BudgetLifeStyle™ Systems
Copyright © 2001 Version 1.0

Introduction:

Before we go any further, I would like to tell you about myself. I feel it's important that you know who I am and what I am not.

I'm not an attorney giving legal advice. I'm not a financial advisor, or investment counselor. Nor, am I an accountant, so you won't get a bunch of accounting jargon from me.

What I am, is an everyday "Joe" or "Jane" ( to be politically correct ) just like you.
I have owned and operated a small business for over twenty five years and let's just say I'm over fifty. My wife works and we have raised two kids, and own a modest home in New Jersey. We have been to Disney World numerous times just like the ad says, "What are you going to do now that you've won? I'm going to Disney World!". When we went to Disney we stayed on premises. We stayed at the Polynesian, Contemporary, and the Grand Floridian which are convenient to the Monorail and generally more costly. All of our trips were for one to two weeks at a clip, do you think I like the place? We have purchased a new vehicle every four years on average and obviously have a computer, and an excellent credit rating. My wife and I have been married for over 33 years, we celebrate both Hanukkah, Christmas and should also celebrate what some people refer to as "Little Xmas" which is January 7th. Financially 8 days of Hanukkah along with Christmas would be tough enough, but both of our boys were born in December. I guess you get the picture, the holidays were never a financial picnic. We always made it through and the boys got what they wanted, most of the time. Notice I said most, not all. To some people that may not seem like much, to others just a dream.  Everyone has their own concept of happiness and success. You're probably thinking,"this guy owns his own business making $100,000 plus, If I made that much I could do it too". Having your own business isn't always a pot of gold and I don't want to embarrass myself, so let's just say we make considerably less net combined income. Early on when the kids were young it was even less. Impressed now? I am! When I look back I can't believe we were able to do the things we did.

The point of all this is, I've been able to do this to some extent because I budget. I started budgeting in my early twenties when I was single and had my first apartment. Every week when I paid a bill that was due, I never had any money left for FUN. I made enough money and could not understand the problem, until I sat down and calculated my finances. I was spending money all right, but on things I didn't expect, that's when I started budgeting. Now, don't get me wrong, I didn't stick to it 100% all the time. There are always things that get in the way of our plans, but I now knew where I was losing it. I could always use the "Peter to pay Paul" plan in my checkbook to cover unexpected expenses, and play catch up to repay "Peter" a little at a time out of allotted spending or savings. To this day I still budget.

Now that you've met me, if you prefer to hear from one of the above professional types, of which I am not, I'll understand. Just delete the files, it's been nice meeting you. If you feel I have something to offer, please continue.

Who Should Budget?

The simple answer is everyone who pays a bill and gets a paycheck. I have talked with many friends and acquaintances about budgeting and have received the following excuses.
"I don't need to budget.", with an attitude that only losers budget. Sometimes our perception is that budgeting is some sort of weakness. The weakness is theirs by not budgeting. Look at successful corporations, there is no weakness there.
"It's just to complicated." Either they truly don't understand budgeting or are to lazy to make the effort.
"I can't budget now, I have too many things to pay off  first." What I believe they are saying is, their finances are in such a mess they can't get control. They seem to think budgeting is putting all your bills in a neat little row and just pay them. They couldn't be further from the truth. When chaos hits that's the time you need budgeting the most.

Many of these people will say, "He's rich because he pinches every penny." Yet, they won't consider budgeting to help themselves pinch a dollar. You don't have to be working with your last dollar to consider budgeting. I also believe many of these people are afraid to face their financial reality.

Because of such excuses, I've come to the conclusion there is a need for a system and templates that will make budgeting easy to understand and use. To that end I've attempted to do that with BudgetLifeStyle. I believe when you read the following materials, and use the BLS Templates provided, you will want to budget and continue to do so as a life style.

What is BudgetLifeStyle?

First let me explain what BudgetLifeStyle is not. It is not a group of Corporate Accounting Style Categories, to which you list your expenses. I especially love the "Utilities" and "Household Expense" categories. If my gas,electric and phone bills are "Utilities", shouldn't they also be "Household Expenses"? I can't run my household without them. Where do I list my mobile phone, is it a utility, luxury, or household expense? What about my pager?

I do not include cute graphs or pie charts for  that "feel good" feeling, just because you checked your pie chart. Wonderful, you now know 50% or more of your expenses are for household bills. If you are giving your family members the monthly budget presentation, you might need the charts. You may even need Microsoft's Power Point. I think you get the point.

