Preparing the Kids Financially

A discussion came up two days ago with our kids about how they feel they aren't prepared to handle things financially and are afraid they will make mistakes. They are 17 and 13. The thirteen year old seemed the most concerned. The first thing I said was "You are lucky you have me for a mom because I am glad to help you along the way." I think they knew that already. :)

Here is what my girls know already:

• You have to work for money.
• How to make change for transactions.
• How to use a debit card for payment at a store and online.They each have their own.
• How to write a check, although they do not have a checking account.
• It is good to save your money.
• It is okay to spend some of your money.
• They know credit cards charge interest if you don't pay it off right away
• They know you can borrow money for a house or a car, which they have seen us do.
• They know we can compare different options at a store to find the best price.
• They know coupons can lower the amount you pay out of pocket for an item.
• You can sell your used items to get cash.
• They know you need to set money aside for retirement.
• They have heard of insurance; health, auto and home.
• The oldest daughter knows how to track her money in a check register.
• That income it taxed and those tax dollars go to the government to decide how to use.

What the likely don't know yet:

• How to open a bank account.
• File income taxes.
• How to determine withholding for taxes.
• Where to save their money for retirement.
• Different investment vehicles, such as CDs and mutual funds.
• How to pay loans off quickly.
• How to complete a budget (actually they have had a little experience with this in school).
• How to chose insurance and what a premium and deductible are.
• How credit scores affect interest rates on loans.

These lists are by no means comprehensive, but writing them out helps me realize they do know quite a bit, but clearly there are things they will need to learn. I sure don't think my 13 year old needs to know how to buy insurance just yet! I do plan to help them along the way. I also will try to bring up more topics at dinner to explain financial terms like 'deductible' and 'premium'. It sure won't hurt them one bit to have more information. 

Do you systematically teach your kids or grand kids about finances? Are they aware of quite a few things or nearly clueless when it comes to money and personal finance? Any good financial advice you learned when you were young that really stuck with you into adulthood?

Still Saving...Really!

I know you aren't reading much on this blog lately. It seems I have been hit with the fitness bug and I'm spending more of my free time contemplating better health than I am finances. This sure isn't a bad thing. I look at staying healthy an investment in my future health. I fell off the wagon in the last year, so it was time to get started tracking calories, and getting exercise in.

The good news is that our finances are on auto pilot in so many areas that I don't have to spend much time working on finances. Part of me is sad about that, but the other part is happy with the freedom that comes with it. Our Roth contributions and college investments are all automatically withdrawn from our checking account. Several of our utilities are auto withdrawn as well. I'm even saving for that 52 Week Saving Challenge automatically, which I now have $409 saved there!

I still have several things I need to go online manually to pay or check on, but I have found that once a week is plenty to check on any credit card transactions and due dates, or any upcoming bills that need to be paid. I usually do this on a Friday or Monday depending on the time I have available. I do hope to keep coming back here to cheer you on and give you new ideas, so keep checking in!

Are you able to keep your finances on autopilot? Are you on a fitness or diet regimen since the new year?

Dental Insurance

Just returned from our six month dental check ups. All is good. No cavities. They are still watching the wisdom teeth for my oldest daughter. They are sure acting like they need to be done, and since she is my daughter and I had to have mine removed, they are probably right. So we need to start planning on WHEN would be a good time to have that done.

The bad news from the dentist is they are no longer accepting our insurance as full payment. They have attempted to negotiate better payment without success. As a result, we will now have to pay out of our pocket for the difference between what our insurance pays and the dentists charge. For all I know this is $20 each. I didn't take the time today to find out since they are still accepting full payment from the insurer for this visit since this decision was just made and our appointment was already schedule. They will also provide 10% off the difference if we stay with them. I think they are being reasonable. I know our last dentist in our old town made this same decision about this company two years ago when the military switched insurance carriers. They are getting sufficient coverage for their costs. How can they be expected to do business that way? I may look for another dentist, but so far I do like them, so I don't feel like changing, especially since we may be moving in another year or so. To be clear, the insurance company will still provide some compensation, but the dentist no longer agrees that the compensation is fair or justified and we will be charged more above that amount. 

Have you had a dental provider reject your insurance company? Would you be looking for a new dentist if you were in my situation? Did you have your wisdom teeth removed? Do you remember anything about that experience?

