Family Finances Lesson

The following is the outline for a lesson that was given by a friend, at meeting in our church. The lesson was meant to give some guidelines on family finances. While it does contain some advice specific to counsel given by our church leaders, the advice is pertinent to anyone.

The text has been reprinted with his permission.

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Key Principles

Money is Life Energy – Money is one form of resource that we have available to help us meet our needs. It represents “Life Energy”.

Money represents one of a number of resources – Time, physical work, possessions, skills, and talents represent other resources. Work and School are examples of ways to transform resources from one type to another. The resources we have are the means we are given to take care of our stewardship and we will be held accountable for how well we use them to that effect.

Think for yourself, question “necessary” expenses, avoid “keeping up with the Jones's” – Our society emphasizes consumerism and our role as consumers of the product of industry. We are taught to want more. This is the reason that the model year concept for cars was invented. Anyone else see a problem with this?

We do need things in order to have a happy and productive life. For instance, I wrote my notes on a computer. I photocopied my handouts to create copies for everyone. I researched some of this information on the internet and I drove to church. These activities all required things.

However, there comes a point where things become a burden. The cost of owning an item includes acquisition, maintenance, and disposal, not just acquisition. These costs add up. Items also draw away time and other resources. If they are not worth these resources, they are a burden and should be avoided.

Guidance

Pay Tithing – This is the NUMBER ONE thing I would emphasize. Pay an honest tithe, whatever this means to you (Malachi 3:10). Pay a generous fast offering.

That said, “To pay tithes and offerings while ignoring the balance of Heavenly Father’s advice concerning sound judgment in family finances will probably cause the windows of heaven to stick a little bit.” - Robert L. Simpson May 1982

Counsel with your spouse and older children – Make managing your finances a family affair. Your spouse should be an EQUAL partner. Proposals can be worked out individually but decisions should be made together or not at all. Without spousal support YOU WILL FAIL. Older children should be involved so that they can learn the skills themselves. They might also be able to give valuable insight.

Avoid Debt – There are acceptable forms of debt. Mortgages, Student Loans, and other loans to cover vital needs in times of crisis are all acceptable. However, care should be taken to avoid excesses and to pay down or eliminate even these types of debt as soon as possible. Pay off the most costly debts first. Use a debt reduction calendar if necessary.

Manage your money – Track your expenses, take control of your spending, budget you funds as appropriate to meet your needs without over extending yourself. Set up savings goals and track them. Use methods that work for you. Change them over time as things change and you gain experience.

Build a Reserve – Save up enough money to cover your expenses for AT LEAST 6 months. Due to recent challenges in the economy, many are suggesting that these reserves be increased to at least 8 months, if not 12 months.

Pay yourself for anticipated large expenses – We own our own car. We don't have a car loan on it. However, we still have a car payment. Why? Eventually the car will wear out and need to be replaced. By paying ourselves a car payment now, we will have the money to replace the car with an equivalent or better vehicle without going into debt when that time comes.

Implementation

Reconcile with the past

The first step is to determine where your money is going or where it has gone. There are a number of aspects to this, do what works for you.

Expense Calendar – Create a table with several columns. Each column is an expense category. Every row is either an individual expense or a time period, depending on what works best for you. In the appropriate cell in the table, record the cost amounts for the expense or the time period in question. For instance, if I were to buy $80 groceries on a particular date, I might make a row for the expenditure and put the “$80” in the column for groceries.

Expense notebook – carry in your pocket a notebook and pen. When you spend money, record the date, amount, location, category of the expense and any other information you might feel you need. At the end of the month, lay out each of these expenses into categories and see where your money is going.

Credit Cards – buy everything on your credit card (buy only what you have real money for). Use your credit card statement as record of expenses. Pay it off every month.

Know where you want to go

After you have an idea of where you are, think about where you want to go. Following the advice of the General Authorities is a good start:

Pay off your debt – Recognize what debt is costing you and if the costs exceed what you are getting from other investments, work to reduce it. Use of a debt reduction calendar is a good start for determining how you can do this. Set goals for how much you will pay off and when. Target your most expensive debts first.

Build up a 6-12 month reserve – The general authorities recommend a number of protective measures. For instance, a one year supply of food. This is in the same vein. The idea is to provide a means to weather the hardships of job loss, transition or other economic hardship.

Look towards other goals – Other objectives are worth considering, including home ownership or upgrade, education and vehicle replacement. Look at your family needs and estimate what they will cost to achieve.

