Author: Bruce Lund

Wants are things someone would like to have but can live without. Needs are things someone must have to survive, such as food, water, or shelter. When learning the differences between the two, people are often told the key to budgeting is simply spending money on needs instead of wants. While needs are more important and should be prioritized, it’s okay to spend money on wants––as long as one’s necessities, savings, and debt repayment plans aren’t impacted. By following the popular 50/30/20 model, people can budget for both wants and needs!

First, what is a budget? It’s a plan that outlines where each dollar someone has will go. However, if a budget is too complicated or overwhelming to follow, people may decide to stop referencing it. The 50/30/20 budget model is a simplified budgeting method that is easy to follow and stay committed to. In addition to being easy to follow, it’s an effective financial strategy. People following the 50/30/20 model divide their take-home income into three categories: 50% for needs, 30% for wants, and 20% for savings and debt repayment.

People should begin by determining what their take-home income is each month. This is what they earn for income after the deductions of taxes, benefits, or contributions from a paycheck. Next, they should write a list of all the things they pay for each month. That means everything from hand soap to health insurance. After all the expenses have been listed, people must decide whether each expense is a want or a need. Most expenditures may be obvious and easy to categorize, but others may be more difficult. For example, water is a need. However, seltzer water is a want. As another example, someone commuting from outside the city would categorize a vehicle as a need. For someone living in the city with access to public transportation, a vehicle may be a want. After the expenses have been categorized, the 50/30/20 model can be used to budget upcoming expenditures.

Needs: 50%

These are expenses that are essential for people to be able to live and work. Some common expenses may include:

Rent or Mortgage
Transportation (personal vehicle or transit pass)
Groceries
Basic utilities
Insurance
Loan payments
Childcare

Wants: 30%

These are expenses that aren’t essential to living and working. They’re luxury items, not necessities. Some examples of wants include:

Video game consoles
Coffeehouse drinks
The latest iPhone
Designer clothing
Cable or streaming subscriptions
Gym memberships

Savings and Debt Repayment: 20%

The final 20% in the 50/30/20 model is reserved for savings and paying down extra on any debt. Examples could include:

Starting an emergency fund (people should aim to save away at least 3 months’ worth of expenses)
Investments
Saving for retirement
Paying off debt (loan payments are categorized as needs, but extra payments should be factored in here)

Using the 50/30/20 model, someone taking home $3,000 a month would budget for spending $1,500 (50%) on needs, $900 (30%) on wants, and $600 (20%) on savings and debt repayment.

While calculating the 50/30/20 rule can be done on paper, an online 50/30/20 budget calculator provides people with access to an easy, streamlined budgeting strategy that can help them stay on top of their finances. Find it at https://moneyfit.org/50-30-20-budget-calculator.

Getting Started with Estate Planning

July 16, 2024July 9, 2024

A home is often considered a person’s most valuable asset. But what happens to your home after you die? Estate planning is an important and often overlooked process that can greatly benefit you and your loved ones once you’ve passed away. Here is a checklist to help:

Itemize your inventory
Follow with non-physical assets
Assemble a list of debts
Make a list of memberships
Make copies of your lists
Review your retirement accounts
Update your insurance
Assign transfer on death designations
Select a responsible estate administrator
Draft a will
Regularly review your documents
Visit an estate attorney and/or financial planner
Simplify your finances
Complete other important documents
- Power of attorney
- Healthcare proxy
- Living will/Trust
Take advantage of college funding accounts for your grandchildren

Estate planning is never easy and often overwhelming. However, it’s best not to put this off. Set time aside to tackle this so you will have the peace of mind knowing you are prepared.

Budgeting for Childcare

May 24, 2024

Childcare is not cheap. Right behind a mortgage, student loans are often said to be the largest source of consumer debt. However, the average annual cost of full-time childcare is higher than the average cost of in-state college tuition. Whether you aspire to have children in the future or have already started a family, factoring childcare into your budget can help you avoid piling up debt. Here are some steps that can help:

Educate Yourself on Care Costs

Whether you’re looking into a day care center, a nanny, or you’re even considering being a stay-at-home parent, you should have sense of how much childcare will cost you every month. Do some research and reach out to any care options that are of interest to you. Make sure that you know exactly what the price will be, so that you can factor in the expense when you start putting together your budget. If your yearly salary is at all comparable to the cost of your child’s care, you might even consider leaving work to stay at home. If the cost of a nanny exceeds your budget, explore nanny-sharing. You can split the costs of care with another family and know that your little one will have a friend to socialize with. And possible, accept help from friends and family if they offer. Not only will you be saving money, but you’ll know your child is in good hands.

