Money Listens

“…there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know.”—Donald Rumsfeld

Doesn’t this characterize how we view finances?  There are things we know. We know we should be following a budget and spending less than we earn. There are things we don’t know. We don’t know as much as we should about investing, insurance, and how to back up a hard drive. And we are fearful there are things we haven’t even thought about that will reach out and bite us. Those unknown unknowns will get you every time.

Now for the good news.  We’re going to follow along with Dave Ramsey’s plan for financial peace for the next 13 weeks.  You still might have some known unknowns, but you’ll have a plan for figuring those out.  Confused?  Don’t be.  After 13 weeks you will know all you need to know.  At least in the area of managing your money.

Here’s one known unknown:  Do you know how much money you need each month to survive?  If not, then the Basic Quickie Budget can come to your rescue.  Go to www.DaveRamsey.com and download the Quickie Budget form.  It’s a simple one page form (with large print) that lists the bare necessities.  It’s a great starting point.  It’s simple and it’s quick.  Don’t agonize about specific amounts, just estimate the numbers.

Why are you doing this?  Think about it.  If you know how much money you need each month to pay for your necessities, and if you know how much money you bring home, then you’ll know how much money you can save.  (You know you need to be saving, right?)  Have you read the newspaper this year?  YOU MUST SAVE!  For buying a car, summer camp, a home, airfare to Paris, college tuition, retirement, granite countertops, Christmas gifts, diamond rings, golf clubs, and, of course, an iPhone.

Saving is one of those known knowns.  You know.

Americans are spending about as much money on eating out as they are on eating at home.

The ERS Food Expenditure data series indicated that spending on food away from home was 48.9 percent and spending for food at home was 51.1 percent in 2006.

We spend about 58 percent of our food-at-home dollars at traditional grocery stores. Non-grocery stores that sell food, such as Walgreens and Dollar Stores, have increased their share of grocery sales to 11 percent. The really big winners were supercenters and warehouse club stores, which accounted for 18 percent of food-at-home expenditures in 2006. No wonder those check-out lines are so long.

The chain restaurants are also competing with the grocery stores. Many of these restaurants, such as Outback Steakhouse and Carraba’s Italian Grill, have emphasized take-out orders by adding reserved parking spaces and special entrances. These chains’ take-out sales account for an estimated 10 percent of their total sales.

Grocery stores are countering with more ready-to-eat meals and salad bars. There’s less and less cooking and more and more heating and eating. It’s getting harder and harder to separate the “at home” spending from the “eating out” category. Does the lasagna dinner from Macaroni Grill that you eat at home still count in the “eating out” budget category? What about Central Market’s “Dinner for Two?” Preparing and cooking a meal at home, with ingredients purchased from a grocery store, still beats eating out. At least in the cost department. Since we’re willing to spend half our food dollars on eating out, it seems the cost department isn’t much of a priority.

Singles make up more than 40% of Americans over the age of 18. (According to the 2000 census). That’s over 80 million people. So why is it so difficult for 80 million people to talk about money. Surely it’s not because they can’t find someone to talk to. Or is it? Let’s face it, most people “talk” about money by either bragging how well their investments are doing or complaining how they don’t have any money. All while showing off their new iPhone or $400 Coach bag.

Singles have to make every decision alone. Am I being wise? Am I too hard on myself? I don’t have anyone to bounce ideas off of. I really don’t want to talk to my parents about this, but who else cares? Probably more people than you think. A good budget will help hold you accountable, but you still need a live person to give you feedback. It might be a friend or neighbor, maybe one of your parent’s friends, an uncle or older relative, or someone at your church who is willing to take a hard look at your spending and saving habits. Don’t be afraid to ask around. You need to find someone who will sit in on your “Budget Committee Meeting” to offer impartial counsel and encouragement.

If you have a child, you feel a tremendous burden. You only have one income, and nobody to fall back on if things get tough.

It is too easy to pay the minimum on credit card balances, buy the pricy new shirt, default on a loan, or make other poor financial decisions– because you can! Stick to your budget and schedule a regular time with someone to hold a “Budget Committee Meeting.”

The advantage to being single is that you don’t have a spender making bad purchases with your money (unless you have a teenager.) Your time is also your own. You may be able to get an extra job to pay off debt or jump-start your emergency fund. Finding someone you can talk about money with won’t be as difficult as you think. If you’re a single parent you will find this book helpful.

Financial Relief for Single Parents: A Proven Plan for Achieving the Seemingly Impossible by Brenda Armstrong (Paperback - Jan 1, 2007) Brenda Armstrong worked several years with Larry Burkett at Crown Financial Ministries and co-authored the workbook Every Single Cent.

