September 24 Budgeting Basics

I couldn't get money off my mind today, so as soon as I got home from work, I started working on balancing the checkbook (which is *ahem* several months behind), writing in all those pesky ATM and Debit transactions we forget to write down, and then entering every transaction into Microsoft Money. Three and a half hours later, I had a clear picture of where we're at in every category.  Fun? Hardly. But, worrying about it for 3.5 hours tonight allows me to reign in where we're spending too much (clothing and gas) and feel better about the categories that are doing fine and NOT have to worry about money for the next few months.  It also showed me where I can transfer some of our checking account money to ING Orange Savings accounts to earn interest.

We didn't spend any money today and ended up eating grilled cheese together at 9:50pm when DH got home from class, but tonight I'll post a little history of my budgeting experiences. My sister has a more comprehensive list of ages/disciplines/methods, etc., so if you are interested in starting any of these with your kids, I could get you more information.

• Age 4-5, my parents gave us 10 nickels each week that we had to place in cups. Five went in the "Savings" cups, 1 went into "Tithe" and 4 went into "Spending".  
  
• Age 6-9, we earned a little more money doing calf chores on the farm, but the same rules applied-50% in savings, 10% in tithe, 40% in spending.  We also received an allowance in cash that we put into category envelopes in a recipe box: Summer Recreation, Book Bag, Gloves, Entertainment, Book Orders, etc. This taught us about saving, and that once the money is gone, it's gone, and you can't rob Peter to pay Paul. (Also, if you lose your gloves, you have to earn more money or use your "Fun" money to buy another pair.)
• Age 10-18, I had a checking account (starting in 3rd grade) and posted every transaction into different accounts by writing it in the "Debit" or "Credit" columns of ledger paper. I did get an allowance but had to pay for my lunch ticket, piano lessons, clothes, and various other things.  Any money we earned from riding beans or babysitting had the 50-10-40 rule, but as soon as I got a real part-time job when I was 16, I think it went to 10% savings, 10% tithe, 80% spending (in expense categories).
• Age 18-21: I managed my money throughout college, including a Vanguard Money Market account and an ING Orange Savings Account. I did get some allowance and my parents gave me a set amount at the beginning of my freshman year that I was free to use however I wanted--for tuition, room & board, etc. This was money they saved by "paying" me for the farm chores I did as a kid and putting the wages straight into investments. It wasn't enough to cover 3.5 years of tuition and books but was still a huge help. I still paid for most of my college expenses with part-time and summer jobs, lived extremely cheap and had some of the money they gave me left when I graduated. I chose to take a small subsidized loan during one year of school when my intern summer job couldn't cover costs, but I invested the money from my parents and used it for a down payment on our house years later. Sometimes I feel like I missed out on a lot of fun college experiences by being so tight with my money (Spring break was usually spent going to the State basketball tournament with my family), but it was probably worth it in the end. College is also where I learned to manage a credit card and disciplined myself into paying the full amount every month so I could build up a good credit history.
• Age 22-26: As life gets more complicated, so does money. Trying to figure out 401k's, Roth IRA's, insurance premiums, savings, investments, and ever-increasing expenses can be overwhelming. But, before even getting into investment and retirement options, my best advice is to MAKE A BUDGET! If you don't know where your money is going, take a month or two to save receipts or write down every transaction, assign categories, and tally up exactly how much you are spending on groceries, household bills, clothing, etc. You might be surprised to find out where there a huge expenses that are killing your budget (housing/cars/eating out) and where little expenses are nickel and diming you to death (coffee/fast food/Ace Hardware *ahem*).  Here is a great article about how to build your first budget. Like I've mentioned before, I use Microsoft Money software that came with my Office package, but you can use Quicken or other software to keep track.

I will always be grateful for the wonderful lessons my parents taught me about managing money from an early age.  Teaching (and modeling) money management is a priceless gift you can give your kids.  Check out moneyinstructor for teaching materials you can use with your kids (or class). Hopefully this month will inspire you to make a budget and then stick to it!