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Budget, Credit card debt, Family, Finance, Home, Parenting, personal, Personal Finance, Southern California, Suze Orman, Trying something different, vacation
As all of you know, this year is election year. One of the big topics this year is budget control. Everyone wants to make sure our governmental officials are spending money, within the allotted budget. What makes budget control interesting is, most people do not live within their own budgets, but expect the government to do so.
Living within your means is difficult. It is especially hard if you are a family of five, living in Southern California and on one income. That is our financial situation. We have lived on one income for 17 years. It has been one of my greatest challenges, as the financial manager for my family. My husband is not in a high paying career field. He does make a good living, but we have five people to feed, clothes, educate, provide housing, and medical care for.
The end of the summer always is a financial strain for us. The older boys both have summer birthdays, we usually take a big summer trip and school supplies need to be bought. By the time school starts, we are broke. We try to plan for the extra expenses of summer every year, but never quite seem to do it. Things always end up costing more than we planned for.
This year I decided to take a serious look our financial situation before we head into the holiday season. My husband and I are tired of feeling so strapped for cash. I will not be returning to work this school year, yet we have goals we need to plan for.
Before I could begin any financial planning my husband and I needed to decide what our financial goals were for the next year. We do pretty good at saving and preparing ahead, but we have been hit hard since we have moved into our new home nine months ago. Our mortgage bill went up $600 a month, something we did not really plan for. We have continued our fun lifestyle living in the new home, including the extra cost of doing upgrades to the home.
My husband and I think alike with regards to our financial future, with a few exceptions. He is very into the latest technology (phones, computers, cameras) and I love entertainment (theater, eating out, movies). We both want to work less on home repairs and travel more. We also need more money is our emergency fund. My husband would like to get a new car next fall, so we can give his current car to my oldest son to drive (Gulp).
As you can see, we have a lot of things to prepare for and that does not account for things we are already doing.
Here are some things we do right, with regards to finances.
Retirement savings
We put at least 11% of our annual income in 401K, stock purchases and IRA. We should be doing more, but we are comfortable with our savings amount for now.
College savings
Each boy has a savings account for college. They are not huge, but better than nothing. We started saving when they were babies, contributing a small amount each month.
Insurance
We have full medical insurance for each family member to include: healthcare, vision and dental. We are fortunate my husband’s employer assists with meeting insurance needs. We also have home, car, disability, and life insurance (for husband and myself). I have always had life insurance, even though I do not earn income. The work I do for the family, would be an extra cost for my husband if something should happen to me.
Own a home
Our current home is our second one. We recently refinanced to get our interest rate lower, so we can manage our finances better. Our home is a valuable asset, but also one of our greatest expenses.
No credit card debt.
We now do not have credit card debt, but have had it several times in the past. It is extremely difficult to live debt free. This is our greatest struggle and something we know we need to improve on.
Here is a list of things we need to improve, with regards to financial planning.
Emergency Fund
We do have an emergency fund, but it is far below the recommended 8 months reserve, financial guru Suze Orman recommends.
Planning ahead for vacations.
We travel every year and every year we are unprepared for it. Travel cost is one of the reasons we get into credit card debt. We need to plan better for our annual trips.
Save for a car.
We have made the decision for my husband to get a car next year, but have not saved nearly enough for it. Suze Orman recommends only buying a car if you can pay it off in three years. This goal is what we hope to do, as our oldest son will be heading to college in three years and we do not want a car payment.
After setting our financial goals, I decided to see how well we were doing with living within our means. As you may have guessed, I am a fan of Suze Orman. Her practical approach toward finances had helped me make better financial decisions. I have several of her books. Suze is a consultant for Oprah Winfrey’s magazine O and on Oprah’s website, she provides several useful tools to get started with financial planning.
Before you use Suze Orman’s financial tools, you must first sign up for Oprah’s website. I am always trying to be a quest on Oprah’s shows, so I have been signed up for years. The first tool I used was Suze’s Budget Calculator. This tool helps to understand how much money is coming in and how much is being spent each month. I used this to decide if we were living within our means.
It turns out, we are living within our means. I wondered why do we always seem so broke. The budget calculator looks at your annual expenses, based upon how much you spend each month. All forms of income are included including birthday gift money and my husband’s annual bonus. The problem is we do not get birthday gift money every month and the annual bonus is not until April. We usually end up paying off our credit card with part of the bonus money. This year we want to be able to save the entire amount of the bonus, not use it to pay off bills.
Next I used the Suze Orman’s Monthly Expense Budget Calculator. This tool allows you to see how much you are currently spending . It has a listing of typical expenses. Each monthly cost is calculated and applied to the monthly take home income. The key to using this calculator is to be very honest with what you are currently spending. It took me a little time and research, to find out the monthly costs of some expenses that only occur annually, but I did it.
Turns out we were over budget for our monthly expenses. This explains why we fee so broke each month. The spread sheet lists expenses and once completed color codes what expenses are above the national average and what could items could be reduced or eliminated. As expected, living in Southern California, we spend far more than the average American family on everyday expenses. Things like gas, electricity, food, water and mortgage were all listed too high of a cost. The sheet also informed me we spend too much on eating out (GASP), entertainment and phone expenses.
The two things my husband and I enjoy the most (entertainment and electronics) were our highest expenses. It was good for us both to see the numbers and realize what changes we need to make. We both love eating out and new gadgets, but traveling and a new car will bring us much more long-term happiness. We vowed to make cuts in both areas and focus more energy on saving.
Budgets are wonderful things. When you build a new plan for savings, things do happen. However, the problem with a budget is it does not account for stress. My desire for eating out comes from getting stressed and feeling I deserve a break. My husband’s desire for the newest gadget comes from wanting to enjoy the latest item, as a reward for his hard work. Both ways are fine to reward yourself, but not so often.
