If you could pick one word . . .

What does this picture represent?

Yes it is a tag cloud of sorts. It is the compilation of the answers to a survey question.

So, was the survey to:

A) How would you describe the ongoing budget negotiations and threat of a Government Shutdown?

or

B) How would you describe the ongoing NFL labor dispute and threat of a 2011 Lockout?

I find the two remarkably similar and disgusting. The only difference is that politicians eventually cave to the fear of losing their job(s) in the next election.

NFL owners have no such fear. Or accountability.

BTW, the tag cloud was the answer to the federal budget and impending government shutdown.

But I think it is equally applicable to both.

Hopefully both will get worked out in the near future.

So, Which do you think will get resolved first?

Federal Budget and Debt negotiations?

or

NFL labor negotiations?

Can your budget pass this test?

The MSN 50-30-20 budget test.

First,, before you begin or do anything like this, you will need to HAVE a budgetto take this test.

Once you have a budget, you will need to track your expenses.  You can do this manually via a spreadsheet or you could go to any number of free budget sites such as Mint.com.

Once you know where your money is going, you will have a good idea of where improvement(s) can be made.

What this MSN article does is provide a representative model to compare your budget with.  Now, this model is by no means a hard and fast rule, but it does provide a decent BASIC comparison.

First they set your monthly income level for a baseline.

Then you will be asked about your monthly costs for needs and wants and savings.  (note: Monthly needs + wants + savings should = monthly income)  A very basic but often overlooked fact.

Needs are the stuff you have to spend money on and or have a monthly bill to pay; like a mortgage or rent, utilities, or minimum monthly payments.

Then there are the wants; the stuff you feel you may need and are entitled too, but in reality can either do without or scale back and be just as satisfied.  Granted ,some of these wants could be considered needs;  such as clothing allowance, but mostly it is stuff like vacations, dining out, entertainment, gifts, and misc spending.

You will then be asked about savings amounts such as retirement funds, investments, savings accounts, emergency funds and any extra payments to put towards loans and such.

After these three basic screens are collected; two simple pie charts are displayed.  Yours and the 50-30-20 model.

So, how did the Fumbled Returns Budget compare?

Not so bad, I think.

You will notice that our “Needs” is considerably more than the model and I have a very simple explanation for this.

We have seven, count em, 7 people in our family.  Me, My Beautiful Wife and 5 tax deductions, Plus two dogs and a foster Greyhound.

This is considerably more than the 2005-2009 Census Bureau estimates of 3.19 persons per family and the 2009 National Pet Owners Survey of 1.7 dogs per household.

So, how does your budget compare?

An Idea …

Vancouver Trucking in Snow to 2010 Winter Olympics

First lets look at the numbers and do some math…

Virginia Budget Deficit ~ $133 Million

Maryland Budget Deficit ~ $2 Billion

Pennsylvania Budget Deficit ~ $3 Billion

Virgina = 1,170,892,800,000 sq feet

Maryland = 334,540,800,000 sq feet

Pennsylvania = 1,282,406,400,000 sq feet

Virginia, Maryland and Pennsylvania currently have between 2 and 3 feet of snow on the ground.

Leaving more than half for the kids to play with…

For a mere penny a foot, we could sell the half our snow to Vancouver and TOTALLY wipe out the budget deficits!

Virginia = $11 Billion profit

Maryland = $3 Billion Profit

Pennsylvania = $12 Billion Profit

Virginia and PA could even loan the proceeds to the federal government to help with their budget deficit too!

With interest of course…

Budget Buster

Snow So, I was wondering about all the “costs” of this epic winter and associated snows.

The Federal Government has been shut down for 3 consecutive days due to the weather. This is the first time this has happened in over 15 years!

One estimate puts the “cost” of the shutting down the federal government for a day at roughly $100 million in lost productivity and opportunity. Meaning that so far this winter has cost the tax payers nearly $400 million.

This winter is definitely one for the record books. By the time it is all over, Punxsutawney Phil say 6 more weeks, this will be the snowiest winter in 100 years.

Businesses are also impacted by the snow. Often businesses are either closed or not properly staffed due to employees not able to get to work. This results in lost revenue and added costs of paying employees who do not report to work.

There are also other costs associated with all this snow.

Maryland has (as of last week before the big storm finished and before today’s third big snow) already spent $50 million of the $60 million budgeted to keep the snow clear. In D.C., officials said they were over their $6.2 million snow budget even before the storm started. And Pennsylvania officials said they had already spent half of their $245 million winter operations budget before the storm hit.

