Category Archives: Budgeting

What is Your Goal?

I almost never mention my first husband.  It was a short marriage that ended decades ago, so it somehow seems like part of a different lifetime.

He and I differed on one very important issue, and I think that is what ultimately drove us apart.  We had different financial goals.  Or at least a different order in which we wanted to pursue them.  All of my life I had two primary goals: earn enough money that I don’t have to be dependent on anyone else, and own my home.  When we married, I had finished my Master’s degree and was started on my career as a financial aid professional.  I had achieved goal number one.  But I was living in a rental apartment.  A year after we got married, we moved to Chicago.  I continued working as a financial aid advisor (this time at a law school—I found my niche!).  He started attending law school.  Within a year of our move to Chicago I was looking at condominiums.  I still wanted to own a home.  He didn’t agree.  He claimed he didn’t want to make that kind of commitment to Chicago.  And that was the beginning of the end.

Ultimately, we divorced.  And a year later I bought a condo in Chicago. A studio was all I could afford, but who needs a bedroom when you have a 27th floor lake view?  It was all mine. And I loved it.  My home, my mortgage, and my rules. After only three years, I sold that condo at a 25% profit.  I moved back to Pennsylvania and started working for Penn State.  And as soon as I was able, I bought a townhouse.  I’ve bought and sold my home two more times since then, and now I know that I’m in the home where I plan to stay for a very long time.  I’ll probably even manage to pay off the mortgage in full.

What I learned over the years is that when the real estate market is strong enough, you don’t have to commit to a home forever unless you want to.  It is possible to sell a home after only a few years without taking a loss on it.  Real estate is more than just a place to live…it’s an appreciating investment.

My first husband still lives in the suburbs of Chicago with his wife and kids.  Ultimately, he did make that kind of commitment to Chicago. We just didn’t have the same goal at the time when it really mattered.  Everyone has their own financial goals. And before you too far into a relationship, it’s important to be clear with your partner what your goals are, and hopefully they will match up with each other’s.

Owning a home and being self-supporting were my goals.  My current goal is retirement at age 60.  Some people have a goal of saving a certain amount of money.  Some have a goal of being debt-free.  Others have a goal of starting their own business.  Your goal is the thing that is important to you.  And everyone’s goal will be a bit different. What is important is that you have a goal and you set your sights on working toward it.

What are your financial goals?

Fresh Start with a Spending Plan

How do you plan to manage your money this semester?  The beginning of a new academic year is a great time for a fresh start when it comes to juggling your finances.  For students, each semester typically begins with a fresh lump sum of money to be used for books and for the semester’s living expenses.  And how a student manages that lump sum is not very different from the way anyone manages their regular paychecks (or direct deposit….I don’t remember the last time my pay actually came in a check).

Developing a spending plan requires that you know how much you are spending on things.  There are countless ways to track how much you are spending, ranging from financial computer programs to spreadsheets to old fashioned ledger books.  How you keep track of things is much less important than the fact that you need to keep track of things.  Some expenses occur once a semester (like tuition or books).  Many expenses occur once a month (like rent and utilities).  Some expenses occur even more frequently (like food or auto fuel).

The other part of developing a spending plan is knowing how much money you have available to work with.  For many of my readers this may be a big chunk of student loan funds that is about to refund to you to carry you through the entire semester.  For some others it may be withdrawing from a savings account.  For some it may include funds from a job.  But you need to know how much you have so you can determine how much you can spend.

Once you have established the resources available to you, then you can start subtracting out your expenses.  Start first with expenses that are required and relatively fixed—your rent and utilities and insurance.  Then you will know how much you have left to spend on things that are more flexible, such as food (which is required, but how much you spend is highly variable), entertainment, and clothing.  If your resources exceed your expenses, that is ideal.  Then you’ll have some to tuck away for an emergency or unexpected future expense.  If your expenses exceed your resources, you will need to rework things.  Figure out how you can spend less.  Or figure out how you can add more resources.  Maybe you need a job.  Maybe you need a student loan.  Maybe you need a roommate.  Maybe you need not to have a car.  There are many ways to make adjustments to your spending plan—and I’m fully aware that many of those choices are difficult to make.

As you start on your fall semester, I know you don’t want to spend a lot of energy on establishing your financial plan.  But if you put in the effort now, you’ll be much more financially secure when we get to final exams in December.  You can control your money rather than letting it control you.

