Personal Finance (Bryan Sudweeks), Part 2

Budgeting Myths and Realities:  Developing a Budget You Can Live With


"Personal finance is more personal than finance, it's more behavioral than it is math." -Dave Ramsey

10 Excuses Why I Don't Budget:

1. I don't have any money
2. I like being poor
3. I love using my credit cards
4. I don't want more money at retirement
5. I want money related stress in my life
6. I don't like managing my money
7. I don't want to be happier in my life
8. I hate to pay taxes
9. I like being in debt to other people
10. Budgeting is a temporal activity

Myths:

Myth #1:  Budgeting is easy, it's only "math"

• Family budgeting is bringing together two people who have different backgrounds, goals, objectives, and gospel views and deciding how money should be spent
• One person's way is not the right way and the others wrong: they are just DIFFERENT
• Try to understand the other persons behavioral and emotional issues involving money
• Do together on personalfinance.byu.edu: Learning Tool 21 (TT21): Key Questions on Money and Relationships

Goals and Objectives:

• Develop personal and family goals together as a couple
• Do Learning Tool 2 (TT2) as a couple
• Find your top 3 goals.  Then plan the short, medium, and long term goals you'll need to get you to your top 3.

Principles of Effective Goal Making:

• What would Heavenly Father have you be or do?
• Write down top three goals as a family
• Write down top three goals as an individual

How do you handle different gospel views?

• Love people wherever they are.  Assume that they are trying their best.  This is your starting point.
• Work on building an environment in the home where the spirit can be.
• Work on building consensus and avoiding contention
• Strive to do things that brings you closer to the Savior
• Work on understanding what Jesus would have you do and then do it

Reality: Budgeting is NOT easy!

• It's not easy, but it's worth it.  Developing and living on a budget is important to achieving your family and personal goals.

Myth #2:  There is one right way to budget

• There are many ways to budget, some are better than others.  It's most important to get the principles right.

Principles of Budgeting:

1. Develop a realistic plan that meets your needs
2. Spend less than you earn
3. Record spending for tax purposes

Main Budgeting Systems:

Envelope System

• Divide spending into categories, put cash into envelopes
• Take money from the envelopes to spend
• You can shift from envelopes, but once the money is gone-it's gone.

60% Solution

• Determine gross salary and only spend 60%
• Save 20% for long term goals
• Save 20% for taxes

Spreadsheet Systems

• Excel: categories, rows (see personalfinance.byu.edu for examples)
• Do Learning Tools (TT4 and TT31)

Computer Software Systems

• Mint.com, Quicken, money, Mvelopes
• Categories: budget each one
• Receipts from banks and credit cards go directly into the website/system
• Plan for reserve and long term goals
• Must update regularly and follow carefully (once or twice a week)

DNA H-ial System

• Do Nothing And Hope

Best System?? Different for everyone, but is...

1. Low cost and easy to use
2. Allows adequate categorization of spending
3. Allows choices of reports for tax and review
4. Minimize time doing finances (1-2 hours, once or twice a week)

Recommend: Mint.com for beginners (it's free) and Quicken for more advanced users.

Also check out Business Management 418 on personalfinance.byu.edu.

Conclusion:

1. Build your relationship.  Seek to understand the other person first, then yourself.
2. Develop Goals
3. Build financial knowledge
4. Resolve family differences
5. Improve communication and problem solving
6. Strengthen relationship with Jesus Christ

Audrey's blah blah:

I highlighted some things that stood out to me or that I hadn't heard before, like the 60% system.  I am interested in personal finance and finding ways to save and get great deals on stuff.  I think that there is always room for improvement and always ways to cut spending and save more.  One thing he mentioned is that credit card users spend 12-20% more than cash users.  That made me want to try the envelope system to see if that's really true.  We use our credit cards for almost everything to get airline miles and then pay it off each month.  I wonder if we would spend less if we paid cash for everything (or almost everything).  Something to think about and maybe try??!