BudgetLifeStyle is a budgeting system and tutorial of my concept of budgeting, with easy to use BLS Templates. The Key to BudgetLifeStyle is the BLS Templates, they are everyday working spreadsheet templates. With the templates you enter all your information in one location, in front of you. When you open the template, the whole month is there, with all your activities and totals.

The BLS Templates will do the following:

1. Keep payment records for reference and clarity.
2. Track bills paid and amount.
3. Carry over to the next month any balance due if an under payment was made.
4. List all your expenses and payments due.
5. Show the total amount due each pay period with corresponding checkbook balance.
6. Show the budget difference between your total income and total expenses.
7. Show how much you've paid for any bill to date.
8. Show all deposits made in your checkbook.
9. Balance your checkbook.
10. Show if you're Over or Short in your checking account.
11. Print all the above information on one 81/2 by 11 sheet of paper for a hard copy.

That is what BudgetLifeStyle is and what it can do. To find out more, continue on.

My Concept of Budgeting:

Life Style.

When you create a budget you need to understand you also create a Life Style change. For example, if you haven't been saving money and now decide to do so, you effectively have changed  from a "spend free" life style to a "controlled spending" life style. Which means, if one week you have to choose between going out to dinner or saving, you'll save. This is a life style change, granted, not a major change, but non the less a change. This doesn't have to be a permanent life style, it's up to you, a little luck and a pay raise.
This is something you must be committed to do or your attempt at budgeting and control will fail.
To help maintain the discipline, you should set a goal or recognize the reason you need and want to budget.

Reason to Budget.

The primary reason for budgeting is to maintain and control " Cash Flow " ( I know I promised no accounting jargon.), but this one is to important to ignore. What "cash flow" means is having the funds available for any contingency when it's needed. When your cash flow is maintained you can pay your bills on time, have fun money, a good credit rating and peace of mind.

The secondary reason can be for short or long term goals. For example, vacation, new home, new vehicle, college etc.

Cash Flow Example.

Because I feel so strongly about the importance of "Cash Flow " this is a good place to elaborate on it's value. Whether you make 6 figures ( $ 100,000.00) plus or not, most people get into trouble because of cash flow. That is one of the many reasons they jump to their credit cards which only creates more cash flow problems.

Before going further, let me emphasize, being debt free is the ideal goal. If possible pay the credit card bill in full when it comes in and avoid using credit cards unless it's an emergency or part of your budget "cash flow " program ( I'll explain this statement as we go on. ).

Many people are concerned about the interest rate the credit card is costing them, and rightly so. They become so obsessed with the rate that it becomes the first bill they want to pay off if they get the money. I agree, depending upon your financial circumstances. Let's look into this statement using the scenario below.

For argument sake let's assume the following:
You make enough money to pay your bills, have money aside for your vacation and save $100.00 per month. The only cash you can put your hand on readily, is the $1500.00 you've managed to save for the past 15 months. Like most of us you play the Lottery and finally hit for $6000.00 ( It's about time.). If you're like me you've spent it on a hundred different things in your mind. Now, we could go out and have a real good time, but we are responsible people. You gain your composure and want to put the money to good use, but where?

The outstanding bills you have at present are a 6 year auto loan you took out for $20,000.00 at 8 percent  with a $5305.00 balance and a Visa card with a $5000.00 balance and interest rate of 14 percent. You have 16 months left to pay on the auto loan at $350.00 per month. The Visa  payment is $103.00 minimum based on approximately 72 months of minimum payments.

At first glance the higher cost loan is the Visa card bill, but should that be the bill to pay off? After all the car loan will be paid in 16 months the Visa bill will take 72 months. The key to your answer is "Cash Flow." Both payments together are $453.00 per month. If you pay off the Visa bill you only have 16 months left to pay off the car loan not 72 months as you would with the Visa loan. Even though the time period is shorter with the car loan, the payment is higher. We all know many things can happen even in 6 months, illness, layoffs etc.