This has prompted some to call for an increase in taxes to help insure that we all can get to work in the snow. A kind of “snow insurance” tax.

This is stupid.

If we had this kind of winter all the time, then the budgets to clear the snow would be higher and therefore the taxes would be too.

The budgets are set based on historical trends and norms. They balance risk vs reward all the time. The risk of this happening, in the DC area, every year is negligible.

There are a ton of other factors that influence lost work, productivity and business revenue.

Yes, there are plenty of jobs that require people to be someplace else in order to perform their work. But in today’s society, especially with more and more people and businesses relying on the Internet there is opportunity to look at other resources to enable folks to work.

If anything, this winter event, should be a great example for the need to have better telecommute policies and programs.

Lets look at some of the risk vs reward and potential cost savings for telecommuting.

I pulled the following examples from Innovisions Canada, well, because I was still thinking snow and work and thought where is there usually lots of snow, people, and the need to work. I naturally thought of the great white north, Canada.

Recruitment & Retention Telework is becoming a make-or-break issue in employee career decisions. If you have recruitment or retention problems, consider EKOS Research findings: 33% of Canadians would choose telework over a salary raise: 43% would quit for another job that allows telework.

Morale Telework is a morale builder. Resisting it, especially when your competitors offer it to their staff, damages morale.

Even my company, a major IT corporation, could benefit and improve from the first two alone. Non essential personnel and sites are closed for work but you have to either make up the lost hours or take PTO.

Real estate & office costs Your organization could save 1 office for every 3 teleworkers (that’s about $2,000 per teleworker per year, or $200,000 per 100 teleworkers).
With telework, AT&T saved $3,000 per office for approximately $550 million by eliminating or consolidating office space people no longer need.
About 25% of IBM’s 320,000 workers worldwide telecommute from home offices, saving $700 million in real estate costs.

Productivity Dozens of reputable studies have proven that teleworking 1 to 3 days per week easily increases overall employee productivity by 10 to 20% — a great way to trim overtime and related costs. Doing the math, five to 10 teleworkers equates to one “free” extra worker. This negates the myth that teleworkers will goof off because they are “out of sight.”

American Express telecommuters handled 26% more calls and produced 43% more business than their office-based counterparts.
Compaq Computer Corporation documented productivity increases ranging from 15 to 45%.
Surveys and pilots conducted by IBM Canada (where about 20% of its workforce teleworks) indicate that employees can be as much as 50 per cent more productive when they work in telework environments.

Stress & work/life balance Work / home life conflict is the top Canadian job disatisfier. With telework’s fewer interruptions and improved productivity help employees catch up on their work; and reduce their stress, burnout risk, going-to-work costs and commuting time. Remember that the total yearly commute of average Canadian workers equates to six to eight full workweeks.

So, perhaps the real budget buster is not necessarily the snow storms and closure of the government and business, but rather the lack of adequate alternative resources for enabling people and businesses to work.

Another good resource site for telecommuting is Telecommuting360.

The Economy is great !

You can find deals everywhere from Walmart (WMT), to Verizon (VZ) and AT&T (T), to fast food chains (Mcdonalds (MCD) and Burger King (BKC) $1 value items), to online brokerage firms (Both Schwab (SCHW) and Fidelity undercut the fee schedule of $7.99-$12.99 for most E*Trade (ETFC) transactions and a flat $9.99 for all Ameritrade (AMTD) trades), to; yes, even credit card companies.

This is a perfect example of deflation which is affecting nearly all parts of the economy.

All of the “excesses” of the previous economy, which was behind both the boom and the bust, have now created a climate of deflation.

Of course this is not good for businesses, as they now have to not only struggle with less consumer spending but now they have to deal with less revenue streams, and reduction in profit margins.

Yes, there is always two sides to a coin, and always a sword with two edges. The result of this economy unfortunately also translates into added pressure on people with lower salaries, unemployment, and defaults in credit and loans.

There is no utopia. There will always be a certain amount of insecurity, risk and “bad side” to everything in life. But there will always be the “good side” as well.

This reminds me of a quote I heard, “There is no security, only opportunity”.

Today’s economy, though far from perfect, has created opportunity.

Here is how I have taken advantage of some of this opportunity.

Credit Cards:

One of my resolutions this year is to reduce, hopefully eliminate, non housing debt.
One step I have towards doing this is to open a credit card account with a 0% interest and fee promotion. This last for up to 12 months depending on ones credit history and score.

The good side – no interest on balances for 12 months. This means my monthly payments go entirely to paying down the principle balance.

Of course as I pay down that amount, I apply (no matter how small an amount) the savings next month to my payment.

