Search Results for: budget

Personal Finance Reassessment

October 16, 2012 By Shane Ede 6 Comments

Occasionally, there comes a time when you have to take a look at your personal finances and do a little personal finance reassessment. While the need may arise to do a complete overhaul once in a while, a simple reassessment can usually suffice. All it takes is a little attention, and some dedicated time to making sure that your finances are in order.

Recently, my wife and I were, more or less, forced to do a little personal finance reassessment. That’s such a nice, delicate way of saying it isn’t it? Truth be told, our finances were (are) in a mess. The ripples from when I quit my job last November are still plenty big, and the new job that I have seems to have come just in time to keep us from completely going under. Combine the drastic decrease in income that event brought about with a couple of people who remained stubborn in their budget, and it was a recipe for disaster.

Luckily, we’re usually pretty good at talking about money with each other. Don’t get me wrong. There’s plenty of room for improvement. But, we’re good about not getting into any heated arguments with each other, and being able to figure out where we’ve gone wrong and correcting it.

So, we sat down and caught up our dreadfully behind budget. And, let me stop here to say something. What kind of idiot doesn’t keep doing the budget when he quits his job and is making a fraction of what he used to? This guy. Dumb. So, yeah, we caught up the budget. About 6 months worth of financial data entry. Some by hand because our bank doesn’t keep history online over 90 days. So, one by one, directly from the statements I printed off. Did I mention how dumb that was?

In case you’re curious, catching up on about 6 months of budgeting takes about 6 hours. 6 HOURS! It’s done though.

One of the things that we discovered, after having done all of that, is that the reason that we were in the pickle that we were in wasn’t because of the loss of income, although that played a part, but more because of how badly we had slipped in the last few months with our spending. July and August in particular were well above what June was. In our defense, those are usually higher spend months because they’re usually the only real summer months we get up here in North Dakota, but it was still way off. And it cost us. The last several weeks have been pretty hairy, financially.

The scary part of all of that is that we haven’t had a bad financial situation like that for over 5 years. And, maybe, in that 5 years, we’ve become a little bit lax in our budgeting, and in our finances in general. No more. We’re taking the control back, and keeping our finances in order. Not doing so could mean disaster. It surely means stress, and that’s something we just don’t need.

During our little reassessment, there were several things that we picked up on. Like the fact that we didn’t have any life insurance on me. In my previous job, my employer kept a policy on me that would have been more than sufficient. For some reason, they decided to cancel that policy when I quit. 😉 So, we’re now budgeting for life insurance policies. Or, the fact that our spending on eating out and groceries had gone way up. A simple attitude adjustment helps with the eating out, and we’re going to start trying to use menu plans to keep our grocery bill down and to spread it out over the month. Another thing that seems to be part of the issue is the timing of some of our bills. Before, I made enough that it wasn’t an issue when the bills came due, we always had at least enough to make it to the next payday. Now, with my lower salary, it’s getting a bit tight right before the 15th (when my wife gets paid), and a few of the bills that come in right before the 15th are adding a little extra stress. I need to call a few of them and try to get them moved to a slightly later due date.

In the end, our personal finance reassessment came just in time. We kept a close enough watch on our finances to see the need arising, and were able to meet the need and keep things from getting any worse. Chalk it up to a lesson learned. The (almost) hard way.

When was the last time you had a personal finance reassessment?

img credit: Matt Mcgee, on Flickr

What’s Your Personal Finance Dedication Level?

September 11, 2012 By Shane Ede 9 Comments

You’ll hear me talk about it all the time. Well, you won’t likely hear me at all, but read me write about it just doesn’t sound right. 😉 If you want to succeed at your personal finance goals and your personal life goals, you need to continually work towards them. (Make some if you haven’t already)

And working towards your goals sometimes doesn’t get the required dedication that it deserves. If you’ve set goals for your personal finance, but have never met one on time, you probably suffer from a low level of PF dedication. If, however, you always meet your goals on time or early, you not only likely have a high level of PF dedication, you also need to set higher goals! 😉

In the course of my day to day life (and yours, I’d bet) I’m constantly tempted with things that I would like to have or places I would like to go. And to get those things or go to those places costs money. Money that might not be in the budget. The temptation can sometimes be strong to put aside a budget item for this month so that you can have that “want” now. Time for a self check.

It’s at times like that, that I try to remind myself of the goals that I have set. That $50 gadget could be a $50 payment towards the next debt item in the debt snowball/avalanche/snowflake. It could go towards retirement, or towards college savings, or towards down payment savings, or… You get the idea. Often, that little reminder is enough to keep me on track.

But it’s only because I’ve decided to have a very high level of dedication to my personal finance goals that it works. If I had a much lower PF dedication level, it might not be so easy to turn down that gadget. And I’d be that many more months behind schedule on paying off my debt.

What is your PF dedication level? Do an inventory of the goals that you have set and decide now how much dedication you want to have towards those goals. I’ll let you in on a little secret. If you set a goal, you want it to be a 100% dedication item. Maybe you don’t realize that, but (consciously, or sub-consciously) you created that goal with the intention of giving it 100% dedication. And if you aren’t giving it the dedication that you intended for it, you’re letting yourself down. And maybe it’s time to rethink your goals and set new ones.