Determine how you will get there

“Those who have little, if they are good at managing, must be counted among the rich” - Socrates

Now that you know what you are spending, where it is going and where you want to be, you need to determine how to get there. You need to make conscious decisions to act. You must decide where YOU want your money to actually go. You have a couple of alternatives.

Earn more than you spend – Whatever methods you end up using, aim to have a surplus. You will need to have a surplus to work towards where you want to be. There are several ways to create a surplus, many of them are not exclusively financial. For instance, learning to take care of your personal vehicle can help you reduce or eliminate the amount of money you might pay to professional mechanics.

Use a Budget – This is the simplest way forward. The concept is that you determine how much money you have to deal with, then you divide it into different categories of where you want it to go. The total sum of these categories should be the same or less than your available income. At the end of the budget period, you see how well you did by recording your actual expenses. You then adjust your next budget as needed. Any money left over goes to savings.

Provident Living has an example budget that you can use as a starting point. If you are interested in this approach, and it is a good one to start with, download the budget worksheet and see how well it fits your own. Then, build your own with categories appropriate to your needs and goals.

The Envelope Method – Use different envelopes for different budgetary categories. At the beginning of each period, place your budgetary amount into each envelope. When the money is gone, so is your spending in that category.

Virtual Accounts – Use a ledger for each budget category, creating an account. Money not spend during one period is available for the next. This way, you can track deposits towards larger items. For instance, you may pay your home owner's insurance once a year. If this is say, $360/yr, you could budget $30 a month and track it in a ledger.

Example

In the beginning

Nothing at all – When we were married, I had $12k in a bank account to pay for school and Sandra had $12k in student loans. We had no budget and didn't know where our money was going, only that proceeds from our jobs were exceeded by our expenses. At the same time, our diet consisted primarily of $0.25 boxes of Mac & Cheese. Something had to change.

Paper and Pencil

Expense Calendar – My boss, Chad Rucker, took time to council with me on the subject. He introduced me to the Expense Calendar. We used it to find out where the money was going.

Virtual Accounts – We attempted to budget using a worksheet similar to the one provided on provident living. It didn't work. We felt that we were not seeing any reward for doing well in any particular category. It was as if when we managed to stay below expense in one category, we rewarded that effort by budgeting less of it during the next category. Virtual Accounts helped us solve this problem. The concept is that when we put money in a virtual account and DON'T spend it, the money is available next cycle for use in the same category. Over time, if the expense builds up an excess in the category's virtual account, we reduce the amount going in and still feel rewarded.

Other than budgetary categories, virtual accounts exist to hold funds that are obligated. This includes things like money to pay the credit card bill.

Expense Ledgers – Using ledgers allowed us to track expenses in each virtual account, thus making it easier to show where the money is going an analyze our overall cash flow.

The Computer Age

Spreadsheets – By moving to spreadsheets, we take advantage of the computer's math capabilities to reduce the amount of work needed. Each sheet becomes a ledger. One sheet is used to summarize the information and automatically check the calculations against real account balances.

GNUcash – By creating ledgers for each of the bank accounts and then sub accounts for each of the virtual accounts in the physical accounts, it was even easier to keep the balances of the virtual accounts consistent with reality.

Helper Accounts – By adding an “adjustment” account to each of the physical accounts, money could physically reside in one account but be credited in another. This allowed for better tracking of the true balance of virtual accounts. Ever so often, the balance of all “adjustment” accounts need to be added up as a check against errors. The total of all adjustment accounts must equate to zero.

Other Principles

Luxuries can be necessities – Some things that may seem to be luxuries on the surface can actually be great for your health, sanity and well being. Don't judge something as a needless luxury or be too spend thrifty. Be frugal. Have modest and affordable release valves so that the stresses involved in being financially disciplined don't cause you to make big mistakes here and there. I speak from experience.

Be Happy about paying taxes, sad if you get a refund – A refund means you gave the government an interest free loan.

Don't “create” needless deductions – Take advantage of all deductions and credits you have, but don't go out of your way to create new deductions. This is like paying someone $10 to get $1 in return. Don't do it (or if you really want the same effect, I'll give you the same deal.)

Additional Resources

These are some additional resources that might help in developing your solution.

Non Church Resources:

Your Money or Your Life

Suzie Orman

Church Resources

Provident Living Website

One for the Money: Guide to Family Finance by Marvin J. Ashton

“Happily Living within Our Means” - January 2008 Ensign

“Personal and Family Financial Preparedness” - May 1979 Ensign

“Let Him do it with Simplicity” - Nov 2008 Ensign – Discusses some of the basic needs that we have.

