A Tale of Two Plans: Spending and Saving

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1 A Tale of Two Plans: Spending and Saving Do you know where all your money goes? Do you know your income? Does your income cover your expenses or do you feel like you could always use more money to cover your expenses? Most unexpected expenses are things we ve neglected in our spending plan. What are some expenses that always seem to cause stress for your family? Do you currently use a spending plan (budget) or do you just remember what needs to be paid and how much you spend? In your spending plan, do you have a savings component? To reach the goals you set, it will require to make some tough decisions and you may have to give up something to be able to reach your goal. However, saving money is worth it when you achieve your goal. How do you save money? How do you replace money that has been removed? Let s start off with finding out how to manage your spending and your saving plan. Do you: $ Dip into savings to pay current bills? $Pay only the minimum due each month on charge accounts? $ Delay payment of some bills you normally would have paid on time? $ Borrow to pay for items you previously bought with cash? $ Take out new loans to pay old ones or to get lower monthly payments? $ Do not know where your money goes? $ Have less than 3 months of living expenses in an emergency fund? Even if you answered yes to all or most of the questions, it is not hopeless. You must first understand that you have a certain amount of money available to you and learn to live within your means. The secret lies in knowing where you are now, where you want to be in the future, and making a plan to get there. A successful spending plan takes time, commitment and involvement from all in the family who spend and make the money. If you combine all of your family income into one account, then each person needs to know how much goes in and comes out from the account. If you have a shared account for household and each have your own for personal, the goal is to be sure that the household account is getting enough money to support those expenses. If not, changes need to be align with your income and goals. So, if you have a 60/40 split, double check the percentages because the person who brings in the most money should pay the larger amount of bills. If you have divided bills and you each keep your own account and pay household bills and your personal bills from that account, always make sure that they are as equal as possible. The split of 60/40 or 70/30 or 50/50 could be applied. When figuring a spending plan, it is best to figure household income and combine figures to double check how the household is spending. Educational programs of the Texas A&M AgriLife Extension Service are open to all people without regard to race, color, sex, national origin, age, disability, genetic information, or veteran status.

2 How Do You Feel About Money? If you received a gift of $500, what would you do with it? Save some or all of it? Pay off bills? Buy a want or two? How you decide to spend the gift, depends on how you feel about money. To some people, money is power. To some money equals status and prestige, while for others it means security. For some people money allows them to get the things they want in life. Others just want to have enough to meet their needs. Look at the graphic below and identify what kind of spender you are? 06 $ Money helps achieve goals $ Buy items that retain value $ Have money reserved to pay for unexpected

3 Are there ways you spend money that could use an overhaul? Maybe consider making a few small changes in how you handle your money. Making Changes Some months you can t pay all of your bills. It may seem like you aren t able to save money. When this happens, spending less may be the next plan. However, what do you do? 1. Don t buy it. Ask yourself if you really need it now or can it wait. Learn to say NO to: yourself, children, grandchildren, salesperson and to things you feel pressured into buying. 2. Find the best buy - comparison shop several options including resale or garage sales. Look before you spend. 3. Use Wisely. Make the items you buy last longer. Take care of clothes properly - read care labels. Keep food from spoiling before you are able to eat it. 4. Substitute. Is there a lower priced item that will do the job as well? Use store brands or generics instead of name brands. 5. Share it. Stretch resources by sharing with neighbors, friends or family. Buy in bulk and share cost and items. Join a carpool. 6. Find it free. Use public parks and playgrounds. Borrow books or movies from the library. 7. Rent or borrow. Do you only need something for a short time or once or twice a year? Would it be more cost effective to rent the carpet cleaner than buying or borrowing? 8. Trade or Swap. Could you trade items you no longer need that someone else may need? Can you trade helping out a neighbor for shared help? 9. Make It (DIY). Can you make the item, which means using your time and skills? Make sure the cost of materials is cheaper than buying the finished product. 10. Watch phantom money. Keep track of cash (debit card) in your wallet. Cut back or cut out spending on snacks, sodas/drinks when out, magazines, eating out, shopping online or on the t.v. Could it be lottery tickets? Complete attached spending extras chart. Your Financial Wellness Check-Up (Action Steps) Select Three that you can complete in the next week: Continue or start keeping your spending log and tracking daily expenses Complete a spending plan Project monthly fixed expenses Estimate monthly expenses Outline occasional expenses Find your little things and see which ones you can reduce or eliminate

4 Spending Plans

5 Do your expenses outweigh your income? Here are some balancing options that may work for you: $ Increase Income this may mean a new or a second job for a family member(s). More education or training may increase earning power down the road. Brainstorm ideas with your family. $ Reduce Expenses - this option often can make the quickest and largest impact to your spending plan. As you review your expenses, consider whether it is a need, want or desire. A need is something you must have to live your daily life. A want is a way to meet these needs with more style, comfort or ease. A desire is something you wish you had but it does not fulfill any basic need. Cutting back on desire spending can free up money to pay for needs and wants. If that doesn t help, wants may have to give way to basic needs. Study where your money is going. Where can you cut back? What can you do differently that will have the biggest pay off? $ Adjust debt payments. Consider negotiating lower interest rates or a temporary suspension of your interest rate, or consider negotiating lower payments with your creditor. A note of warning: do not make any adjustments unless you have it in writing that your creditor agrees; in the long run, these choices will cost you more. $ Sometimes a combination of two from above works best. Small changes in each option may work better than trying to make up the difference through one single option. That is when spending plans do not work.