 

Lessons from My Father

I’ve been away a lot lately.  I haven’t really been in my office and I haven’t written a Moneywise Tip in quite a while.  Sometimes family responsibilities have to take priority over other things. And that has been my situation as my father arrived at the final weeks of a long illness and then passed away.

My father was a teacher by trade (German and French), and he was always teaching something to someone, whether in the classroom or not.  While he never succeeded in teaching me to speak German (much to his dismay), he did manage to teach me quite a bit about money over the years.

My dad grew up poor.  He was born during the Great Depression, and after his parents divorced he lived with his father in a one room cabin without electricity.  Because he knew what it was like not to have money, he was very careful with it once he actually had some (after 4 years in the U.S. Navy and working his way through college on the G.I. Bill).

I remember always receiving an allowance as a child.  That is how I learned about how to receive a regular paycheck and that more money didn’t come around until the next payday.  My dad was paid every two weeks, so my allowance came every two weeks.  So I had to get used to saving and budgeting.  As I grew older and took on more responsibilities in the house, my allowance grew to reflect that.  I learned that more work yields more money.

My dad helped me start a savings account when I was young.  I remember a program in my elementary school where students all started savings accounts together and brought deposits to school for regular savings.  But I didn’t participate because I already had my savings account, and it was growing whenever I had some extra allowance or some birthday or Christmas money.  Over the years I learned the value of having some extra cash stashed away in case of emergency or for a purchase that required saving ahead.  And now I still have an automatic transfer to savings set up right after every pay day.

My dad also taught me about loans.  My sister and I were desperate to have a television in the bedroom we shared.  But the 12 inch black and white TV we dreamed of was more than $40, which may as well have been a million dollars for two elementary age kids in the 1970’s.  But my dad loaned us the money.  He kept a ledger of the amount we owed, and we paid it back over time, in dribs and drabs.  I remember at one point handing my dad a small box full of pennies to pay on that account.  And he accepted that and subtracted it from my balance due.  I’m not quite sure how long we took to pay off that TV, but I’ll always remember my first loan.

My dad was quite the master of budgeting as well.  He didn’t have spreadsheets, but he worked out his budget extraordinarily well using the envelope system (which I understand made a recent comeback thanks to TikTok). Every payday he would go to the bank and get a certain amount of cash to fill the envelopes.  He had a list of exactly how many of each denomination bill he needed.  Then he would lay it all out on his desk like a Monopoly banker and would fill each envelope with the budgeted amount.  Each regular expense had its own envelope.  Then when the bill came due, he would go to that envelope and get the money to pay that bill.  If the amount in the envelope wasn’t enough, he would rework the budget and would have to figure out which category could spare a little to cover the difference that month.  It seemed incredibly complicated at the time.  But it was amazingly effective.

My dad taught me so many things I am grateful for.  The lessons weren’t always easy at the time.  (Especially the time he taught me how to stop going up hill without drifting backward in a manual transmission car.  That lesson came with a LOT of tears.)  But I will forever be grateful for the many things he taught me.  I hope I am able to have anywhere close to that kind of a positive impact on other people’s lives.  Thank you, Pops!

Happy New Year!

Happy new year!!!  I know that most people celebrate the new year on January 1.  But for those of us who live our lives in higher education, the new year always starts in late August and ends in mid-May. The months in between are simply a big blur of trying to squeeze in some vacation time while still working at breakneck speed to make sure everything is ready in time for the new year.

For many folks the new year involves making resolutions.  And a very popular resolution is about building a budget to manage your money.  If that B word scares you, call it a spending plan instead.  It somehow sounds less like a punishment and more like a goal that way.  Unless you are independently wealthy (which is rare among students), a spending plan of some sort is a necessity to make sure you have enough money to get through the semester.  Otherwise you could find yourself surviving on a menu of ramen noodles three times a day by the time you get to exams, when you most need some decent nutrition to power your brain.