“A Lasting Marriage” - May 1982 Ensign – Robert L. Simpson

“Catching the Vision of Self Reliance” May 1986 Ensign

Internet Coupons

I've had several people ask me about coupons for grocery items. Coupons can be a great tool to help you gather items for your Family Home Storage. You can get some coupons from the store (sometimes posted near the items). For those of you who have a major US newspaper in your area, the Sunday edition usually has coupons in it as well.

I also use internet coupons. For most internet coupons sites, you must be using a Windows based OS platform (like XP or Vista). You will have to download a program which monitors your printing, allows you to print, etc.

There are tons of great sites out there for internet coupons. Most of them are related to grocery items, but there are some for other items. I've listed some of my favorites below.

Most sites allow you to print only two copies of each coupon within a certain time period (usually about a month).

Remember to check with your local stores to make sure that they accept these coupons. Many do, but some may require a dot scan barcode beneath the expiration date. You can usually check the store's website (or ask at customer service) for their coupon policies.


Coupons.Com
This site provides a variety of coupons, for a range of products.

Very Best Kids
Sign up for their newsletter, and they will include coupons for several Nestle products (usually totaling about $8) a month.

Betty Crocker
Some great coupons for products we buy often, especially cereal and baking products. Also a great source for recipes.

Pillsbury
This is run by the same company that produces Betty Crocker, so you'll find some duplicate coupons on this one, but they are still good!

Box Tops for Education
This site is also run by General Mills, and duplicates some of the coupons from the Betty Crocker and Pillsbury site. The nice thing about this one, is that by signing up, you can earn Box Tops, which can be given to the school of your choice to provide them with additional income. All the products which have coupons on this site also have boxtops on their packaging, so remember to clip them and give back to your schools!

Smart Source
Like Coupons.com, this is a general grocery coupon site.

I also believe that the commissary's website also carries a few internet coupons.

If you discover any new sites for coupons, let me know!

Mini Challenges: Make a Financial "Rainy Day" Plan

It's that time again, a new month has begun and it is time for a new mini-challenge. Keeping in line with our monthly (or in this case bi-monthly) focus of finances, our December 1 challenge will be to create a financial rainy day plan.

While this will take time, experts recommend having at least 6 months, but preferably a year, of your expenses set aside in case of an emergency (such as a job loss, disability, accident, etc). You can start out small (say one pay period) and work up slowly (say the next step being 3 months) toward whatever level you have decided on. A little savings is better than none.

While this doesn't mean that you have to rush out tomorrow and have all your rainy day money set aside and every contingency taken care of, you do have to start somewhere.

Here is what it does entail:

1. Review your income. Determine how much you have coming in.
2. Review your expenses. This ties into our mini-challenge for the last period of making a budget.
3. Determine what your expenses would be for a 6 month period. Assume that for this 6 month period you have no income coming in.
4. Now you know how much you need to save.
5. Determine a goal length for saving your total. Consider saving it over a year, two years, 6 months, whatever you think your income will allow and what fits your needs and wants.
6. Decide on a way to break down the total into manageable chunks, whether that is by week, by pay period, by month, etc. In whatever way fits with your timetable and income.
7. When you have determined how you want to break down the total, make a plan for saving it. There are plenty of ways to find the money.

• Add it as a budgetary item, which is easy if you are breaking the total down by weeks or pay periods.
• Consider assigning "excess" funds, such as tax refunds, pay bonuses, or gifts to meet your total.
• Save your spare change from cash purchases, and after a set time period, deposit the total towards your goal.
• Have 26 pay periods a year instead of 24? Consider budgeting using the 24 and deposit the "extra" 2 pay periods into your rainy day fund.
  

After you've made your plan (and don't forget to include your partner), think of ways to keep yourself on track.

1. Consider making a chart that will allow you to mark off as you contribute to your rainy day fund. Think of those giant thermometers that help us see how much we've contributed to various charities. This can help motivate you as will have a visual reminder of your progress.
2. Think of a reward for when you reach your goal. Maybe a dinner out, a new movie, something to look forward too....just make sure that you have set aside funds for that too :)
3. Keep a "checkbook" ledger to help you track your savings.
4. Consider adding all the dividends and interest from investment and bank accounts.
5. Consider giving up a vice or luxury (such as the morning latte, cigarettes, candy bars, etc) and putting that money toward your goal...it could not only make you richer, but healthier too!

Now, you are on your way to having a rainy day fund! Remember this is meant to relieve some of your financial stress, and give you some security.

As time goes on, your expenses and savings may change. Remember to review your "rainy day" plan and adjust it as is necessary for you.