Coupons and Promotions:

This first month alone, we have been able to take advantage of department and grocery store promotions and coupons to save on everyday purchases. This enables me to apply these savings to paying down my debt even more.

So, how have all you readers, bloggers and Internet surfers out there found ways to save and take advantage of opportunity?

Bad Karma – Revisited

So last year I did this post about things just “going wrong”.

Well, just when I resolve to get my debt taken care of, improved my bottom line, and get my finances in better order….

This month the following has happened….

What turned into get one or two new tires for my car turned into needing to get all four replaced, to an alignment repair and needing new brakes…

Then last Friday our refrigerator decide 63 degrees was just the right temperature to store food. NOT! So, forgoing repairs that would have approached a new refrigerator, we opted to get a new one. After hours of shopping online we narrowed our choices down to two models and then proceeded to shop locally for them at local stores. Well, needless to say, we found what we were looking for but we have to WAIT for delivery which is currently scheduled for next THURSDAY!. Arrrgh.

So now we are living on frozen food for a week not too mention that we will have to replace everything that went bad in the old one. DOUBLE Arrrgh!

So just when I was planning to reduce debt, I have added to it.

Perhaps I should have gone to a fortune teller before making my new years resolutions.

Speaking of which, I was looking online for a type of widget that would actually track my progress of reducing credit card debt and report it in percentage format much like my covestor widgets on the right sideline do.

Needless to say, I could not find one I liked. But I did find this…

Palm Reading Widget

Something tells me that if all palm readers looked like this, business would be pretty good.

So, starting next weekend, until I find a credit card widget I like, I will post my progress, for better or worse, on the right via a manual chart. And you will just have to take my word for it.

Oh yeah, and the stock market went really south this past week too.

But the month is not over yet. So, who knows what will happen between now and then.

Keeping Score

Perhaps some of you saw this article about a nurse who took on the IRS and won.

She took on the IRS regarding her claims that her MBA costs were deductible. She won!

I like the fact that she was able to take on the IRS by herself and win!

She did it by checking the facts, reading the fine print and being anal retentive and sticking to her guns and goals!

Education loans and expenses are one of the two types of debt that I can accept as being OK to keep.
The other is housing.

Both can be tax deductible.
Both are also considered, in my mind, investments and can lead to more opportunity and potential earnings.

When it comes to debt it is important that you keep a few things in mind.

First, A Budget!

You can’t do anything if you don’t have one.

Second, Just as with a budget, set goals for either staying out of credit card debt or goals to get out of debt. And stick to them!

Third, Keep Score. Track your credit report and score.

A credit score is a basis for determining or rating or your risk for assuming debt based on your credit history.

The score is based on certain factors, including payment history, the amounts you owe and the types of credit you’ve obtained.

Personal information like income, occupation, age and marital status are not considered.

Everyone is entitled to one free credit report per year. This report shows everything the credit bureaus use to come up with your score.

NOTE: The only official site to go through all three major credit bureaus is
AnnualCreditreport.com

A credit report will also give you another means of protecting yourself against fraud and suspicious use of your credit and finances.

Check out my post about the Identity Theft Game

If you do an Internet search for free credit report or score, you will get way too many scams listed in your search results.

Having lots of available credit is good. Good for emergencies, purchasing power, obtaining loans and lower rates on said loans, and good for your credit score.

This is where some people first get confused about debt and credit cards.

Debt is bad.

Credit cards are good.

They can:
– Earn you rewards which can be used for other purchases, plane tickets and even vacations.
– Allow you to pay bills on time, even automatically. (this is important)
– Protect against identity theft, and fraudulent activity. (important too)
– Help resolve disputes with vendors and merchants.
– Purchase protection.
– Interest free loans. (if you pay bills in full and on time each month)
– And last but certainly not least – Improve your credit score!

Of course, it is also recommended that you pay off any credit card debt each month, or at least as soon as possible.

Here’s why.

Let’s say I give you a penny today, and promise to double the amount every day for a full month. How much money would I be giving you on the 30th day?
The answer: over $5 million. Check it out:

It all adds up

Lets call this my compounded interest game!

Each day, the “interest” I paid you the previous day earns more interest. At the beginning, the amounts are nominal, but by the end we’re talking big bucks.
Of course, no one’s going to double your money every day. Not even credit cards. But this concept explains how people who save relatively small amounts over the years can build rather substantial nest eggs. After a few decades, their actual contributions represent only a small part of their burgeoning wealth — it’s mostly their returns that are earning returns.

