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Our financial planner responds to participants' budgets

Melissa Liberman

11 months ago

WEEK 3:

I was out eating lunch this week and in walked Darren Richards, one of our 10connects Crash Dieters, with a brand new co-worker, about to enjoy what I know could not have been less than a $30 ticket for two, and as Darren walked out, he saw me and proclaimed his family was doing well with its $800 monthly budget this week, in part because the "other" guy had just picked up the check.

You never know when a fellow crash dieter, or observing advisor is nearby.

The Richards are doing well, the result of sheer determination to live within their 10connects-imposed means of $800 for groceries, medical, gas, and clothes, and that in the face of Thanksgiving Day complete with dinner guests. Congrats to the Richards for finding a very inexpensive day trip for them and the kids: the trip to the TECO plant in South Hillsborough to watch the manatees. They are well on their way to proving you can live within your budget if everyone on the team has "bought in" and are working together.

Melissa, our single participant, had already made turkey chili before the big holiday, so she is really turkey'd out, but she did learn some valuable lessons about stretching inexpensive meals and avoiding wrong snack foods, and shopping at discounters. The inevitable confessions continued with Melissa admitting her Starbucks and other "elective" expenses needed to be dealt with. She's done that and now her biggest challenge is to get through her final week with only $20, which is less than 7% of what she started with, $300. Remember that trip to the Magic Kingdom?

Derrick Kearney and his fiancé' Pam had some unfortunate luck during their third week. Pam was in a car accident and though Derrick says she had no serious injuries, there are ancillary costs, including trips to the repair shop and doctor. They added a pooch to the family, along with start up costs, and that didn't help meet their budget goal of living the whole month on $500. Derrick says the two are on track to finish strong, however. He and Pam seem to be staying on top of their expenses. It can be a big adjustment, but it's worth it.

Food is the biggest expense in this experiment and our brave participants are learning to follow five basic rules we can all learn from:

1) Determine what's on sale

2) Create a menu for the week based on the above

3) Buy only what you need for those meals

4) Cook large quantities and store leftovers for future meals and lunches at work

5) resist altering rules 1-4

WEEK 2:

The experiment our three family units are participating in teaches timeless lessons about careful spending and can reveal even more if we review how our volunteers are handling this self-imposed financial squeeze.

Communication, communication, communication. Derrick and Pam need to be on the same page. They need to agree in advance on what is and isn't correct spending for this month, so that Derrick isn't having to wonder and rely on receipts after the fact. Eating out is clearly a temptation, which is understandable. When it's been a hard week someone can convince himself he's earned the right to have someone else prepare a meal for him.

That's fine -- if the money's there. To his credit, Derrick carefully analyzes every penny of spending.

Melissa says she is two-thirds through her money, but our experiment is only half over. A big ticket item like Disney will do that to you. I am confident she will finish strong, however. She's absolutely on the right path by preparing a large dish at home and using it over days, including bringing it to work for lunch. That's true savings. She shows valuable discipline by going to the mall to look in advance at Christmas deals, but not actually spending right now since it's not in her budget. Well done.

Deborah has this experiment under control in the Richards family. Observe how she flat out declares there will be no restaurants this month. That's a serious, rewarding step to take control of spending.

I have to ask, are our three families actually using envelopes? The idea was our families were to go to their banks and withdraw the amounts they were to work with, put the money in an envelope, and spend only from that envelope. Debit cards are convenient but shield us from the real effect of spending, because we never actually have to personally give cash to a vendor. I hope our volunteers are using envelopes. It's a proven system we could all benefit from trying.

WEEK 1:

I have to salute the three families who blindly agreed to participate in this experiment. They really did not know what they were getting into. Their three blogs revealed some interesting patterns and truths about spending.

Deborah Richards correctly points out that when you are using debit cards, and especially when husband and wife each have a card and spend independently, it's easy to forget just how much money you had, that you don't have anymore, because it's going out the door in dribs and drabs daily. Her experience planning for and shopping at Costco and Wal-Mart is a textbook study of our thinking when we suddenly and unexpectedly have less money to work with. It's a very useful exercise because it draws attention to what our spending habits were before the "crisis," always a good thing.

The Richards also defaulted into another beneficial result: They unified the family on this project. Getting the kids involved makes it fun for them, because it's usually the parents who struggle more with the implications of having less. The kids pitched in, finding solutions, and that actually serves as a form of accountability to Mom and Dad, who are the spending control persons.

Interesting, the Richards drew attention to two sources of outflow we really don't think often about: routine kid birthday parties and school fundraisers. We always feel obligated to say yes to those things. The Richards said no. They had to.

You have to appreciate Derrick Kearney's analytical approach to this process. He wanted to know how his allowance broke down per week and per day, and even per person. That's his personality driving his approach, and my guess is that he is a skeptical person who when he finally embraces something, can sell the heck out of it. Derrick correctly took "an inventory" of what he already had available in the home, a natural place to start. He couldn't be more right in buying what's on sale, cooking at night and bringing leftovers to work. There are two great benefits to that: that food is less expensive and that food is absolutely better for you. You will be more fit and have more money and those two virtues alone confound much of the western world. A great idea, Derrick.

Melissa is our single participant, and she was facing quite a challenge over the weekend: Disney World. If she figures out a way to include Disney World in her budget, we should all tip our hats to her. I praise her ideas of grabbing coupons online and in the newspaper. She also went back and researched her spending the previous month, a natural outcome when you suddenly feel a financial pinch. Like the proverbial frog in the slowly heating pot of water, Melissa was killing her budget in small amounts per day and now she sees it. If nothing else, that's a takeaway for her.

Steve Overton, CFP, Raymond James Fin. Services

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