How to Manage Expenses

MARMORA – If you faced a $400 emergency expense, would you have the funds available to pay it? If not, you’re not alone.
According to the Federal Reserve Board, four in every 10 Americans don’t have the money to pay for a $400 emergency.
“Spending and Saving Tracker” research conducted by American Express in 2014 found nearly half (47%) had an unexpected expense in the previous year. Car repairs and medical bills topped the list of the most expensive emergencies then, and still do, so it makes sense to plan ahead. 
Not a Four-Letter Word
“Budget is not a four-letter word,” noted Russell Graves, director of Consumer Budget and Credit Counseling, (http://bit.ly/2MgbbEr) a non-profit consumer education and financial counseling agency doing business as the National Foundation for Debt Management.
Its purpose is to educate individuals and families, enabling them to reach their financial goals and solve their financial problems through financial literacy education, credit counseling and comprehensive housing counseling. They’ve served Cape May County residents for 22 years.
“People need to do a budget, and stick to it,” said Graves. “Even if they fail to follow it for a month or two, they need to keep at it, even if it’s nine out of 12 months of the year.” 
Area Hit Economically
The last eight years, in particular, have been economically tough for people living in Cape May and Atlantic counties, according to Graves.
“The area saw a massive housing crisis with foreclosures because many of the casinos closed and the region saw high unemployment,” he said. “People were living in houses they could no longer afford. That rippled through the economy.”
Another factor impacting the region is the effects of Hurricane Sandy, which continue to reverberate across the area, according to Graves. “Some people still haven’t fully recovered,” he said. “Some people still haven’t rebuilt their homes.”
In Cape May County, he said, 24 construction projects haven’t been completed because people ran out of money.
His organization administers the Sandy Recovery Housing Counseling Program, which provides free housing guidance to renters and homeowners who were impacted by the storm and lived in one of the nine counties the federal government determined were most affected by Sandy.
A third impact on the local economy is the seasonality of jobs in the area. “Two part-time jobs don’t pay for health insurance,” Graves said. “A lot of people were and are struggling.
“When people are laid off, they aren’t going out to dinner as often, so there aren’t tips for the wait staff. They aren’t buying things like they used to. When people are laid off or are struggling financially, it ripples throughout the local economy,” he continued. 
People of All Ages Seek Help
Graves said his organization sees people of all ages seeking financial and debt management counseling: newly out-of-school graduates paying back student loans, first-time home buyers, parents concerned about paying for their children’s college, those nearing retirement and those retired.
“Any life change requires a look at your budget,” he stressed.
Some clients come to his organization with credit issues, and Graves and his team work with them to improve their credit rating. “People with bad credit may pay double-digit interest rates, have to make a bigger down payment,” he pointed out. “The idea is to save money and have a good credit rating.” 
Know your Income
One of the first steps in establishing a budget requires knowing one’s income. “If you work for four months and collect unemployment during the rest, add it all together and divide it by 12 months in a year,” Graves said. “If you’re a teacher and get paid 10 months of the year, and work in sales over the summer, that’s your income. Your income doesn’t have to be steady, but you have to look at everything you earn for the year. You can’t spend more during the summer just because you may earn more.
“I know it’s easier said than done,” he admitted. 
What’s Your Priority?
Once all sources of income are identified and you have the monthly income figured out, one needs to identify priorities and fixed and secondary expenses.
“Your priority may be a new roof, food or a car,” Graves explained. “Your fixed expenses are food, car, and housing. Everything else is a secondary expense.”
Where one spends their dollar “says a lot about you,” according to Graves. “Are you spending $5 or $6 for a cup of coffee at Starbucks, or spending $4 at Dunkin’ Donuts, or going to Wawa where it’s $1? Or are you making it at home where it might cost 40 cents a cup? My favorite cup of coffee is at work where it’s free.
“Life is full of choices,” he added. “Same with water. Are you spending $6 a bottle, or getting it from your well at home? It’s all about your choices.”
Graves recalled a time when he saw a tar-papered shack, next to a Humvee. “That person knew what his priority was,” he said. “He was willing to sacrifice for his car.” 
‘Best’ Way to Save
The “best” way to save, according to Graves, is to have an amount withheld from each paycheck and deposited in a bank “across town with no debit card access. This makes it more difficult to access.
“If you are paid twice a month and save just $25 each paycheck, that’s $650 in a year for those bumps in the road we all face,” he pointed out. “There are your funds to pay for that emergency.” 
Know the Numbers
Health care costs can create havoc financially and Graves said it’s important for people to know what their deductible is, and to know what are the maximum out-of-pocket payments.
“Some plans have high numbers, so how are you going to pay that $5,000 deductible, for instance?” he said. “Health care expenses can ruin you.
“Disability short-term is only 60% of your income, so you could have some tough numbers to hit,” he pointed out. “A shrinking paycheck … it can be tough.” 
One Step at a Time
In Graves’ opinion, debit cards are “good” because “you need to have the cash to use it but credit cards? You are borrowing money from the bank every time you use it. Do you really want to use your credit card and borrow $1.25 from the bank to buy a slice of pizza?” he asked.
Graves said he and his staff typically work with clients one to six months on short-term goals and nine to 24 months, or longer, on long-term goals.
“How do you build a house? One step at a time,” he said. “You can accomplish anything one step at a time, one room at a time, a little by little.” We can help you get ready for that opportunity you want,” he added.
To contact Karen Knight, email kknight@cmcherald.com.