Pay Day Thoughts

I paid and recorded our bills for payday. Some bills are automatic, so I only need to record them. Other bills I just need to go online and authorize a payment. All credit card bills are current. Yea!

At the beginning of the month I save $50 for Christmas, $114 towards auto insurance and registrations, and $57 for the 52 Week Savings Challenge. The mortgage which includes an extra $103 towards principal, water bill, cellular bill, gas bill, and electric bill are all paid. I also give a small allowance to our girls. I pay the Target Red card and any balances on any other credit cards. I set aside cash for the upcoming pay period. And if there is cash left, I save it!!

This payday I was able to save $510. I like that! February was definitely a low spend month for us. With the cold weather it was just easier to stay in and out of the stores. I think that using up things last week also stretched our grocery bill a little, too. I still have my eye on a few things in the cupboard that need to go soon.

I'm fully aware that we will owe money for taxes in the next 6 weeks. Our daughter has a birthday in March. It is also spring break from school and we are taking a mini road trip to visit a college. Family is  near there, so only gas and food, no hotel costs at least. I will pay our auto insurance, but this is already saved for, as I mentioned above. And if it gets the least bit warmer it will be time to buy some new spring clothes. We don't buy a lot, but several of us will at least need new capris and shorts. We are probably pretty good on short sleeve tops. I also know one daughter will need a jacket. So although I saved that $510, I do see increased expenses in the future. Which means at least some of that money will be spent.

Yep, it was a good pay day! I'm very grateful for the blessings bestowed upon us.

Frugal Eating

Our family isn't exactly frugal with our eating. This can be seen by our grocery bill and unfortunately some of our waistlines. Ugh! I really would like to think that we are more frugal than some people. While I don't want to blame my husband entirely, he has some expensive tastes and goes through chips and snacks fast. As a mom, I also easily give in to my children's wants. I have noticed my older daughter has pretty good portion control, so no complaints there!! My younger daughter is picky, which is another way of saying she doesn't eat a large variety of foods. All of that to say, we don't have this eating thing down perfect.

What we do well over many of our peers, is that we watch for sales on foods we normally buy and use coupons when we can. Although, I've noticed there are not many coupons for fruit and veggies, but they do go on sale and are less expensive in season.

We make a list when we go grocery shopping. This means we make fewer trips to the store, which saves time and money, but also keeps us  from buying too many extras. Yes, extras do pop into the cart at times. Darn extras!

The one thing that helps the extra spending on food is that I make a point to make sure we eat what we purchased with as little waste as possible. This involves looking in the cupboards and fridge before we go shopping and while we are making our meal plan. For example this week, I chose to make tacos since I noticed we had a full container of sour cream. We need to use that up. We also had tomatoes, shredded cheese and refried beans already on hand. I plan to eat a salmon filet that has been in the freezer awhile. I will probably eat it for lunch since there is only one. I might make a salad to use up carrots and lettuce we will have leftover from tacos.

I have my eye on some applesauce, margarine, and ripe bananas that need to be used up this week. We'll see what I can come up with. Banana bread is a strong possibility!

Do you make a conscious effort to eat things up in your fridge and cupboards as a way of being frugal with the things you have already purchased? Do you have anything you can make an effort to use up this week before it expires or use instead of buying more at the store?

The Simplest Way to Track Spending

I was thinking about the early money days in our marriage recently. One thing that I remember doing is tracking everything we spent. I specifically remember a three month period where I was very meticulous about it. If I remember right, it was just to gauge where we spent our discretionary money and how much that generally was. In this case, I mean discretionary as in anything that wasn't a bill with a due date. So this included gas, groceries, formula and diapers. 

I wanted to keep things simple because I had two young kids and a husband who worked three jobs and didn't have any interest in the information. I found a used envelope, wrote the month on the outside and stuffed all receipts inside. Some receipts my husband gave me where ATM withdrawals. Initially, I didn't care what he actually spent the cash on. Once it was out of our checking account it was spent. 

At the end of the month, I went through every receipt and did my best to categorize each item we purchased. It wasn't perfect, but I was able to get an idea how much we spent on diapers, formula, eating out, groceries, gas, entertainment, and even cash spending (even though I didn't know what it was spent on). I also made sure to know the total of all this spending for the month.