Talking about money and finances is difficult. Especially if you’re married to the person you’re talking to! Why is it so hard to communicate when you’re doing a budget? It’s because you and your spouse don’t agree 100% on everything. What happens when the nerd wants to put the extra $100 in the 401(k) and the free spirit wants it to go into the vacation fund?

One gives in to the other, but isn’t happy about it, and resentment builds.

Or, both stew about it and nothing get done until someone spends the money without the other’s consent. (And wait until he or she finds out!)

Or, stalemate, nothing gets agreed upon or done and somebody ends up sleeping on the couch.

How about really listening to one another? Write down what each wants and why. Why do you want more money for gifts? Is it because you’re afraid what your sister will think if your gift isn’t nice enough? How about if you are upfront and say that we’re trying to save for retirement and are going to give some small home-made gifts this year. List the pros and cons of each item, brainstorm alternatives. Keep this list with your budget and refer to it often. You’ll forget what you already decided and this will keep you from having to rehash and redefine the same issue. Consider the goals and values you both have agreed on. Compromise. You both must own the financial decisions because you both must live within the budget. Make sure your spouse feels understood and appreciated. Try talking for no more than 30 minutes at a time; and never after 10:00 at night. Here are some questions you can ask each other:

1. What’s the important issue here?

2. What are you hoping will happen?

3. How will this help us reach our goals?

4. What is your biggest fear about this?

5. What’s preventing you from …..?

6. What would you be willing to give up or compromise for…..?

Think positively about money. We have goals and managing our money is the way to achieve those goals. There. That wasn’t so difficult after all.

How’s your budget coming along? What’s that? You haven’t been able to agree with your dear spousie about all the categories yet? Welcome to the club. I’m assuming you wrote down your projected expenses, totaled it up, and exceeded your income. So what do you trim? Make the cuts you both can agree on, then take turns suggesting other areas you each could cut. It isn’t magic, it’s effort. If you feel “I’m the one always giving in, always sacrificing,” write that down. This would be a good thing to journal about. Also, write at the bottom of your budget –

By not getting a haircut, Jane just paid off $25 of debt.

By not playing golf, Dick put an extra $25 into savings.

By skipping the vacation category, Jane funneled another $50 in the 401(k).

By ____________ (insert your name here) saved $_____for________.

Then cross out the single name and add both your names. You’ve got to be in this together. Dave Ramsey always says “It’s about ours.” When you married, it went from mine to ours.

This is where a paper budget can be more useful than Quicken. When you make changes on a spreadsheet you forget why and what you did. On paper, you can see the cross-outs. Draw arrows from the category you’re trimming to where you’re putting that money. The idea is to see the positive side of giving up things. When you look in the eating out envelope, instead of feeling deprived because there’s only $25, think “Wow, that $50 we would have spent at Ta Molly’s has gone right to our emergency fund.”

If your spouse still hasn’t “got it,” try using guilt, fear, shame, nagging, and manipulation.

You know, a low budget, you have to work harder. You have to plan well; you don’t have much time to rehearse.
Hector Elizondo

If you don’t know who Hector Elizondo is, you don’t have pre-teen girls. He played the head of the queen’s security in The Princess Diaries. Foodies know him as the father and chef in Tortilla Soup.

What is a low budget? A producer making a low-budget movie doesn’t have a lot of money for extras and special effects. He has to work harder and plan well. The same goes for us. When we try to make our budget as low as possible we have to work at it. Spending money is easy, stretching a dollar is hard work. Planning becomes a necessity. It takes no thought to eat out, buy the first thing you see, or pull out the credit card. You have to plan to have ingredients to cook with, you have to take time researching the best buy, you have to be creative and work with what you have.

Haven’t you seen some big-budget movies that were total flops. Remember Waterworld with Kevin Costner? It cost $150 million in 1995. Many low cost films have been winners. There was a low-budget gangster movie in 1972 that won 4 Oscars. Ever heard of The Godfather?

One of my favorite movies is My Big Fat Greek Wedding, which cost $5 million to make in 2002. Like many low budget films, this movie is about family and relationships. Low cost films explore one or two characters in depth. Usually there’s a serious problem and viewers watch to see how or if it gets resolved. There’s no need for superheros, gimmicks, or gadgets. We are interested in the people and their relationships.

That’s how it is with our low budgets. It’s not the stuff that’s important, it’s our relationships with one another. This week, plan something that involves your friends and family but doesn’t cost anything.