Budgets? “We Don’t Need No Stinkin’ Budget”

Budgets rarely work. It takes tremendous effort to accurately record all transactions so that you have a valid budget. Then, frequently, after all this effort, you rarely come back to the budget. That means that the work had no payoff. Furthermore, people often claim that they had nonrecurring expenses. Doing so, they artificially understate their expenses, not realizing each year has some nonrecurring event.

A much easier way to test savings is to take a twelve-month period, look at cash and credit card balances at the beginning and end, check for any inflows from gifts or other non-salary items, and then measure the change. Did the cash accounts go up or did the credit cards go up? That is your savings/dis-savings for that year.

Rather than doing a budget to adjust behavior, force a change. You can do that by removing money from your discretionary spending by contributing the maximum to a 401(k) plan, by an auto debit that put funds into an investment account, and other auto payments. If your credit card balances go up, then you have to make a decision to alter behavior, such as cutting entertainment, or decide to delay goals (retire later, no new car now, etc.)

How does cash flow relate to debts? Managing your debt means getting the lowest after-tax interest rate so that you pay as much principle with each payment to pay off the loan as quickly as possible. You can deduct the interest paid on a mortgage and an equity line of credit debt. You can deduct up to $2,500 of student loan debt. But you cannot deduct the interest on most other debt, unless used for your business (watch for a post on side hussles).

Web-Based Financial Planning Tools for College Students and others

In advising a senior going to study abroad, I learned that he did not know how to obtain his own credit card, how to set up banking before and during his trip and how to manage the entire process. This was a surprise, as some many web sites seem loaded with information.

However, the bank sites tell you some but not all of what you need to do. Similarly, college sites may mention ATMs without connecting to Handbooks may suggest Parents may have no clear understanding of

No single place gives you a complete road map, let alone telling you how to connect all the resources to get your answer, so you have to turn the web into your own tools.

The first step is contacting the overseas college for local banks, currency exchanges and connecting to close by ATMs and banks. The next step is getting your own credit card or a additional cars on your parent’s account. Then you get to finding a US bank into which your parents can deposit or from which they can wire so you have funds in you bank at college.

The key is to link all the information that is on the web to create a plan for your study abroad, using the web sites to answer and obtain all you need

Cash Management and Financial Planning – use your credit card for more than just purchasing

(This is a summary of a recent post by Kiplinger’s)

You may have selected a card for points or for cash back. However, there are many other benefits to keep in mind, from on-line purchase protection to vacation and travel insurance.

Prices
: many gold and platinum cards, and now the Citi premium card, will give you up $250 back if you find an item you purchased for a lower price within 60 days.
Warranties: several cards extend the manufacturer warranty for up to a year, ending the need to pay for an extended warranty that a sales clerk tries to get you to buy at check out or a company e-mails urging you to purchase after you buy on line. AMEX, Visa Signature, gold, and platinum MasterCards do this when used for purchases. Some add a 90-day protection for loss or breakage of a laptop or digital camera. Citi Premier and some replace the item.

Theft – Coverage on the road: If your laptop is stolen from your hotel room, MasterCard will reimburse you if you used a gold or platinum card to pay for the room. Likewise, if your luggage does not arrive when you do, MasterCard will reimburse you for the cost of replacing essential items. In addition, MasterCard will cover the cost to repair or replace damaged luggage. Use your Visa Signature card to buy your airline ticket and you can be reimbursed up to $3,000 for lost or stolen luggage.

Avoid checked-baggage fees. You can redeem points for an airline ticket with your U.S. Bank FlexPerks Travel Rewards Visa Signature card and receive a $25 credit toward the checked-bag fee. Gold Delta SkyMiles cards from American Express cover the cost of checked bags (up to $50 per person round-trip) for up to nine people on the same reservation. American Express’s platinum card offers a $200 annual credit for flight-change and baggage fees.

Free admissions: Bank of America and Merrill Lynch cardholders receive free admission to 150 museums in 85 cities on the first weekend of the month. Participating institutions include New York’s Metropolitan Museum of Art, Chicago’s Art Institute, Nashville’s Country Music Hall of Fame and the National Cowboy & Western Heritage Museum, in Oklahoma City.

Concierge services. The 24-hour service (available to Visa Signature and MasterCard World Elite cardholders) can help with restaurant reservations, party planning, travel arrangements and getting tickets to sold-out events. Visa cardholders can see what is available by visiting Visa’s Web site or by becoming a fan of Visa on Facebook.

Getting back home: Chase customers can call Global Lifeline (the number is on the back of their card) and get help with hotel and airline reservations and medical assistance. For example, Chase helped a cardholder stranded in the Dominican Republic get a flight back to New England this past winter after a massive snowstorm forced flight cancellations.

We added checking these benefits to the Finance Health Day page .

Let me know if you have questions or comments.