If you have any easy or cool ideas on how to set aside those pennies, or success stories on how you have saved, please post them! Even if it is just a little at a time, you can do it!

Organized Pantry: Beginner Guide to Pantry Pride

Here is a great article on getting started on your food storage that was posted on Organized Home.com (the title below is also a link to the article on their site).

Organized Pantry: Beginner Guide to Pantry Pride

Posted September 9th, 2007 by Cynthia Townley Ewer

in

• in the kitchen

It's the secret weapon of a well-organized kitchen: a working pantry. A planned reserve of foodstuffs and sundries used in the. home, a pantry saves time, money and stress in the kitchen.

Tap the pantry for unexpected meals and reduce trips to the supermarket. Stock it with frugal finds to lower grocery costs. Set aside a supply of food and sundries for a rainy day and protect your family against weather emergencies or financial dislocation.

Properly managed, the pantry is an integral part of an. organized home. Polish your pantry pride with our best hints and tips:

A pantry's not a place, it's an attitude

"Oh, I'd love to have a pantry," writes a reader, "but my house doesn't have one!" Sure it does! If there's so much as a spare roll of toilet paper tucked underneath a sink, the household. boasts a pantry.

Don't confuse storage space with the reality of the pantry principle. Certainly, it's helpful to have designated cabinet space for. pantry goods--but that's not the pantry. Think of the pantry as a reservoir of consumable goods which may be stored in any area of the home.

Tiny urban apartment or spacious rural farmhouse, all homes can include a pantry. That some houses may or may not feature a specific storage area labeled "pantry" is beside the point. A pantry's not a place, it's an attitude!

Eyes on the goal

What's the goal of establishing and maintaining a pantry? It's two-fold: household convenience and protection against unexpected events. A well-planned pantry means that the household will never run out of commonly used products such as toilet paper.

More important, a pantry is a reserve against hard times. Whether it's job loss, illness, or natural disaster, a pantry ensures that the family will continue to be fed, clean, and comfortable in the face of adversity.

A beginner's pantry focuses on convenience and contains back-up products for each storable item used in the home. The standard is simple: for each open bag, box or carton in the household, the pantry contains a second, back-up product, toothbrushes to tortellini. A good first goal: a three-day supply of food and hygiene supplies adequate to support your family plus one additional person.

More robust pantries serve additional goals. A mid-range pantry can feed a family for a period of two weeks to a month in case of emergency. This pantry includes substitutes for fresh foods, such as powdered milk, dried fruits and vegetables, and protein products.This pantry offers convenience and basic protection.

The most comprehensive home pantries are designed to meet long-term food storage needs. For instance, members of the Church of Jesus Christ of Latter-Day Saints (LDS) are taught to maintain a one-year supply of food and clothing for their families. To do so, these premier pantry managers stock versatile foodstuffs with long shelf life, such as whole wheat berries, together with a variety of preserved and dried foods. LDS home managers learn pantry-specific cooking techniques to enhance nutrition and appeal of long-keeping foods.

Inside the well-stocked pantry

Traditional home organization advice often specifies long lists of "recommended pantry items", idea being that you buy them and voila! you've got pantry. Eighteen months later, you're hauling dusty cans of apricot halves to the Food Bank and wondering what ever possessed you to purchase them in the first place.

Reality check! Each family's pantry will vary according to their own tastes, needs and standard of living. Storage space and financial constraints also affect pantry contents.

For instance, single-income households with young children will build pantries replete with cold cereal, formula, disposable diapers and child-friendly snack foods--all purchased on sale with coupons. Empty-nesters with an active social life and his-and-hers diets will lean toward pickled asparagus, cocktail crackers and tiny jars of caviar for pick-up appetizers and hostess gifts.

Dedicated home bakers include specialty flours, gluten, and dried buttermilk powder in their pantries, while non-cooks rely heavily on microwave entrees and freezer pizza. And just about every family can stockpile basics for kitchen and bath: toilet paper, toothpaste, laundry and dishwasher detergent, disposable diapers and feminine hygiene products, paper napkins and food storage bags.

Where's the best place to discover your family's pantry preferences? A grocery list! If you buy it, use it, and it can be stored, it's a pantry candidate. Building a pantry from the grocery list is also a powerful antidote to Pantry Mania: the indiscriminate purchase of case lots of canned turkey chili or house-brand soups that no one in the household will eat. Hello, Food Bank!

