Kinderbudget

I met with a financial adviser a while ago, and when I found out he had a son a couple years younger than mine, I asked if I could pick his brain a bit. First, I asked if he gave his kid an allowance (yes), how much (eight quarters a week), and what he was expected to do with it.

I liked what he told me, so I decided to implement it at home.

My son, having just turned six, gets six dollars a week. I budget for it as part of his $100 monthly envelope.

wpid-wp-1442364068430.jpgThe main idea here is that the kid gets three jars, labelled “spend”, “save” and “share”, respectively. I saved up some empty protein powder jars because they are huge and I’d like to give him room to fill them, should he want to. We decorated them with stickers.

He gets his allowance in change, loonies or smaller. The rule is that he has to put one dollar in each jar every week, but he gets to choose where he puts the other three dollars.

The Spend Jar is pretty self-explanatory. This is for stuff he wants to buy. There is still an element of saving required, since most things cost more than a few dollars. He’s keeping a list of items he wants and their prices, and learning about sales tax.

wpid-wp-1442364152471.jpgThe Save Jar is for long-term savings goals, like an expensive toy or a trip. Eventually, some of this will go into a bank account.

The Share Jar is my favourite. This is money he has to spend on others. It can be used for birthday gifts for friends, or Christmas gifts for family, or donated to charity. He’s got plenty of ideas already.

This week, the extra three dollars went right into Spend. He saw this silly calculator at Staples last week with a ball bearing maze in the back of it, and it’s all he’s talked about since. I was kind of hoping he’d get over it, but no luck yet.

wpid-wp-1442364586483.jpgHe’s pretty proud of his jars, and I think it’s an easy way to teach budgeting in an age appropriate way. I’d love to hear your thoughts.

What other lessons in financial literacy do you think it’s important for kids to learn? Or do you think kids just shouldn’t have to think about money at all?

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Same Money, Fewer Problems

A lot of people are still asking me how much money I have saved since September.

It’s not a lot.

I think what they really want to know is how much less money I have spent. I don’t really have an answer for that since my recreational spending wasn’t a constant before.

My monthly obligations are largely unchanged, although I have cut back on anything I consider to be discretionary, like gas and food (food is necessary; filet mignon is not).

A few months back, I set myself some general financial goals for this year. I think it is time to update them a bit.

I revisited my budget recently. I use an online envelope system, and it was very helpful at tracking my spending back when I was doing a whole lot more of it. Now, I mostly use it to determine how much of my monthly income can safely go towards paying down my debt. It also has pie charts, which are enlightening.

I have not been able to maintain a minimum balance in my chequing account, so I have decided to take that goal off the table. It was getting in the way of making progress in other areas. I now have $1,000 in a savings account, acting as an emergency fund. I plan to leave it there and top it up as needed. Otherwise, no more of my income will be allotted to savings until this debt is gone.

Credit Line

The limit is $10,000 and it was very nearly that when I began in September. No minimum monthly payments. Interest is around prime-plus-one. Current balance is $8,000. My goal is to clear this balance by August 31, 2015.

Bank Loan

I took this out in November of 2013 to clear up a bunch of credit card balances and close out another credit line with a higher interest rate. Initial balance was $27,700 over a five year term. I can’t remember the interest rate. I have only made the monthly payments so far ($546, automatic withdrawal) and the current balance is $22,044.80. Once the credit line is gone, all the money that frees up will go toward paying this off early. My goal for this is December 2016.

Car Loan

I financed a smallish portion of a new car last summer. I have weighed new versus used and I know what Dave Ramsey has to say about it already. I wanted the new car so I bought it. Bon. I have no idea what the balance is now but the interest rate is 0.99%, four year term. I am making only the monthly payments ($273, automatic withdrawal) and will continue to do so until the bank loan is gone. With those two larger debts out of the way, I should be able to clear this up lickety-split.

Credit Cards

I have four dedicated credit cards (travel, gas, groceries, miscellaneous) and they all have zero balances. The argument could be made that I don’t need all of those cards. There’s an Amex that I got for a points promotion, but that’s already served its purpose and I think I will cancel it. If oil prices stay this low, I can see cancelling the gas card too. The points don’t accumulate quickly enough and I drive a sub-compact, so… maybe better to focus on the grocery points.

My initial plan for the year was to pay off an additional $10,000 in debt, over and above my regular monthly payments, and I am currently on track to do this. My debt obligations are about 22% of my total spending. Devoting an additional $500 per paycheque to paying it down makes debt repayment more than half of my spending pie. And I’m not even including the mortgage. That’s another piece of pie entirely.

We have done a fair amount of travelling over the years, and I still think that most of it was worth it. I am struggling to come up with a list of stuff I have to show for spending all this money. It is embarrassingly short. My relationship to stuff is changing as I work my way through this experiment, and I expect to end up with much less by the end of it. I think my brain chemistry has changed.

You know when people spend a lot of money on school and then can’t get a job when they graduate? At least those people have degrees. All I had was a lot of purses. And now I don’t even have those. I’m glad I seem to have kicked the shopping habit, but it sucks that I’ll still be paying for it years later. Maybe I won’t buy anything for TWO years.

Moneytalks

This is the first time I feel like I need a disclaimer on a post. Money is hard. A lot of people don’t have enough of it, and they do what they can. I have made financial choices that I am not proud of, and that is why I am choosing to share. My situation is very likely not the same as yours, unless you’re related to me. Even then, probably not. 

The primary goal of this project is to take control of my stuff, but I also have financial motives. I have friends who are working toward being debt-free, and this has always seemed so far out of reach for me. Debt and I have an easy relationship. A real give-and-take. Debt is like sweatpants: Overindulge, and then get comfy.

(I really like sweatpants, you guys.)

Since I’m not buying any new sweatpants, I roughed out a short list of financial milestones that I think I can hit this year:

1. Maintain a minimum Chequing balance of $1,000 after all monthly expenses.

2. Maintain a minimum Savings balance of $1,000 for unwelcome surprises.

3. Throw everything else at my consumer debt, highest interest rate first.

I toyed with the idea of contributing to my savings and paying down my debt concurrently, but I decided against it for the sake of simplicity. I like to quantify my goals, and focusing on one number is easier than focusing on two.

I’ll still be making regular payments where required, and covering the interest. I’ve decided that I am going to reduce my debt by an additional $10,000 by the end of August 2015.

I am pleased to report that after just one month of making do, I have met my first financial goal. The mortgage is out, the bills are paid, and I still have some breathing room before I dip below $1,000 in my Chequing account.

Are you like me, living within your means, if “your means” means your credit limit? Or are you one of those magical unicorns who doesn’t owe anyone anything?