, tax and utilities.  How much do you make, Jack?"

Jack smiled.  "I just got a raise a few months ago, actually.  So I'm at $5100 per month gross right now."

"All right, good - you've got your housing and utilities costs at 30.8% of your income.  That's not a bad figure - don't let it creep any higher than that if you can help it, though.  The general guideline is to keep all of your housing costs, including your utilities and other bills like your phone, to one-third of your income or less."

"Looks like someone else has a head for numbers," laughed Jill.

Richard grinned back at her and nodded.  "Up next is your car - looks like you're doing all right there. Do you know how much you still owe on it?"

Jill looked at Jack, who shrugged.  "Around nine or ten thousand, I think..."

Jane nodded knowingly.  "I figured that would be our goal for tonight.  I don't think we even looked at our car loan papers after we signed them.  Didn't look at them all that well before we signed them, for that matter.  We want to help you with getting an understanding of your financial 'big picture' - we'll get back to that later on, though.  Let's finish with your journal first.  You have some health/dental on there - don't you have insurance through work, Jack?"

"Yes, but it's not really adequate.  And some of it is done by reimbursement, so we still have to pay out."

"Gotcha.  We'll want to plan on that when we work up your budget."

"Well, the rest of this is pretty straightforward," Richard said.  "What we need to do next is, like Jane said, get you to understand your financial 'big picture'.  I assume you have copies of all your loan agreements, credit card contracts, mortgage papers and so on...?"  Jill nodded.  "Good.  How about your credit report?"

Jack shook his head.  "No - you have to pay to get that, don't you?  I saw something on the internet where you could order it, but..."

Richard cut him off, waving his hands and shaking his head.  "No way, man!  Don't pay money to any of those places - all you have to do is contact the credit bureaus yourself.  There are two, and they'll just mail it to you.  You can get it once a year at no charge.  Here, let me get you the info.  Once you've got those in-hand, we'll go over everything and see what you're looking at.  In the meantime, keep up your journal, and see what little steps you can start making to make sure next month's receipts don't fill a grocery bag!"  They all laughed, but while he went to collect the credit bureau details, Jane smiled secretively and slipped Jill a note with a suggestion of what they could do with their pocket change instead of spending it on coffee.

"All right then - here it is!" Richard returned and handed Jack a sheet with info printed on it.  "You guys have a good night, and remember, call any time if you have questions about what to do next - otherwise we'll wait for you to get those reports in the mail."  The two men shook hands, Jill thanked Jane, and they collected the kids from the rec room.

On the way home, Jill looked at Jack. "How are you feeling about all of this?"

"A little overwhelmed maybe... a little frustrated because we've gone a whole month and not really made any progress... but at the same time, I think I'm feeling positive.  It's good to know we're on our way to somewhere, even if we are going slowly right now."

Jill nodded and smiled.  "You took the words right out of my mouth."

Previous Post in this Series:

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