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?

1 comment:

  1. I found you via blog-catalog and am so glad I did. My husband and I have a little less than 70k in debt ourselves and want to be debt free by the time I'm 30 (4 years away.) It's a bit ambitious, but I like it that way. I am so excited to read someone else's similar journey!