In the above scenario I would pay off the vehicle loan, with the following reasoning:
1. Cash flow, you have reduced your monthly obligations by $350.00.
2. You now own the vehicle and have additional equity in it, which could come in handy.
3. If you didn't pay the car loan off, repairs are your responsibilities, which would be on top of the $350.00 per month. You now have $350.00 available per month to use for unexpected repairs.
4. You can double up on the Visa payment and send $203.00 every month instead of $103.00. This would in effect reduce the loan time to approximately 25 months, only 9 months more than the car loan would have been. This also reduces the total interest you would have paid on the Visa card based on reduced time and reduced principle of the loan. You still have $250.00 per month to put toward a longer vacation or save etc.
5. THE WORSE CASE SCENARIO:  Most of us have every intention of taking care of our obligations, but things happen. If things turn for the worse and potential bankruptcy looms over our shoulder, the following options may or may not be available.
A.  If you didn't pay off the car loan, the bank might repossess the vehicle leaving you with no form of transportation to go to work or to find a job if necessary.
B.  By owning the vehicle you have the option, to reduce expenses by dropping the collision insurance as it is no longer required by the bank. (Note: I don't recommend removing collision coverage as it covers your potential loss. Only in extreme circumstance or when value verses cost dictates would it be wise to drop the coverage.)
C.  You could sell the vehicle to cover some obligations and use one vehicle in the household, or buy a less costly one, especially if you are mechanically inclined.
D.  Because the credit card was not paid off the bank may be willing to negotiate a settlement by as much as 50 percent. I know a few people that said they did that themselves or through attorneys. Obviously your credit rating will suffer, but when you get on your feet you'll be able to repair that. Be aware, from what I know credit card companies can lean assets such as vehicles, homes, salaries etc. DISCLAIMER: I am not an attorney or an accountant and do not portray the above statements as a fact in law. These are scenarios reported to me by acquaintances that spoke with me about their personal experiences. I strongly recommend contacting the proper professional for your circumstances.

Credit Cards and Loans

Using Credit Cards:

I will explain my earlier statement in the next paragraphs. First, credit cards can be a two headed coin, they can be good or bad depending on your ability to discipline yourself.

WARNING: I recommend no credit cards be used if you are undisciplined. ( Be truthful with yourself, many of us have traits we are not proud of. Kidding yourself here can and will hurt you, financially.)

This is part of my personal budget and how I use my credit cards and loans to help with " Cash Flow ." This section is the credit cards, the loans I'll explain further on.

I use specific cards for specific purposes, not just any card I happen to have in my hand at the time. My Mastercard is my vacation card. Like everyone else, I'm not as disciplined as I'd like to be. Saving $5000.00 in 12 to 18 months for vacation means putting aside approximately $300 to $400 dollars a month into an additional savings account. Since this is not my primary savings account, it seems this source is least sensitive to occasional withdrawals. Every time I turned around we needed $50 dollars here or a $100 there, not necessarily for important stuff. Then I would wind up using the credit card also. To stop the lack of control, I decided to put nothing on my Mastercard that was not vacation related. Now when we need an extra $50 dollars, we look for a source we can rob from in the budget, sort of the "Rob Peter to Pay Paul" theory. We eventually pay it back a paycheck at a time, by putting a little extra back from spending money. We also make sure we really need to spend that $50 dollars.

Since I can afford to put aside $300 per month, it takes me 12 months to go on a $3600 dollar vacation and 18 months to go on a $5400 vacation. I put everything I can on the card, hotels, travel, gifts etc. When the Mastercard bill comes in it is usually $90 to $150 minimum per month. I send in $300 which effectively reduces the time of the loan and the interest cost. The card is paid off in either 12 months or 18 depending on the cost of the vacation. When it's paid I go on another vacation. This forces me to become more disciplined than I might be otherwise. After all I do want to go on another vacation. There is a price to pay for the lack of discipline, the interest you pay until the card is paid off. Remember my WARNING!

My Visa card is for gifts during the holiday season and household emergencies. The average is generally $1500 to $2000 per year. I send $150 per month although the minimum is much less. Most of the time if we can avoid using the card, we make every attempt to do so.

I have had my Gas card since 1966 and use it every month. The advantage of a gas card should be obvious. When I have a limited amount of cash in my pocket and wish to dine out, but also need gas, I don't have to choose gas or dinner. I setup my budget at $150 per month for gas and oil for both vehicles. ( Note: Obviously pay this card in full when the bill comes in. When a shortage occurs in your cash flow, you have the option to send in the minimum payment. Remember the consequences, interest charges and now another running bill.)

My budget is setup for the above expenses. Again, be aware that the above credit card uses can be dangerous if YOU lose control.