There are a lot of online tools available to help build a spending plan.  I’ve tried a bunch of them, but I always end up coming back to a good old-fashioned spreadsheet.  It’s tried and true and does exactly what I want it to, giving me flexibility to manipulate and analyze my own data.  I like to start with my monthly income—that stays the same every month.  Then I subtract fixed expenses like my housing, insurance, debt payments, and utilities.  Then what is left over is what I have left to divide among the things that can be flexible from month to month, like food, gasoline, entertainment, medical expenses, and clothing.  All of these are necessary in my life, but I can spend varying amounts depending on the month.  If I spend more in one category, I may have to carve it out of my spending in another category.  And I always put some money in savings each month for future emergencies to prevent the need for future adjustments to my normal spending plan.

Things work a little differently for students living on student loans funds during the academic year.  You may be receiving a large refund at the start of the semester that you need to portion out over the full semester.  I generally recommend putting the lump sum into a savings account.  Some of the online banks are actually starting to pay a somewhat reasonable interest rate again, rather than just a fraction of a percent, so a savings account can actually earn you a bit of money.  Then each month you should transfer a designated amount to your checking account, so it is more readily available for that month’s expenses.  But once that month’s money is gone, don’t let yourself transfer more until the next month’s designated “pay day.”  That will make it easier to keep some control over your spending plan.

It’s the start of a new year.  It’s a fresh start.  New semester.  New classes. New people to meet. For many, a new place to live.  A new spending plan.  Now is your chance to get the year started right.  Happy new year!!

Life Happens. Roll With It.

I feel like I’ve been playing life by ear a lot lately.  Sometimes things just don’t go according to plan and you just have to roll with it and do the best you can.  I’ve been away from the office quite a lot lately helping my elderly parents manage a medical situation.  Because of that I’ve found myself working from my parents’ living room at weird hours and using all the technologies that I learned during the peak of the pandemic.  I’m just rolling with it and making life happen.  I did a Zoom presentation for prospective students last week and experienced some technical difficulty that stopped me from being able to share my PowerPoint slides.  And I just went with it to make it a less visual and more verbal presentation.  I credit my experience in community theater with making me able to think on my feet and continue on as if everything is normal.  It’s a good skill for everyone to have.

But there is one area of life where I never want to play it by ear.  That’s with managing my money.  It’s always best to have a plan when it comes to money.  Know how much is coming in.  Know how much is going out.  Know what you are spending it on.  Build a spending plan.  Build a savings plan.  Build an emergency fund.  Save toward specific goals.  Have a plan for paying down debt.  Know what dates your bills are due so they can always be paid on time.  Know what credit card to use at what store to earn the best rewards.  It feels like I have a million plans that are all tied to my money!

Does all of this planning mean I’m never caught off-guard?  Nope.  Everybody experiences money surprises.  The unexpected car repair.  The computer replacement that comes ahead of schedule.  The January heating bill.  Even the skyrocketing prices of gasoline and groceries.  Life is full of money surprises.  The key to being able to handle them is to have a contingency plan for money surprises.  For some that means an emergency fund.  For others that means leaning on a credit card.  For some it means calling the Bank of Mom and Dad.  Some may need to increase a student loan.  Some folks may need to sell some belongings to raise funds.  It may be some combination of these and other things.  The important thing is to know what your contingency plan is….before you need it.

Life happens.  Sometimes you have to roll with it.  Do you know what your money contingency plan is?  If not, it’s time to think about it.

Putting your Money on Autopilot

Routines are a good thing.  When something is routine for you it almost runs on automatic pilot.  You don’t have to expend the energy to remember it.  It just happens.  I brush my teeth before bed.  I feed my cats first thing when I get up in the morning.  I set up the coffeemaker for the next day right after I wash the dinner dishes.  I don’t think about these things.  I just do it because it’s routine.

This semester I’ve found myself needing to establish new routines.  And that’s not always easy. I have to remember to grab a mask before I leave the house.  I have a new travel mug that I’m using for my morning coffee (because it allows me to use a straw I can slip under my mask) and I haven’t adjusted to exactly how much to fill it so it doesn’t splash over when I put the lid on.  I’m getting used to being back in the office after working from home for an extended period which is good (my computer monitors are so BIG!) and bad (traffic in State College isn’t horrible, but it’s much worse than the commute from my living room to my guest room) and good (I get to see STUDENTS!!!) and bad (with the combination of my glasses, my mask, and my headphones for Zooming, I feel like I’m wearing a motorcycle helmet all day).