6 How to Save Money Saving comes easy for some people and not so easy for others. Some people can save money on the short term better than for an extended period of time. Which type are you? When it comes to saving money, making sacrifices and changes to how you spend, is something we all must do. What you give up depends on what you and your family value most. Why save? To accumulate an emergency fund equal to nine months (12 months is ideal) of your take-home pay or living expenses; start with saving your deductible, double that amount; add money that after 6 months is at least one month mortgage or rent payment. When you have saved your first $1000, move to a certificate of deposit (CD) and keep working on your next $1500. There are many ways to save. But the most important thing to remember about a savings plan is to keep it safe, simple, and steady. If you make saving automatic, it will be easier to stick with your program. A plan for saving and investing is an important part of a household spending plan. Begin today to build your savings for a financially secure future. Is Your money safe? Money needed to pay monthly expenses, to meet emergencies and to save for short-term goals must be convenient, readily available and safe. It should also be in an account that is safe. Most savers keep emergency money in a savings account or a money market deposit account. Both of these accounts are federally insured and available through local financial institutions. Checking accounts at banks and credit unions are also insured accounts. Do not confuse money market deposit (savings) accounts with money market mutual funds. Money market mutual funds, although relatively safe, are not federally insured deposits. Both types of accounts are easy to open and require a minimum deposit How much to save? It depends on amount needed for goals: $ How much money you need $ How much time you have to save the money $ What interest rate you can earn on your savings For example, let s say your goal is to take a dream vacation in three years. Determine how much per person and grow total amount. You think you ll need $5,000, and you plan to save at your bank. $5,000/36 months = $ each month. You would need to save approximately $140 each month for 3 years to reach your goal To calculate your own savings plan, divide the amount you need to spend by the time you have to spend it.

7 Pay yourself first. When you pay your bills, pay your savings bill by depositing the money in your savings account Use payroll deductions. Have your employer deposit your savings directly into a credit union or bank account Save bonus income. Save tax refunds, overtime pay, gift money, refunds, and rebates. Save coupon money. Save the amount you save by using coupons at the grocery store. If you save $2 a week using coupons, put the savings (the money you did not spend) in your savings account. Pay installments to yourself. Once you pay off a loan (and if others loans are not overdue), continue to make payments to your savings account, try for at least six months. Collect loose change. Empty your pockets and wallet of loose change and place in a jar. Once a month, deposit the change in your savings account. Break a habit. Save the money you didn t spend when you make your own coffee at home and take it with you. Do you buy bottled water? Break the case habit, save $400 minimum a year. Ways to Save Money How can you save when you don t have a dime to spare? Here are some tips. Check the ones you plan to try. Save lunch money. Get up 10 minutes earlier and make your own lunch. Save money you would have spent on lunch. $10 x 5 =$50 wk = $2200 a year approx.. Save money on a sale. Save the difference between the sale price you paid and the full price you would have paid if the item had not been on sale. Have a nothing week. Once every two months have a week when you try not to spend any extra money. Save the money you would have spent.

8 The Texas A&M AgriLife Extension Service is a unique education agency with a statewide network of professional educators, trained volunteers, and county offices. It reaches into every Texas county to address local priority needs. Texas A&M AgriLife Extension offers practical information for families: raising children, housing and environment, eating well, managing money, and staying healthy. The majority of the content in this newsletter was adapted with permission from University of Arkansas Agriculture Cooperative Extension Service Marian Ross County Extension Agent Family & Consumer Sciences Tarrant County 200 Taylor Street, Suite 500 Fort Worth, TX m-ross@tamu.edu Angel Neu County Extension Agent Family & Consumer Sciences Cooke County 301 South Chestnut Gainesville, TX (940) adneu@tamu.edu Your Money and Your Health Think Money and Health are not related? Think again. Some people may manage their money very well and then become sick and need the extra money to pay for treatment. On the other hand, some people manage their health so well that they live for many years and need a large nest egg built up that will last. According to Barbara O Neill, author of Small Steps to Health and Wealth and Extension Specialist with Rutgers Cooperative Extension, there are many connections between money and health including the ways we manage it: Think about incorporating some of these suggestions into how you manage your money and your health: $ Keep track of what you spend and what you eat. $ Make a commitment to change. $ Stop and think about why you may be buying something on impulse or why you many be eating unhealthy foods. $ Make S.M.A.R.T. Goals to manage both your money and your health. $ Be realistic about what you can actually achieve. $ Just Say NO to the supersize portions as well as the 15% off if you open an account today offers.