Using Loans:

The above credit cards can be paid off with personal loans from a bank, many times at a lower rate than the credit cards. Consider this route if you can get a personal loan from the bank, for the vacation bill as an example. Some people may not be able to get a personal loan for $5000 dollars from a bank. In that case a collateral loan may be the answer. Try to avoid collateral loans for intangible purchases, unless you are willing to give up or sell the collateral to pay off the loan if finances go bad.

Early on I learned that I would need a good reliable vehicle to survive and get around. Without reliable transportation you can't easily get to work or best of all recreation. The need for a new vehicle to me anyway, seemed obvious. Every 3 to 6 years I would purchase a new vehicle. Since saving $20,000 dollars for a new vehicle is even harder that $5000 for vacation it's painfully obvious a loan is necessary. Long ago I came to the conclusion I would have a car payment till the day I die, but I would rarely have a car that wouldn't start. I told you I wasn't a financial consultant, a reliable less costly used vehicle might have served me just as well, and saved me a lot of money over the years. A reliable vehicle would probably cost between $5,000 and $10,000 dollars. Because used car loans are generally of a shorter time span, the monthly payment might very well be the same as a new car loan. Plus, the cost of repairs that are usually not covered on a used car, would be an added expense as well as the payment. I might also need to put aside additional funds for a down payment when the car needs to be replaced, because of it's reduced value due to age and mechanical wear. Remember my concept, "cash flow" is the primary concern. With a new car I generally have enough trade-in value left to use for a down payment on a new purchase.

Example of my vehicle transaction and loan:

This is the deal as it was made on the purchase of a new 1997 Ford Expedition 4x4 UV.
I had a '91 Ford Explorer 4x4 that I purchased new. It was starting to show some rust and mechanical needs. It also had 108,000 miles on it and was 6 years old. I knew if I waited much longer, it wouldn't be worth much as a trade-in. The new Expedition was going for $33,410.00 dollars, no way could I afford that outright. Of course it took negotiating, but the dealer gave me $10,410.00 dollars for my Explorer as a trade-in. I effectively purchased a $33,410 dollar vehicle for $23,000 dollars, now that I could swing.

You may say I gave up $10,410 dollars. On paper you're right, but consider the following.
1. In that $10,410 dollars is a dealer discount of $2,000 to $4,000 dollars that anyone can get if they negotiate, regardless of trade-in or cash. So effectively the Explorer was really worth between $6,000 and $8,000 dollars.
2. If I could sell the Explorer for $10,410 dollars outright, what good would the money do me? I still need a vehicle. Do I buy someone else's headache?

Now for the rest of the deal, how do you pay for it?

Because I wanted and needed my payment to be around $300 dollars per month, (again "cash flow") a minimum 7 year loan was necessary. The standard car loan was 5 or 6 years at 9 to 11 percent.
I was able to get a Home Equity loan at 7 and 1/2 percent fixed. (Note: Not a revolving equity loan.) By using my home as collateral I now own the vehicle outright, and might be able to deduct the loan interest from my income tax. ( Note: see a tax professional)

WARNING: NEVER USE A HOME EQUITY LOAN OF ANY TYPE, UNLESS YOU ARE COMPLETELY AWARE OF THE CONSEQUENCES OF DEFAULT. YOUR HOME IS ON THE LINE.
You may be thinking, isn't that exactly what you did, you idiot? Not really, remember the Expedition is mine outright, a $33,410 dollar vehicle for $23,000. There is enough equity in the vehicle to pay off the loan, if I had to sell it.

NEVER: Use the revolving home equity type, unless it is the most logical course of action based on your cash flow program. These loans fluctuate because they are based on the prime rate on any given day. The minimum payment can go up just like a credit card, the interest rate is usually lower, because you're using your home as collateral. I would rather use the credit card based on the information I shared earlier, even though I may be able to deduct the interest from my income taxes. (Note: See a professional on this point.)

To maintain "cash flow" control, I recommend you use your BLS Template regularly. Try to make entries in the template every time you make a payment or deposit. This will keep your template and checkbook in sync, with less of a chance of errors. This may seem like extra work, but not necessarily. Because the BLS Templates balance your checkbook, you don't have to add and subtract every entry in your checkbook. Just enter the final balance from your template. Doing this keeps you in touch with your responsibilities and especially your money. The BLS Templates are designed to work within this concept.

I hope the above information has been of some help. All the above scenarios are in my personal budget and my budget is tuned to my beliefs and life style. Now is the time to develop your budget to your life style or change your life style to match your budget, whichever is best. Good Luck!

Go to the BLS Template Tutorial.