An expansive view of the pantry principle encompasses more than the traditional dry storage of canned foods and baking staples. Manage your pantry to include freezer storage and a limited amount of refrigerator real estate. Carrots, potatoes, oranges and apples enter the pantry zone when bought on sale and tucked into corners of the vegetable bin, while freezer convenience entrees qualify, too.

Bottom line: build a pantry to suit your family. Whether it's Chef Boy-ar-dee brand ravioli or Wolfgang Puck's upscale condensed soups, feature your family's favorites on the pantry shelves.

Organization and inventory tips

To work the pantry principle, you've gotta get organized! Maximum pantry power requires that you know what you have, how long it will keep, and how to store it safely. Good organization and inventory techniques will keep your pantry cycling smoothly.

Beginning pantries are relatively simple, and don't require complex organization systems. Create them by buying twice as many of each item as required for weekly use, then storing the extras. Use the last smidge of mayo making today's tuna salad? Retrieve the back-up jar from the pantry, and add "mayo" to the week's shopping list to replace the pantry jar.

Often, the beginner's pantry can be stored side-by-side with opened or in-use items. For example, stack the open box of detergent on top of the pantry box or line up cans of chicken noodle soup front to back on the canned goods shelf. Remember to rotate! Add newly-purchased items to the back of the stack or row; use the front items first.

Even for beginners, a dedicated pantry area can be a big help. Set aside a cabinet or shelf to hold pantry items. Organize them by category, stacking cans and boxes. Flat-bottomed plastic baskets support and contain bags of dried beans, rice, or pasta.

One exception to the "store by category" rule: complete pantry meals. On a section of pantry shelf, assemble all the makings for three to five pantry meals: a family-sized can of clam chowder, extra can of chopped clams, and the box of oyster crackers shelved together make it easy to replace these items after use.Check your "pantry meals" area before shopping day. Empty spaces will remind you to stock up on the clam chowder as needed.

More comprehensive pantries call for a more organized approach. Larger pantries require more storage space, often sited away from the kitchen.In this situation, a written pantry inventory can remind forgetful cooks of the existence and location of pantry items.

Pantry Inventory

To inventory the pantry, use a clipboard, steno pad, laptop computer or a free printable pantry inventory form from our Household Notebook Forms Library. Record pantry contents, amount and location for easy reference. Before grocery shopping, check the pantry; will you need to replace any items that have been used? Include them on the weekly shopping list.

Larger pantries may be stored in multiple locations around the house, so pay attention to food storage guidelines as you store. A cool, dry basement room is a good storage environment for root vegetables, apples, or baking staples; canned goods and dried beans can be safely stored in areas with greater temperature variation.

Long-term storage pantries require a thorough approach to selection, storage, maintenance and use of stored foods. Families storing a year's supply of food and water must pay close attention to storage guidelines, safe packaging, and integration of pantry supplies into the daily diet.

Building a pantry on a budget

Investing in the pantry principle pays off in savings of time and money, but it does involve an up-front cost. Even a beginner's pantry--a back-up product for each item used in the home, plus ingredients for three to five pantry meals--represents a significant financial outlay. Try these tips to spread the load:

"Tithe" for the pantry: set aside a regular percentage of each week's grocery budget for pantry-building. Even a few dollars a week will start the process of stocking and maintaining pantry reserves.

Buy on sale: take advantage of supermarket loss leaders to stock up. Supermarkets routinely offer tuna, tomato sauce, canned soup and canned beans at drop-dead prices to get shoppers in the door. If it's a pantry candidate and it's on sale, buy multiples!

Buy in bulk: bulk-buying for the pantry really pays off. Using the pantry "tithe", buy the 25-pound sack of bread flour for $3.89 at the warehouse store, rather than spend $1.39 for the supermarket's five-pound bag. You'll save and stock up at the same time!

Storage tips for small spaces

Even beginner's pantries may have a hard time finding a home in small houses or apartments. Try these storage ideas to tuck away a pantry in the tiniest home:

Break the mold: look beyond the kitchen to store pantry items in a small home. Provided that temperature and moisture are not issues, any room in the house is a candidate for pantry storage. Who says cans can't live in the coat closet?

Disguise it: integrate pantry goods into the home. For example, stack two large bulk-food storage containers and top with a plywood circle and round tablecloth. Who can tell this attractive end table is really storage space for 50 pounds of flour?

Look high and low: make use of storage space under or over furniture. Fill shallow under-bed storage boxes with canned food, labels up, and push them beneath the bed. Similarly, cover cardboard records boxes with gift wrap or fabric, fill them with bags of pasta, beans and rice, and stash them away on top of tall bookcases.