Experts say that it takes 66 days to develop a habit.  That’s the magic point at which your routine goes on autopilot.  Which explains why I’m struggling with returning to the office after working at home for 17 months.  My work from home routine was on autopilot.  And it’s not easy to build new routines.  You need to focus on doing the same thing at the same time on a regular basis (whether that’s daily or weekly or monthly).

You are likely also working on establishing new routines.  A new class schedule.  A new commute.  And quite possibly a new way of managing your money.  All of these things are much easier to manage once they are routine.  So how do you make managing your money routine?  Last week we talked about putting your “monthly paycheck” on auto-transfer.  That’s the first step.  But you can also set up a lot of your bills for auto-transfer.  And any bills that are not on auto-transfer you should establish a routine for when you pay them.  I always sit down with a pile of bills at the start of every month, right after I get paid.  I schedule all the payments with my bank’s online bill paying system, and then I’m done for the month.  Autopilot.  And I do the same with savings.  I have auto-transfers set up to move money into my emergency fund and my long-term investment account at the beginning of the month.  And my retirement savings comes right out of my paycheck before I even see the money—it doesn’t get more automatic than that!  And my final money routine is to check my recent transactions every morning when I sit down at the computer.  I subscribe to a service that imports all of the transactions on my different accounts into a Google spreadsheet, which allows me to better track where my money is going.  The daily sorting and categorizing of these transactions helps me to manage my budget and alerts me to anything that may be out of the ordinary (hopefully “What did my husband buy at the music store now?” rather than “My credit card has been hacked!”).

While you are working on establishing your new routines, make the extra effort to put your money on autopilot too.  It really can remove a great deal of stress from your life not to need to think about it!

 

Big Doesn’t Have to Be Scary

Big can be very overwhelming.  Penn State has a very large student body.  Reading a very long book can seem an ominous project.  Running a marathon is a huge undertaking.  Paying off a mortgage or a student loan or even a car loan seems impossible at first.  Saving enough money for retirement (yep….enough money to live on for the rest of your life!) is an enormous task.  Big is simply overwhelming.  Because it’s….well….BIG!

A wise man (I’ve seen it credited to too many different people to try to attribute it) once said, “How do you eat an elephant?  One bite at a time.”  This is the secret to turn overwhelming into accomplishment.  Break it down into manageable chunks.  Penn State has a very large student body…but Penn State Law is a much smaller and very familial portion that is easier to navigate.  Reading a very long book can seem like an ominous project…but if you take it one chapter at a time, it adds up to a relaxing read.  Running a marathon is a huge undertaking…but runners use mental math to break it into smaller distances (One 10K down…only four 5 milers to go!).  Paying off large debts or starting a long-term savings plan is a scary concept, but one month at a time it all gets done.

It’s pretty typical for graduate students to live on student loan funds throughout the year.  And these funds come to students in two giant chunks…one at the start of each semester.  And that’s pretty overwhelming as well.  It’s a lot of money all at once.  And this is a lot easier to manage if you break it down into more manageable amounts.  Bills typically come by the month, not by the semester (with the exception of tuition, fees, and books).  So it makes sense to break down your refund by the month.  Put that giant refund into a savings account.  Preferably one that isn’t tied to an ATM or debit card.  Set up an automatic transfer to your checking account for the beginning of each month.  Then live on that amount for that month.  Don’t transfer any funds early.  If you blow your grocery money on clothes, you’ll have to find a way to feed yourself with what you have on hand…just like if your paycheck were coming from a job rather than from a transfer from your student loan savings.  If you don’t tap into your funds early, it will actually last for the full semester.  You truly do not want to find yourself eating nothing but ramen during exam time when your brain needs nutritious food the most.

How do you eat an elephant?  One bite at a time.  How do you manage your money?  One month at a time.

Rings of Priority

My weekend was too short for my plans.  This seems to happen all the time.   But this weekend was particularly bad.  After what seems like 14 years of sitting at my tiny desk in my guest room staring endlessly at a computer screen, I have a very small vacation coming up at the end of this week.  Those of you who have been following my adventures for some time know that I have a tiny teardrop camper that I love to escape in.  This weekend I was working on my little camper in preparation for my first trip of the year.  My goal was to make a few little upgrades to the camper and to clean and prepare the camper and other gear for the upcoming trip.

