I think I am finally getting over the crud. I am sleeping all night and coughing less and less. Yes! I am left feeling a little beat up and slightly depressed. I think the depression has more to do with the weather and less with my health. I am longing for warmth and sunshine.
Back to class, dear readers. We are now entering the Unit entitled “WISE BUDGETING AND BUYING”. I think this is going to be a very interesting study to see how things have, or maybe have not, changed since 1948 in the areas of money management and spending. Our first lesson is called:
Planned Spending of Money and Time
“The Matter of Allowances”
Ms. Greer opens the chapter illustrating the importance of young people having an allowance and learning to be accountable for their spending. This isn’t outlined as giving a child a wad of cash and letting her do with it as she wishes. Rather, the child/young person would learn responsibility with the money using it for some fun yes, but also maybe school lunches, school supplies, gifts, savings, etc. She even provides a “budget” as an example. The allowance is $3.00 but is used for the following: Streetcar tickets $.30; 5 lunches @ $.30ea = $1.50; 2 pencils $.05; Tablet $.05; School party $.10; lingerie ribbon $.30 (uh, what would this be?); Movie $.30; Sunday school $.10; Savings $.10. When added up it uses the entire $3.00 and the young financier is ready for her next $3.00.
I did some quick calculations (and research). At www.ssa.gov, I found a table that showed the median incomes in the USA from 1951 until 2009. Based on that information, I figured out that $3.00 a week represented roughly 5.5% of a family’s income. The equivalent today would be about $43.00 a week allowance for a young person. Steep? At first glance I would say yes. But the more I thought about it I realized maybe it would not even cover everything. Kids always have their hands out for some sort of “donation”. But if a parent (using this scenario and figures) gave her child $43.00 a week and worked out a budget that included clothes, lunches, entertainment, school supplies, other incidentals AND savings–would it work? Could she do it? Is it an adequate sum? I did some more rough figures (before I found the tables) by adding up the possible expenses today’s teen might have each week and here is what I came up with: $15 toward travel (whether gas or subways/buses–our local bus system is $60 a month for a smart pass); 5 school lunches = $12.50; 0ne movie night $8.00 (minimum)…all of this totals $35.50 and doesn’t include clothing, savings, supplies, etc (or the hoards of food they eat at home). So if you upped the allowance to $50 a week (hoping they would save $15 toward clothing–yeah right), you have upped the percentage (6.5%) of your income going to an allowance for just one teen. Oh, you have a couple more of them lying around the house? (Rent them out–no, that won’t work. Teens aren’t going for much these days…jusk kidding of course.) Well, now you are spending 19.5% of your hard-earned income on allowances. It really becomes staggering. But no matter how you work it out for your family, I can see the value in having a budget for each child in the home. It would teach them sooooooo much now so they don’t become clueless, high interest paying, perpetually in debt, borrowers in the future.
Ummm…I really spent more time on that than I planned. Bored? Too bad. I’ve got more to cover.
“The Need of Planned Spending”
Ms. Greer makes these wise statements, “…looking forward to what one must spend money for is as necessary for wise money handling as looking back to what has been spent…it is necessary to have a plan for spending. Such planning makes for thrift, and being thrifty is a habit that one does well to acquire…Business and government make very definite plans for spending money….and home-making is a little business and a very important one. The costs of running a home should be decided upon…the family income should be budgeted.”
Many of us think of the word “budget” as negative–constricting, constraining. But by thinking of it as described above helps one to see it as a necessity to successful home-management. And do we want to live with balanced budgets OR take our cue from the Government (and that would be just about any government nowadays)?
“The General Income of a Family”
In order to budget successfully the first step taken is to “know what the family income amounts to”. This would include wages, interest, dividends, commission–all taken into consideration to figure out “an average monthly income”.
“Expenditures: A Budget Pattern”
“Household expenses may be grouped under six divisions: rent/house payment, food, clothing, operating expenses (light, fuel, and so on), advancement (education, recreation, and the like, and savings.” I think those are basic divisions that still work for us today as well. And how does one know how much to budget for what? Ms. Greer says, “The following percentages are merely suggestions:
Housing, 20%–rent or (if home is owned) taxes, insurance, interest on mortgage, repairs (including painting).
Food, 20-25%–groceries and meat, or meals purchased outside the home.
Clothing, 15%–ready-to-wear clothes, materials for clothes, underwear, hats, shoes, and other clothing accessories. (Don’t you wish we still wore hats?)
Operating Expenses, 15 to 20%–Family: light, fuel, telephone, water, laundry work, cleaning house or yard work. Personal: car fare, manicures, toilet articles, etc. Automobiles: gasoline, oil, repairs, license, insurance.
Advancement (or development), 10-15%–Education: school fees, tuition, books, magazines, lectures, etc. Health: medical and dental fees, drugs, glasses. Recreation: entertainments, vacation trips, etc. Benevolence: contributions to church and charity
Savings, 10 to 15%–money, life insurance.”
Ms. Greer does acknowledge that these “percentages will not hold for all incomes”. Both how much a family makes and the cost of living in a particular area will come into play.
Again, I was curious how these percentages work in our world today. I remembered a financial table, “Abide by Financial Rules of Thumb to Prosper” by Gregory Karp in the book, “Living the Savvy Life” by Melissa Tosetti and Kevin Gibbons. Among other items, these were suggested:
“House payment: Your mortgage, including taxes and insurance, should not exceed 29 percent of your gross monthly income.*
Car payment: All vehicle payments should not exceed 15 percent of your take-home pay.
Total debt: Total monthly debt payments should not exceed 36 percent of your gross monthly income.”
For similar 2011 guidelines, please check out this link which also references Dave Ramsey’s recommendations as well. Notice how the percentages have changed drastically in some categories (this is Dave Ramsey’s table):
|Category||Percentage of Overall Spending|
I think I miss the fact that clothing is no longer recommended at 15%. But maybe if I ate less….
This will end our lesson for today. Next time we will focus more on the actual steps of planning and executing a budget.
How are you doing with your budget? Have you found which percentages for what work best for you? How do you feel about children having a sizeable allowance so that they can learn the art of budgeting?