This quarterly newsletter was prepared by Members of our Network of Managing My Life Professionals and was sent to you by Cassandra Gierden of Prophet Coaching who is a member in good standing of the Network. Cassandra can be reached at 416-886-3488 or by e-mail at va@prophetcoaching.com.
Please feel free to forward this newsletter to your friends.

If you do not want to receive this newsletter in the future, please use the "reply" button and indicate "REMOVE" in the subject.

Budgeting – what a terrible word!  So many consonants in such a little word!  And it sounds so restrictive and limiting. But the term “budget” simply means “an itemized summary of estimated or intended expenditures for a given period along with proposals for financing them.” (The American Heritage® Dictionary of the English Language, Fourth Edition)

In other words, budgeting is a plan for projecting how much money will be available and what the intended uses of that money will be for a certain period of time.  Some financial planners use the term “spending plan” in place of “budget” because it doesn’t seem so restrictive and limiting. However, I feel that this often gives us a false sense of entitlement to spend everything that comes through our hands without the need to save and invest. Of course, if one of our “spending” categories is for our future needs and in actual practice we put money aside as savings and investments, then it’s OK to use the term “spending plan”, as we are spending today’s money for tomorrow’s necessities.

At a retreat in 2004 I heard a term used which has become my favorite, and that is “map of intention” as expressed by Bari Tessler of Conscious Bookkeeping™ in Santa Cruz, California.  Bari explains that “map of intention” is used to describe how people should look at planning for their needs. Money flows into our hands and money flows out of our hands, and if we have a map of intention as to how it will flow in and out that is tied to our values and our needs, then we are being very conscious in managing our cash flows. And it’s a term which is understandable, without being too limiting or too free.

While I can’t begin to cover what Bari shares in her day-long workshop on this topic, I can give you a few examples of what she means by tying our cash flows to our values and needs:

            Mortgage or Rent becomes.......Sheltering Nest

            Food & Groceries becomes.......Sustenance and Nutrition

            Car Payment becomes.............A Way to Travel the World

            Health Club Dues becomes.......Wellness and Recreation

As you can see, by defining our expenditures to things that really matter in our lives, we feel as if there’s more of a purpose to the things we need to do in order to have the funds available to pay for our valued and needed goods, services, and activities.  

But there’s more to just thinking about and planning for the flows of money in and out of our hands.  It’s important to know the difference between our needs and our wants so that we are using our money in a way which brings meaning to our lives.  “Needs” are those things we must have in order to survive or live in today’s world:  food, shelter, and clothing are the things that come to mind by most people, with the addition of basic transportation and communication devices by many.  “Wants” are items we would like to have but can live without: television and cable, computers and internet access, cell phones, and many other consumer goods come to mind.  Needless to say, many of us spend much more money on our wants than on our needs, with the consequence that we have little left over for saving and investing.

So, here’s a little exercise:  take a piece of paper and make several columns with the following headings – “date,” “amount,” “how paid,” “to whom,” and “need or want.”  Next, for everything you buy, (and I mean everything), enter in the appropriate column the date of the expense, how much you spent, whether you paid by cash or by credit card (or other method), to whom it was paid, and whether it was a need or a want.  Then, at the end of each month, for three months, total up all the expenses that were your needs and all that were your wants.  You may be surprised at where your money goes.

When you can clearly differentiate between your needs and your wants, you can begin to make wiser decisions about how to spend your money.    After all, you probably work hard to earn it, so you should work at least a bit at deciding how to spend it.  Take just one of your wants for the month and analyze it.  Figure out how much you actually make per hour after all taxes are paid, and then extend the same amount out to figure out how much you make in a day, a week, and a month.  Then, compare the cost of this one want you are analyzing and divide it by the actual amount you make per hour, day, and week.  Ask yourself: was it worth working that much time to pay for this one item? 

Here’s an example.  Let’s say that you earn $20 per hour, but all taxes (including any payroll taxes) come to $8 per hour, leaving you with $12 per hour.  Now, let’s say that your cable-TV/high-speed internet bill is $120 per month.  At $12 per hour, you have to work 10 hours a month to pay for this want, which works out to 1.25 work days, or 25% of your work-week, and about 6.25% of your work-month to pay for it.  Ask yourself, “Is it really worth that much of my time to have this one expense hanging over my head month after month?”  For some, it is…but if you can go to the library and get free high-speed internet access for the amount of time you actually spend using it, or if you can get by on a "basic" cable programming instead of “expanded” – or even watch just what you can receive from a rooftop antenna, perhaps it’s not a good use of your hard earned money.  Add up your other wants and you can see how quickly it can get out of hand.

The first thing to do is make an appointment with a Financial Counselor (not a Financial Planner), who is a financial professional trained in helping people get through times of immediate financial crisis.  A financial counselor will help you develop a specific plan of action based on your personal finanical circumstances.  You can easily locate a financial counselor in your State or Province by conducting a search on the Internet.  Search for "financial counselor" or "debt counseling" at your favorite search engine and you will find a list of a large number of useful sites to explore.

Under the current laws in the US and Canada, and depending on the state or province, the bankruptcy courts are seeking more to structure debt-payoffs than to actually eliminate the debts. Regarding the "implications of declaring personal bankruptcy," they are many and varied but they all lead to future problems if you seek to work in certain fields - financial or security for example, and when you seek future credit and future credit cards.  Anytime you need a new service where a credit check is conducted you will also encounter problems getting the service.  Eventually, you will be able to secure future credit, but you will also be considered a "high risk" and the interest you will be charged will be much higher.  So be sure to get all the specific professional advice you need from a Bankrupcy Attorney or a Financial Counselor before moving forward with a bankruptcy petition filing.

"I'm amazed at how much I'm now able to save for my future after working through some of the exercises in "Managing My Life: Managing My Money."