Armed with my cordless drill, I started in on the upgrades.  And I very quickly got frustrated.  Putting new hinges and a pneumatic lift on the underbed storage looked so easy in the YouTube video I watched.  But that just didn’t translate to my reality.  Eventually I realized that if I kept devoting my time to the project that I wanted to do, I wouldn’t have enough time left to finish the projects that I needed to do.  So I abandoned the upgrades and focused on what was necessary to get the camper ready to roll this next weekend.  I can live without a lift under the bed.  I can’t as easily live without clean bedding and a supply of water in the tank.

There are many times in life that what we hope for and what we actually can achieve are two different things.  But it’s important to keep focus enough to make sure that what we actually do achieve includes those things that are necessary to achieve.

This is one of those concepts that applies in all areas of life, including managing your money.  There will almost never be enough money available to you to fund everything that you dream about.  And you need to make sure that your basic expenses are always covered.  But there is usually room in the budget for you to have more than just what is necessary.  And only you can decide what is important enough for you to include in that second ring of priorities.  One of my favorite nutshell statements is, “You can have anything you want….you just can’t have everything you want.”  This shows you just how true that is.

Returning to “Normal”

With vaccine now pretty readily available in the U.S., many people (including myself) are starting to think about what it will be like to return to “normal,” with the pandemic in the rear-view mirror.  I’ve already noticed that it is going to have an impact on my budget.

Within the last few weeks, I finally returned to doing some grocery shopping in person, after a year of curbside pick-up.   While it is refreshing to walk through the aisles and browse (browsing is definitely one of the things I’ve been missing!), the chances of making an impulse purchase are greatly increased.  Just yesterday I looked at some really nice pork chops and put them in my cart without regard to price.  That’s something that just doesn’t happen when you order online.  And it’s something I’m going to have to retrain myself to avoid.  The best way to keep the grocery budget in check is to make a list and stick to it.  The order online and pick up curbside process kind of builds that in.  And I’m going to have to be pretty aware of my tendency to stray from the plan now that I’m shopping the aisles of the stores again.

I also returned to eating in a restaurant over the weekend, after a year of takeout and delivery.  Again, it’s really nice to sit in a restaurant and have someone wait on me.  And the cost of the food never really left my budget.  But the thing I didn’t pay for over the last year was restaurant drinks.  Takeout food from my local brewpub (with a hefty tip built in because those working in food service have taken a real financial hit during the pandemic) is always going to be cheaper than food and drinks inside my local brewpub.  That’s another thing that I’m going to have to keep in mind to make sure that I don’t completely blow my budget on drinks.

This fall (maybe even this summer!) I’m hoping to be back in my campus office on a regular basis.  But the return to in-person work also comes with added expenses.  Mostly because of the commute.  My cars have been sitting in the driveway largely unused for more than a year.  Less driving equals less gas and maintenance.  And as things return to a more normal state, I’ll be driving more.  Back and forth to work.  Random trips to the grocery store.  Trips to visit family and friends (because we can do that again!!!!).  More miles equals more gas and more frequent oil changes and tire rotation and brakes and all of the other things that wear and tear on cars.

Things are starting to feel more normal.  And I’m thrilled about that!  But it’s definitely going to affect my budget, so I want to keep these things at the front of my mind to make sure I don’t break the bank.

How will the return to “normal” affect your budget?

STRESS!!!!!!

We have arrived at a time of great stress.  Stress is largely caused by situations over which you have little to no control.  Such as upcoming law school exams.  Such as a global pandemic that seems to be getting worse rather than better.  Such as the end to a turbulent election cycle.

These things weigh on us because we can’t really control them.  We can only control how we react to them.  You can’t control what your exams will be like.  You can control how you prepare for them.  You can’t control how the Coronavirus will progress.  You can control how much you stay home, wear a mask, and wash your hands.  You can’t control how the election turned out.  You can control how much you tune in to overly political news and opinion pieces.

Money is another thing that causes stress for a lot of people (usually because there never seems to be enough of it).  How much money comes in and when is not always something we can easily control.  We can, however, usually control how much goes out.  We have the ultimate say in how much we pay for housing, transportation, food, and entertainment (among other things).  A well-organized spending plan can help you to make sure that your outgoing funds are less than your incoming funds…and that any extra is safely tucked away for those unexpected emergency moments.

Life is full of stressors—things that we just can’t control.  The world is very uncertain right now. But in times of great stress, it’s important to focus on the things that you CAN control, which should ultimately ease that stress.