Wednesday, October 28, 2009

How Would You Teach Others about Money?

When my cousin moved in a few weeks ago, Mr. DFx40 and I sat down and talked with him about his situation and what happened. After this talk, we realized that there were quite a few things his parents had never taught him. So we shared the vast amount of knowledge (please note sarcasm) we have gained from our 25 +/- years on this earth.

Cousin DFx40 tends to be a little forgetful. Sometimes he forgets to pay his bills even when he has the money. This seems to be a pretty common problem. Setting up a few simple daily, weekly, and monthly routines are the best way I can think of to solve this problem. I suggest putting these in writing, whether it’s on a piece of paper on your desk, on a calendar, or tattooed on your arm.

Set a regular wake up time. Even while he was searching for a new job (which took 5-6 weeks), we had him set his alarm and get up at 7am every morning. When he did find a job he was already used to getting up every day and it isn’t a big adjustment when his hours vary each week.
Eat three solid meals a day. Eating breakfast every morning is just going to make you feel better, and better equip you for the rest of the day. And since he was already waking up in time for breakfast every morning, this was easy to add to his routine.
Have a desk day once a week. I find it easier to keep up with junk mail and bills if I designate one day a week to deal with it. Set up a station (in an area you will use) to sort your mail and bills as soon as you bring them inside. For Cousin DFx40, this is just a corner of the desk in his room.
Review your situation regularly. At first we sat down with him every week to go over where he had applied, where he was still going to apply, and if he had any offers. Now that he has a job and is working regularly, we meet with him every other week (which happens to coincide with payday) to review his bills, savings, and goals.

After our talk, we realized that Cousin DFx40 was so overwhelmed with his situation that he had no goals. He was completely lost on what he wanted to do and what he was doing. This can be crippling, especially if you are in a situation your unhappy with. If you don’t have a goal (written down or not) you are not likely to change where you are.

Write them down. I think writing something down makes it real. We have our goal, DFx40, printed out and placed on our refrigerator. Since the kitchen is a place we visit frequently, we see our goal at the very least three times a day, but usually more.
Keep track of your goals. This goes back to reviewing your situation regularly. Find a frequency that works with your goals, sit down and look at where you are. If you find that you’re not quite on track, either readjust your methods, or your goal.
Celebrate the victories. This doesn’t mean go on a $500 shopping spree when you pay off your credit cards. It means if you’ve given up going out to eat to pay the cards off, celebrate by eating out.

I realize I am in the minority of people who love to budget. It makes me feel in control and I like to have a tool to measure how I’m progressing towards my goals. Also, it keeps me honest. This doesn’t happen to be something Cousin DFx40 loves as much as me. Thankfully, since he doesn’t own anything, and doesn’t have many bills, we were able to keep this relatively simple.

Write everything down. This means all forms of income and every reoccurring expense. Then total both of these up and figure out if you even have enough income to cover your expenses. If you don’t, you have no choice but to increase your income or decrease your expenses until you can cover everything.
Figure out how much is left. When your income does cover your expenses, figure out the exact amount you need. Don’t forget to take into consideration any fluctuating expenses you might have (food, utilities, etc).
Start automating savings. Once you figure out how much money you have left after paying all your bills, you can figure out a savings amount that you can afford, and that will allow you to reach your goals. Once you settle on an amount, set this up to automatically transfer at the beginning of the month. This may be scary but you already know your income will cover your expenses without this money. If it never stays in your checking account, you won’t even notice it is gone.
Budget entertainment from what’s left. I don’t’ think that anyone benefits from not having some type of entertainment fund built in to their budget. If you don’t have this allowance, you are much more likely to throw the budget away and give up. However, I do think that this should be determined by what is left after paying bills and saving.

Cousin DFx40 wrote down his routines, goals, and budget on a single piece of notebook paper and put it on a bulletin board in his room. We also have a copy of the paper so we can help keep him accountable. If you have someone you are comfortable with I recommend sharing some of your goals with them.

What about you…what advice would you give a friend or family member who is struggling financially?

Monday, October 19, 2009

Would You Take a Roomate?

There is a reason things have been vacant around here for the last three weeks. Mr. DFx40 and I became roommates with my 20 year old cousin last month. Before you make too many assumptions, let me give you a little more information about the situation.

His Situation
Cousin DFx40 always impressed me when we were growing up. He had a job throughout high school to pay for a used car he was bought from his parents and to pay for his insurance. He had this job while being heavily involved in more than one extracurricular activity. The reason this impressed me is because I didn’t have my first job (outside of babysitting) until my freshman year in college. My parents also supplied me with a used car they were through with and paid for my insurance. Cousin DFx40’s parents were divorced when he was pretty young, and he didn’t get much direction before or after he graduated from high school. After his first year of college he dropped out because he wasn’t sure what he wanted to do, and he didn’t want to take out more student loans until he figured it out. He found a job that offered more hours and moved in with another family member. Then he got himself into a little trouble when he lost his job and didn’t tell anyone for 3 months. When his parents and his roommates parents found out, they confronted him about it and gave him a few choices. Move home, move in with aunt and uncle, or move in with us.

Our Situation
You might think we’re a little off to offer a spare room to Cousin DFx40 based on his previous record. But when we sat down and really thought about the decision we realized there were many more reasons in favor of letting him stay with us than against.

We understand his frustration. Even though both of our parents helped with out with out insurance while we were in school, we did marry young and we both paid (and are still paying) our way through college. We knew how overwhelming it could feel, and we still feel overwhelmed at times when we look at how far we still have to go.

We are in control of our finances. If our electric bill or food bill goes up drastically before he is able to pitch in we will still be able to fit it into our budget. And because we have been able to pay off so much of our debt, build our savings, and pay cash for Mr. DFx40’s current tuition, we will be able to give him some tips and teach him how to manage his finances.

We have plenty of spare room. We live in a 3 bedroom house (not counting a large game room with walk-in-closet) and we have an extra bathroom. That is more than enough space for all of us to have privacy whenever we want (or need). There will be times when it might get a little cramped, but I think we were created as social creatures and we need daily human interaction.

He is family, and I love him. Enough said.

Your Situation
I will be the first to tell you that although our situation is going smoothly (so far), having a roommate is not for everyone. You may have small children in your house, you may not have an extra room, or you may not know anyone to share an apartment or house with. In this case I suggest you look for other ways to save or make money. But if you are in a position similar to ours, you have the extra room, and you know someone well who needs a place to stay I say go for it. But I do have a few suggestions.

Agree on things before they move in. Decide on things like how much you are going to charge for rent and if that number will cover any increase in utilities. Also think about food. In our situation we are buying and preparing food for him, so we will include this in our rent. He is welcome to eat out whenever he wants, but he has yet to choose that option.

Put something in writing. This is just as important for you as it is for the landlord of an apartment complex. If something goes wrong between you and your roommate, this will be a very important document to have. If things don’t go wrong, it is still good to look at every once in a while to remember what everyone agreed to. I suggest reviewing it regularly to make sure everyone’s needs are still being met.

Learn to be forgiving and always get a second opinion. Sometimes with roommates (especially family) feelings get hurt. Learn to forgive and learn to talk to someone you trust about the situation before any confrontation. I have already discussed a few situations with my parents to determine if I was overreacting or justified in my feelings. It is nice to have some input from a neutral party.

What about you…have you (or would you) ever had to take a roommate? What steps would you take to make sure everything went smoothly?