Whatever the case may be, your dedication level to your goals is the deciding factor in meeting those goals.

image credit: Duchessa

The Life Insurance Movement

August 22, 2012 By Shane Ede 9 Comments

Much like the Roth IRA movement that I participated in a while back, Jeff from Good Financial Cents is spearheading a Life Insurance movement today. The movement is designed to help educate people on the different types of life insurance, the ways to go about getting life insurance, and on how life insurance works, in general.

I’m sure we’ll see lots and lots of excellent articles to help educate the community. If you want to check them out, Jeff has compiled a list of all the participants and posted them on the Life Insurance Movement homepage.

Where do I stand on life insurance?

I used to be on the fence. On the one hand, there is a very strong argument for it. On the other hand, it can be pretty draining on your finances, for something you don’t use (hopefully).

For a young person, struggling with debt and bills, that extra $50-$60 a month to cover my wife and I is a not insignificant chunk of money. Neither of us is very old, and our probability of dying is pretty small. So, why spend that money on something that we have no plan on using when it could just as easily go towards paying off some bill? Maybe when we’re older, we thought, we’ll get ourselves some life insurance. You know, when we can “afford” it. I know there are quite a few of you out there who agree with that statement.

But, here’s the thing. I buy car insurance to help pay for damages to my car should I get in an accident. I’ve used that car insurance. My wife and I are good drivers, and neither of us has been in an accident that has been directly our fault. The few accidents we have been in have always been someone else’s fault. We had very little control over whether we got into that accident or not.

Life insurance isn’t all that much unlike car insurance. If car insurance only paid out if you were at fault in the accident, I’d never buy it. After all, I have never been in an accident that was my fault. Likewise, if life insurance only paid out if you died of natural causes, it wouldn’t make much sense, statistically, to purchase any before you were at least 45 years old. But, we all know that people don’t just die of natural causes. They die in all manner of accidents too. And those accidents don’t just happen to people of a certain age. So, it’s really the accidental, not-your-fault sort of death that you are insuring against. And you have no control over that. And, should you die as a result of one of those accidents, will your spouse and family be able to pay the bills? Or, will they be forced to sell the house to pay for the funeral? Do you really want them to have to make that decision if you die?

What kind of Life Insurance should I get?

There are basically two kinds of life insurance. Term life, and whole life. The difference is in how long the term of the insurance is, and how much the premiums are for the coverage level. A whole life insurance policy is good for your whole life. Because it’s good for your whole life, the premiums are usually higher for the coverages. A term life insurance policy is only good for a set term. It might be a 10-year term life policy, and be valid for 10 years from the purchase date. At the end of the 10 years, you have to purchase a new plan. When you are young, the term life policies have much cheaper premiums because, statistically, you aren’t very likely to die young, and so, the chances of having to pay out on the plan is pretty small. When you renew after the 10 years, the new plan would be based on your age at the time, and would be slightly more expensive because of a higher probability of death.

I can’t really tell you which is the best for you, though. It’s something that you, and maybe a good financial planner, should look very hard at. You need to educate yourself on the different types too! Really do your research, and don’t be misled by Colonial Penn’s “affordable” insurance, for example, look for a reputable life insurance company, that offers everything you and your family might need. I encourage you to click that link above, take a look at all the articles that are part of the life insurance movement, and find out as much as you can about life insurance. Being educated on the subject will make it easier for you to spot bad policies, and find one that will fit your financial needs.

How much life insurance do I need?

Clearly, we’d all like to have a life insurance policy of several million dollars. Some amount that would set our family up to never have to worry about money again should we die. In reality, that just isn’t usually possible. As the amount of the policy goes up, so do the premiums you pay to keep the policy. What you really want is a policy that will pay out enough to make the transition from a two person led household, to a one person led household.

If you’re single, a policy that would pay off your debt, and pay for the funeral is likely enough.
If you’re married, with no children, a policy that can pay off the debt, the funeral, and replace your salary for a couple of years is a good policy.
If you’re married, with children, a policy that can pay off the debt, the funeral, and replace 5-10 years of your salary with some left over is an excellent idea.

Obviously, all of that is partially determined by what size policy you can afford. By “afford”, I don’t mean afford in the way you likely do. I don’t mean, after you’ve eaten out several times in the month, how much money is left over to buy life insurance. I mean, it should be included in your budget, just like car insurance, your mortgage, and your utility bills. When all of that, plus your life insurance premium is paid, you still need to be able to keep your bills current, and buy food to stock the refrigerator. That kind of “afford”.

In the end, when you go and read all the other articles that are part of the life insurance movement, you’ll likely find several viewpoints that clash with mine. You’ll find people who think that whole life insurance is better than term life insurance. You’ll even find people who don’t think you need life insurance at all. I think the important part is that you think about life insurance, learn about life insurance, and then make the decision yourself (preferably with help) on whether you want life insurance, what kind of life insurance you want, and how much you want the policy to be.

Tip: Check with your employer. Some companies are offering life insurance to their employees.

For me, I think that life insurance of some sort should be mandatory, just like car insurance. There should be state required minimums that you have to carry. Far too many people are leaving behind families without any sort of coverage at all. Even if it’s a small policy that can cover funeral expenses, that’s better than nothing at all, and you can increase it later too!