Saturday, June 27, 2015

Budget Quiz answer to Question 2: What are the two keys to budgeting?

The two keys to budgeting are (a) negotiating and (b) preparing your plan (budget) in the quiet of your home and not when you are making a purchase.
(a)        I believe every person that your income supports should be given spending guidelines and should be able to negotiate, based on facts, the guidelines. When my two daughter’s expenses were a part of my budget, they are now 42 & 40, they knew they could negotiate with me. For example, when they were in college, I gave the $50 month for spending money to purchase essentials they would have normally found at home, like tissues, toothpaste, or toilet paper. The understanding was that if they needed more than the allotted $50, and they could show me proof, I would increase the amount of their spending money. There are three other examples I can share. When they were going to a prom, and I thought it important for them to look nice at the prom, I paid 100%. When they wanted to buy a high school jacket, we negotiated that I would pay 50%. On the yearbooks, I only paid for their senior yearbook.
My daughters were provided a clothing allowance until they graduated from college. They charged purchases on their personal credit card, with a reasonable spending limit, and I would pay the credit card bill until they graduated. Then they got a new credit card for which they were totally responsible. When at school, they would call me when they were going clothing shopping and ask me “How much money do I have in my clothing allowance?” Knowing that, they could make purchases within their allotted and negotiated budget allowance or repay me for any overage from their funds.
These are just a few examples to help you understand the concept. Even younger children can be taught this concept. If you can only afford one after school activity, like soccer, cheering, dance, etc., your child can be part of the process to select the one activity.
(b)       Preparation of a budget is a serious matter and thus should done in a quiet environment with paper and calculator or computer. When you go to make a purchase, you should know how much money you have in the category where that money is listed. Purchasing decisions should not be made emotionally in a store, but based on what you have previously decided or previously negotiated. If you budget does not have enough money set aside, the purchase should not be made. NOTE: Budgets can always be adjusted, but not in the store.

Saturday, June 6, 2015

Budget Quiz answer to question 1.

Budget Quiz

1.  What is the first thing you will have to do before you can be successful with a budget?
ANSWER: CHANGE THE WAY YOU THINK. The best way to think of this is to image yourself as business, ie, ME, Inc. Here are three scenarios: (1). Your office chair breaks, so you drive to Office Max or Office Supply and buy a chair. You then assemble the chair and take your boss the bill. (2). Your office chair breaks. You go to your boss and tell him; and then ask him, if you can purchase a new chair. He inspects your broken chair and agrees. He then checks his budget and determines that he has money, $300 max., in his budget to purchase you a new chair. He then gives you a charge code. You go to the Purchasing Dept. and tell them that you need a new office chair and have a $300 limit. Purchasing gives you a catalogue with office chairs in it, and you select an appropriate chair. They give you a purchase order to fill out INCLUDING THE CHARGE CODE GIVEN YOU BY YOUR BOSS. The Purchasing Dept., orders your chair. The chair is delivered to warehouse loading dock. It is then assembled and delivered to your office. (3). Your office chair breaks. You go to your boss and tell him; and then ask him, if you can purchase a new chair. He inspects your broken chair and agrees. He then checks his budget, and determines that he does not have any charge code for office chairs or he finds that the office furniture charge code has a zero balance, but he says he shall plan on having the money in his next budget. Meanwhile you get your chair repaired or you scrounge for another chair.
People that do not budget use option (1). When a cost needs to be made they decide to spend the money with no real understanding of their finances.  THIS ALMOST ALWAYS CAUSES FINANCIAL PROBLEMS.
A true budgeter uses options (2) or (3). Rather than a charge code, personal budgets have categories. You must ask two questions on all expenditures, just as any business does. They are (1) Which category (charge code) is the money in, and (2) How much money is the in the category for the intended expenditure. If you have planned well, you can make the expenditure. If not, the expenditure will have to be delayed or not done at all. THIS ALMOST NEVER CAUSES FINANCIAL PROBLEMS.

Wednesday, June 3, 2015

Budget Quiz

    The Budget Quiz is designed to educate you about the value and describe some of the challenges of budgeting.  I shall provide one answer each day.

1.  What is the first thing you will have to do before you can be successful with a budget?
2.  What are the two keys to budgeting?
3.  What are the definitions of a budget?
4.  (True or False) Budgeting restricts your life and prevents you from doing things you want to do.
5.  Why should a person budget?
6.  What are the two main purposes of a budget system?
7.  What is the real problem with money?
8.  What are the three money pitfalls?
9.  What is the guiding principle of this budgeting system?
10.   How will you know when you are really budgeting?