Summary of Step 3: Being Honest with Yourself
Facing reality – comparing the money coming in with the money going out – taking control
1. Each adult of the household, without consulting each other, write down what they think is spent each month on all monthly expenses (it’s always written $1000-$1500 lesser than reality)
2. Forgotten Expenses once or twice per year:
a. Once a year renewal for the gym, or monthly payments?
b. Disposable contact lenses cost how much each month for the annual payment?
c. Insurances calculated into costs each month to cover semi-annual or quarterly
payments ?
d. What did last year’s vacation cost if broken down to 12 monthly payments?
e. If you pay to have your taxes done every year, how much is that cost every month?
3. Forgotten Seasonal Expenses:
a. Do you forget during the summer how much higher the furnace oil/gas bills run in
winter?
b. For your fireplace, do you buy one or two cords of wood in the winter and how
much is that per month?
c. On the higher electric bills for air conditioner, do you count that in the winter
monthly costs?
d. Do you pay outside help to wash your windows once or twice a year?
e. Do you plan the weekly summer costs into your monthly budget for lawn and
garden care?
f. Do you include summer camp and winter ice skating classes in the monthly budget?
g. Do you include pet care for food, vets, grooming, etc. in your monthly budget?
h. How much do you spend each season on new clothing items that needs to be in
your monthly budget?
i. What about hair cuts or hair color or perms being included in your monthly budget?
4. Hidden Expenses – weekly payments usually have four weeks, but four months of the year there are five weeks that payments have to be made, say for child care, the cleaning lady, or mortgage payments.
5. Smaller Expenses – often ignored and add up fast, such as a weekly date night of movies, popcorn, dinner ($16 for movie tickets, $4 for popcorn/soda, $20 for dinner x 52 weeks = $2,080 per year) >> magazine subscriptions, cosmetics, yard supplies, car oil change, flashlight batteries, grill charcoal, anniversary dinner, birthday parties, housewarmings, baby and wedding showers, flowers or bottle of wine for dinner at friend’s home, Christmas presents, and many more “here-and-there” expenses
6. Miscellaneous, Unexpected Expenses – Figure in $50 or $100 per month for surprise expenses that cannot be ignored, such as dental work not covered by insurance, travel to someone’s wedding or funeral, etc. needing to be figured into cash flow.
7. And then there’s the “My Spouse Doesn’t Know About This” Expense(s): Be Honest!
HOW MUCH IS GOING OUT?
v Canceled checks, checkbook, bank statements, cash withdrawals, money spent once a year, money spent every month, money spent once a season, holiday expenses, ATM statements, credit card bills, etc. for expenses the last 2 years – must be 2 years to see what it costs to live the way you live
v Taking time to do this will give you back more time in the future
v Make categories for each month—telephone, gasoline, food, utilities, vet bills, golf fees, babysitting, etc.
v Fill in each category for the past 2 years, total each category, and then divide each total by 24 to see what you spend on an average for each month during the past 2 yrs.
v Add together all those averages in each category to get your monthly costs to live each month, and since it is averages, the actual amount could go up or down, but to meet the expenses, you have to bring in at least the average amount each month.
HOW MUCH IS COMING IN?
v Have to match what is coming in after taxes with the amount that is going out
v Write down ALL INCOME from every source that will continue to come in for at least one more year (a loan to somebody that is almost paid off, you are going to retire or get laid off and will not have any more paychecks – do not count these types of income)
v Examples of INCOME>> monthly paychecks after taxes, predictable bonuses, Social Security income, disability income, bond income, rental income, cash gifts that are standard from year to year, loan repayments to you if will continue more than a year, retirement income, pension income, miscellaneous income
v Divide the TOTAL INCOME by 12 to see what is coming in after taxes
v Compare to what is going out
WHAT TO DO NOW? -- 1.) Make more money (get 2nd job), OR 2.) DECIDE to spend less, say about $25 to $30 less per month in about 15 or 20 category, NOT restrict or limit but DECIDE which categories you would rather spend your money – Unrealistic budget cuts are like unrealistic diets, they never work! All the plastic cards, checks, electronics, digital “conveniences” leave us out of touch with money—we need to touch our money, handle it as cash in order to respect it and feel the power over it.
WHERE TO TRIM? Leave the fixed categories alone – focus on the other categories and make a game of it – hair cut every 8 weeks? What if you could make it last 9 weeks? What about one less magazine subscription or one less movie? Each DECISION of where to trim is GAINING POWER over your money. Keep track: calendars, yellow stickie notes in checkbook.
KEEP TRACK – CREATE a CHART or other SYSTEM – Each monthly payment, check your categories – as long as the numbers balance you are okay – say you want to buy a new $200 coat, but you have already spent your annual cost for clothing, and then you see that your vacation was cut short and you saved $200 – you are in the clear to buy the coat.
Suze’s book claims that on the next Steps of 4, 5, and 6, she will now teach us to manage our money and create more money. On page 49, she states, “You will soon see, too, that you have more than what it takes to manage your money on your own (a message, by the way, that the commissions-oriented financial industry would rather you never learn).”
Anybody trying out these steps yet?