Track Your Current Spending

Start tracking where all your money is going now – before kids. You can either keep track using good old’ pen and paper or use a free app. Tracking your spending and comparing it to your income can give you an idea of how much you’ll be able to spend on childcare. If you discover that you won’t be able to spend much, it might be time to start looking into a higher-paying job or cutting some spending, which is a perfect segue to the next step.

Find Places to Cut Spending

The great part about tracking your spending is that you have a clear understanding of where your money is going. Look at all of your discretionary spending to see where you can start making cuts. It might be time to finally cut your cable, brew at home rather than stopping for coffee every day, and carpool to save on gas. You don’t want to be borrowing money from your emergency fund or contributing less to your 401(k).

Monitor Changes Over Time

Stay open to the idea that the costs associated with having children will change over time. While your salary may increase, so might the cost at the day care center. You might have another child, doubling the cost of the care. Childcare costs vary by age, with infants being the most expensive. Your child will someday grow old enough that paying for childcare is no longer necessary. Instead of childcare, you might have to fund their activities and interests. Don’t get caught sticking to the same outdated budget. Make sure that you’re sitting down and evaluating your budget every year to stay on track.

Happy parenting!

Watch out for Charity Fraud

March 15, 2024

According to the Giving USA Foundation’s annual report on U.S. philanthropy, Americans contributed nearly $485 billion to charity in 2021. Unfortunately, this willingness to donate money opens a door for scammers, who capitalize on donor’s goodwill to steal money. Charity fraud scammers succeed by mimicking the real thing.

This fraud is an example of Relationship and Trust Fraud under the Fed’s FraudClassifer model.

HOW TO IDENTIFY THREAT: Scammers solicit “donations” by contacting victims using the same channels as legitimate charities, such as telemarketing, direct mail, email, door-to-door solicitations, social media, crowdfunding platforms, and cold calls. Scammers may also use natural disasters or other emergencies to commit fraud. For instance, scammers may commit insurance fraud against natural disaster victims, re-victimizing people whose homes or businesses were damaged by the disaster.

HOW TO PROTECT AGAINST THIS THREAT: Real charities will accept donations using any method available to the donor, such as ACH debit, check, or credit/debit card. Scammers will request payments immediately using payment methods that are difficult to trace and provide the scammer guaranteed funds such as cash, gift card, virtual currency, Instant Payment, or wire transfer. Donors should verify the charity’s names and web addresses before donating. Consumers should also keep records of their donations and view their bank accounts regularly to ensure they weren’t charged the incorrect amount or unknowingly signed up for a reoccurring donation. Consumers who find incorrect or unauthorized entries on their accounts can dispute entries with their financial institution.

The Internal Revenue Service maintains an online database where consumers can check whether an organization is a registered charity and whether their donation is tax-deductible. Click here.

A victim of charity fraud can report it to the FTC and the government agency in their state that regulates charities. The consumer can further report a charity fraud to the FBI at 1-800-CALL-FBI or visit www.fbi.gov for more information.

Coaching kids to stretch a buck on spending

February 15, 2024

By getting your kids more involved with understanding money, many of us could not only reduce expenses but also help our children learn a life lesson. Here are some ways you can involve your kids.

Coach your kids on the concept of budgeting. You might take a couple of dollar bills out of your wallet and explain that spending too much now means there may not be enough later for something else they want (say, a winter trip or summer camp)—a concept a schoolchild of any age can grasp.
Set a budget that encourages them to plan. For example, some parents pay for all academic supplies, then provide each child $100 for other back-to-school needs. The kids are free to stretch the $100 using money they’ve earned or saved. If they’re alarmed about this budget, brainstorm with them about ways they can earn more. (See #5.)
Help them inventory what they already have. Can they reuse backpacks or sports equipment? If there’s peer pressure to have something “new,” how about personalizing those possessions with stickers or stencils?
Ask them to make a list of what they really need. Have their needs really changed? If new clothing is essential, can they mix in clothes from their closet later on?
Hold a yard sale of outgrown or unneeded stuff to raise money. While you’ll probably want to oversee the sale, encourage your kids to get involved in the pricing, set-up, and selling. They’ll value the profits more, having worked for them.
Avoid paying full retail. Start with discount stores and other nearby consignment shops. Teens who like to dress distinctively may find bargains at resale shops, outlet stores, and vintage clothing emporia. If you do need to buy “new,” peruse sale flyers and search for online coupons first. Above all, stick to your shopping list.
Consider sharing with the less fortunate. Many communities have an organization that provides items to truly needy kids. If you come upon a great deal, buy a little extra and donate it. You won’t save money, but you’ll gain rewards of another kind. Your children will, too.