We have reviewed our finances and have decided to make changes. We sat the boys down to explain what the financial changes mean and how their lives would be affected. The reaction was good, especially because Old Boy will be getting his own car in a year and we are saving to go to the Grand Canyon during Spring Break.
For the first time in a while, I am feeling confident. It will interesting to see how the new budget goes. We will do our best. If we are successful, you will be seeing family photos on Photo Friday at the Grand Canyon in the Spring.
If not, you will see photos of us swimming in the Pacific Ocean, during a staycation in San Diego.
It is kind of a win-win situation, if you ask me.
Sounds like you are on top of things. I am not so familiar with Suzie Orman (your guru) but I am guessing she would be proud.
I hope Suze (correct spelling, English teacher) would be proud. Several years ago, we updated all of our financial information. It has been years since I have done anything. We are hopefully back on track.
I too, like Suzie Orman, while I do not work, (I take care of my mother with Parkinson’s disease on a daily basis), when my husband and I sat down and figured out our budget for me to be able to do it, it was a help to look at some of her ideas. We have the last of our 5 children in her Senior year at College, and with some smart budgeting we are able to afford everything we want while also saving for our “vacation” of a cruise with the hubbs parents. It’s kind of stressful at sometimes, but I’ve learned to make cut backs on some of our biggest expenses, I make my own laundry soap and other cleaning items out of stuff that is usually in my house anyway.
But what I meant to say was Good for you and Good Luck on the budgeting!
Camsgranny
Wow. I am so impressed. My husband and I do pretty well, but nothing compared to you. Making your own laundry soap? That is amazing. Thank you for the support.
“The end of the summer always is a financial strain for us. The older boys both have summer birthdays, we usually take a big summer trip and school supplies need to be bought. By the time school starts, we are broke.”
We raised our kids in a similar situation. It’s no better with the kids grown, because we like to help out however we can with the grandsons. Our anniversary is in September. We never have the money to celebrate. Maybe someday…on our fiftieth?
My birthday is in September and usually I use my birthday money to buy school clothes and supplies for the boys. The things we parents do for our kids. Sure hope some day they appreciate it. Happy Anniversary! What number year are you on and when in the big day?
It sounds like you have made a good start, and that you are aware of the pitfalls of debt. We have refinanced our house to a very low 3.something rate, so our payments have dropped significantly. By taking the money we save on the payment, and applying it to the principle, we will have the house paid of years earlier than expected. We do not own a car that is under seven years old. We bought them used, and we take very good care of them. We will never finance another vehicle, it is much cheaper to keep the older cars running than it is to pay finance charges for a car that will lose its value more every day.
We have invested in gold and silver as a back up just in case we need it. We do not use credit cards, only a debit card from our bank. We have three credit cards and make sure to activate them at least once every three months, but they are paid off immediately. Because we will retire soon, (I am already retired) we started looking at ways to invest our money that will give us an easy income. So we bought several rental properties in a college town. They stay rented all year long, and bring us a soft income because we paid cash for the houses. In this real estate market in middle America, you can get some GREAT deals! (we are looking at buying an apartment building with flats for the retired generation.) To be diversified, we also have a business that provides ATM’s for small town cafes and bars, and I run a small vending machine business. All our business, except for the rentals, is done with cash only. That way our overhead is low and we don’t have to spend a lot on credit card charges. (the CC companies charge the businesses too.)
By the time Hal is fully retired, we will have an income that will keep us comfortably for the rest of our lives, and we will always have a place to live since we will own several houses and an apartment building (or two). We are way over insured too, but would rather pay that than have to cough up a huge deductible every time we need to see a doctor. With older cars, insurance is much less if you have a good driving record.
As for planning, I always buy school supplies for the next year when they go on sale. If my kids were going into, say, third grade, I would also pick up a supply list for the fourth grade. When things went on sale after school started, I would buy what I would need for the next year at a discount. Then I only had to buy stuff for individual teachers. It made a huge difference in the long run. I would also stock up on things like binders, paper, pens, pencils, USB gadgets, and notebooks, because those things need replaced throughout the year. I stored it all in a closet that my boys called the school closet.
Vacations are important. We generally do several small vacations instead of using up all our three weeks in one go. We plan around holidays so we always get two weekends per one week off. Saving starts as soon as we get home from the last vacation. All our change goes into a jar, you would be surprised at how much you can save up like that. We have a special account we set aside just for our holiday fun. It usually takes us about three months to save enough to go on a cruise, as long as we are diligent and don’t go off and buy doo dads and stuff we want instead of need.
Christmas is always hard for a budget. I start buying in January for the next year. When things go on sale throughout the year, if it is on a wish list, I buy it and set it aside. Clothing isn’t something I would buy that way, unless it was for an adult. Kids grow too fast. As my kids grew up, I would start setting aside cash for them as well. After a certain age, money is more fun than any gift. They like to get what they want.
When I see something I want, not need, but want, I put it on my wish list and when I have the extra funds, I will buy it. The important thing to know is what is a WANT and what is a NEED.
We started with a small inheritance from Hal’s parents, added to our own savings. As we gained property, and saved more, then we would buy more ATM machines or vending machines and place them. The cash income helped to keep the ATMs loaded, and the fees helped us to save for the next machine. The goal is to have 25 of them spread around in small towns. We are getting closer every day.
OK, sorry, long winded. But you CAN prepare for the future by having a bit of common sense and forethought put into the process. We won’t ever be rich, but we will be comfortable.
Loved your post! Suze Orman is my favorite. Standing in your financial truth will set you free. Great read and good luck. I touch on similar topics in my blog perfectgirlquest.com.
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