Stop Burning Cash!

In three real-life situations, experts show how to create a workable budget so you can take control of your money and meet your short- and long-term goals.

Photo by Greg Platcha

Kasheen and Regina DeMoss financial goals mimic those of most Americans. They want to pay their monthly obligations and still have enough left over to cover vacations, new cars, college educations, and retirement. Unfortunately, the pair isn’t making ends meet on their monthly income of $7,200. Kasheen works in transport operations and Regina is a customer support manager.

“I think we’re doing OK, but according to financial guru Suze Orman, we’re doing horribly for our ages,” says Regina, who admits that even when she budgets for simple needs like groceries, she regularly spends over her target amount. The pair enjoys two vacations each year, and shops for clothing and other accessories once a month.

The DeMosses have no savings, but Regina has $8,000 in her Roth IRA. They spend about $1,500 per month on housing, $700 on transportation (one car payment plus insurance and gas for both autos), and $1,000 on monthly credit card bills. Other recurring monthly expenses come to about $1,000, including food; and the family spends about $240 a month on grooming (hair and nails).

“Our youngest son will be 16 next year and will need a vehicle, and my car has more than 100,000 miles on it,” says Regina. “He’ll be attending college in three years, and we don’t have any money saved for that.” The couple’s 20-year-old son is working.

Sheila Chesney, president of Chesney & Co., in Sheldon, South Carolina, says the DeMosses should kick off their budgeting strategy by focusing on one financial goal at a time, and then figure out how to achieve it.  “It’s almost impossible to save for retirement and college and new cars at the same time,” Chesney says. “That’s how people get into trouble.” Right now, for example, she says the couple should be focused on saving for retirement by starting a retirement plan for Kasheen, and contributing regularly to Regina’s existing plan.

Kasheen & Regina DeMoss
Age: 43 (Kasheen) and 41 (Regina)
Location: Raleigh, NC
Family status: Married with four sons, two of whom live at home (ages 15 and 20)
Primary budgetary goals: “We want to save for new cars [for Regina and the couple’s youngest son], plan for our son’s college, be ready for retirement, and do a better job of investing in a 401(k).”

Ideal Budget for Kasheen and Regina:
Based on their current income, here’s what Kasheen and Regina DeMoss should ideally be spending, maximum, on each expense:
After-tax monthly income: $7,200
Housing costs: $1,500
Debt/credit card payments: $1,440
Other expenses: $1,440
Savings: $1,020
Potential Monthly surplus: $1,800
Key suggestions: Carefully assess all expenses; tell son to earn cash for his car and college expenses; cut back on vacation spending; put bulk of monthly surplus into retirement savings.

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