After tracking for at least three months, maybe four, I had an average we spent in a month. I ended up using this number or a number as a starting point for our budgeting system. I'm not entirely sure I remember the number but I think it was around $1000. Since my husband was paid weekly, we set aside $250 each week to cover all those discretionary expenses. I'm pretty sure this was relatively tight. Not too tight, but not so loose we were out buying music or eating out every week. 

I would take each paycheck subtract bills due that pay period as well as the $250 to see what amount we had left to do something else with. I do know some had to be saved for our mortgage payment each pay period as one weekly paycheck alone didn't cover our mortgage. And I'm positive some money each pay period was either sent in to pay down debt or at least set aside to add as extra on a debt we would pay later in the month. 

Over the years the amount we set aside each pay period has increased. We just recently increased our discretionary spending to $1000 per pay period. My husband is now paid twice per month. I think it was necessary to increase it as we have two teenage daughters and our grocery spending seems larger, likely inflation, but probably being more relaxed about what we buy. 

It doesn't have to be difficult to track your spending. I think it is an important exercise to try for a few months. It can help you see where you spend the majority of your discretionary money or to establish a discretionary spending amount for your budget each pay period.  All you need is commitment to holding on to your receipts, a place to store them and a calculator and pen to add them up at the end of the month. Then do it again for another couple months. This can be the start of knowing where you money goes and how much you really spend. Of course, if you have a budgeting spreadsheet that works too!! 

Start a Slush Fund

I've got a little tip for you! If you are just starting to get control of your finances and budget your paychecks you might want to establish a slush fund. A slush fund is pool of money set aside for unexpected expenses. It is a little similar to an emergency fund, but for use for non emergency spending. Maybe you budget a certain amount for entertainment or eating out each month, but you get a call near the end of the month from out of state friends who want to meet for dinner. Your budget for eating out is zero this time of the month! Yes, you could say no, but you really want to see these friends. This is where I dip into the slush fund, because I know that it isn't an emergency. Some people might pull from another budget category and that would work too.

At our house, we don't budget by categories in great detail. Yes, we set aside money each month for Christmas, auto registrations, car insurance, but we don't break it down by groceries, gas, clothing, entertainment and so forth. We have a set amount we set aside for all of those things and just watch our spending as we go during each pay period. When we get near that set amount, we really slow our spending down or wait to buy something until the next paycheck. The amount we set aside for discretionary spending is conservative. We purposely do this to keep spending in check. And I will say we have increased it a little in recent years as we have noticed the price of food has gone up, but again very conservatively.

Our slush fund varies from month to month. It rarely is over $500, maybe an average of $300. Sometimes we don't put anything in because it is already funded well enough and we would rather send extra money to pay down our mortgage or save for our vacation. Some months the fund gets a lower than $50 if we have several dips into it. There is really no right or wrong amount. If the fund starts to get too big, over $500 in our case, I will pull that excess away from the slush fund and apply it to our current goal. For some this might be adding to an emergency fund or paying down credit card debt. In our case, we are currently paying extra towards our mortgage principal. I should also say some months we don't dip into the slush fund, because our discretionary spending is within the amount we set aside.

We keep our slush fund in our checking account currently. I am able to do this because I use a simple spreadsheet to track the slush portion of our checking account funds. It might be a little complicated for first time users. In fact, my husband probably doesn't even get it! If you are establishing a slush fund for the first time, you might consider a second checking account at your current bank, especially if you can get one for free. This way you will keep those slush funds separate and clearly know when you are dipping into those funds and for what amount. A second checking is better than a savings account, as many of those have rules on the number of times you can withdrawal from them without a penalty. You might be dipping in more than those, especially when you first start. I think it is important to keep it at the same bank because of the ease of transferring the funds. Usually instantly. An account at a different bank will have a couple days of wait time for the funds to be available.

Because we get paid twice per month, I simply evaluate the balance in our slush fund each pay period. Do I need to throw some more in, do I need to adjust the balance down for extra spending that occurred, or do I need to take some out because the amount is to big. I find it helpful and comfortable to have a slush fund, because it is stressful to see the balance in your checking account close to zero when you really NEED something or have an opportunity come up that you don't want to say no to. I do suggest that you try not to touch your slush fund too often, if you are doing it everyday there is a something wrong. You likely are spending too much, or cutting your discretionary fund to close.

Try it out, tweak it. Make a slush fund part of your personal budgeting plan. I really don't think you will regret it!

Do you already have a slush fund? What do you call it? What amount do you tend to keep in yours? Where do you keep it?