It also illustrates how debts can quickly balloon out of control. If you’re paying interest, rather than incurring it, and you’re not diligent about paying off the finance charges in full every month, the unpaid amount will incur additional interest charges, increasing the total amount that you owe.

This is why so many families who incur credit card debt eventually find themselves in trouble as the amounts they owe explode past their ability to pay.

One of my new years resolutions is to pay off none housing debt. I have been “debt free” before and it is my goal to pay off my credit card balance.

There are a couple ways to go about this.
A) If you have the money and regular automatic savings to recover it quickly if you deplete it. Use the savings.
B) If you have the automatic savings and feel comfortable diverting that to pay off the debt, use the automatic savings each month.
C) After establishing your budget, find where you can make savings and put those savings towards paying off the debt. Chances are, this will have a two fold effect. First cut back on the expenses that are most likely adding to your balances each month and secondly apply these savings towards paying down your debt.
D) Move your credit card debt to an interest free card. This is more tricky now than it used to be.
– There are no more transfer free card programs out there. Everyone is charging 3% – 5% or more as a transfer fee.
– I would only recommend this if you can budget to pay it off during the 0% introductory period.
– Like everything else, do your research. There are a lot of different cards and programs out there with even more “fine print”.

E) Tip: As you pay off the debt, take the savings from you minimum amount (even if it is just pennies) and add it to your next payment. Remember the chart above!

F) And if all else fails and you are unable to come up with a reasonable plan or goal to be debt free, then ask for help. It’s OK. And in the long run you will benefit from it and be better off. A good place to start is here at the National Foundation for Credit Card Counseling.

Of course these are only suggestions. I believe that everyone needs to tailor their budgets, goals, and plans to their own individual life styles.

I would be happy for anybody to make other suggestions if they have them. After all, as with the nurse who took on the IRS, information and education is a valuable weapon.

As Always

Be good. Do well. Have fun.

1 + 1 = 2

That simple equation, one we all learn as kids, is the basic formula anyone needs to remember when talking budgets.

I was originally going to post about one of my new years resolutions, Reducing Debt, but then I realized that before anybody starts talking about reducing debt, one needs to address his or her own budget.

And just like resolutions, budgets should be specific, tailored to your life style, and have goals.

If you make a resolution, or approach the idea of having a budget, by saying “I’m going to make a budget” and stick to it; though noble, I believe is opening the door for failure.

Here’s why.

Lets say you plan on making a budget to go on that Caribbean Vacation you love to go one each year, and or to save enough to one day buy a house.

Hopefully, if these are some of your top priorities, every time you pull out that plastic or cash, you will think, “do I really need this” or “will this help me reach my goal?”

Which gets me to the basic components of the formula.

Needs and Wants:

Needs are what you have to spend. Fixed costs, bills and expenses that you need or know you will have to pay every month.

Some people put these into basic categories of Food, Shelter and Clothing. However, there are usually more than just these three. Such as; Utilities, Loans, Taxes, Transportation, and don’t forget those once or twice a year bills such as insurance payments.

Wants are those things that add enrichment, entertainment, and pleasure to our lives. Wants is where your goals really come into play. Your top want, top goal, should be what you really want to obtain, what you are really saving and spending your money for. Not your bills. Not your budget.

A budget is nothing more than a tool, a means of balancing and prioritizing all your needs and wants in such a way so that 1 + 1 really does = 2.

So, where do some of us get into trouble?

Well, one area is separating needs and wants. Example: Housing. A basic need. But do you pay for a luxury condo, or split rent with others in on a 2 or three bedroom apartment, or even (hopefully temporarily) live with parents or relatives. Example2: Transportation. Walking vs. Biking vs. Public Transportation vs. Porsche. I think you get the idea.

Budgets are not easy. They require us to make choices. They require us to look at ourselves, our habits and life styles. They require constant attention and yes, sometimes become quite a balancing act. But they are necessary. It is these reasons that people often view budgets as limiting; and therefore not necessarily a good thing.

But they are good, and in the end, not limiting but rather enabling and liberating!
When making a budget, and sticking to it, adjusting it as needed, it is important to view it as a means to an end. And, just as we are all different, so too are budgets. Budgets should be tailored to what is important to you and what you value and how you live.

So, what is my budget?

Here are the top level categories. I have each with sub categories but here are the top.

Housing:
Groceries:
Transportation:
Bills & Utilities:
Shopping:
Education:
Time Outs:
Misc Taxes:
Savings:
Debt:

Unfortunately, that last one has crept back into my budget and the topic of one of my New Years resolutions and future post(s).

Until next time, and with all things…

Be good, do well, have fun.