Frugal Intuition

Okay, sorry for the delay in posting.  I’ve been tied up with stuff for the last few days. If you’re just now joining us, take a moment to go check out Part 1 , Part 2 , Part 3, and Part 4 of the series.

Here’s the part where I write out a sample budget for Bob and Sue Spendthrift

Here’s our sample list of necessary expenditures per month:

• mortgage ($700)
• electric/water ($100)
• student loan ($118)
• car note ($281)
• phone/internet ($160)
• satellite ($45)

That’s a total of $1404 a month in recurring expenses.  Of course with the utilities, that’s an average of what things cost, so that value could go up or down, depending on time of the year. Now we begin adding in the things that don’t have a bill that comes in the mail.  Remember, we’re using our Part 1 homework to figure out how much we spent on this in the last month (again, these are sample figures)

• Gas for car ($200 for household)
• Groceries/household supplies ($500)
• Entertainment ($100)
• Dining out ($120)

That’s another $920 per month.
And then, of course the not monthly, but must be remembered expenses:

• Car insurance ($1200 every six months, approximately $200 a month) [there is a significant savings to paying all at once instead of monthly]
• Car tag ($600 for both vehicles)
• Car maintenance (oil changes, tire rotations, etc.) (approx. $400 a year)
• Christmas and other gifts throughout the year (approx. $600)

That’s another $4000 in annual expenses.  Which works out to about $333 a month, but remember that a lot of these don’t have monthly payment options, so you have to save for them.

And now for the credit cards.  Let’s say our fictional couple have 4 credit cards.  Two for Bob and two for Sue.  (I estimated the minimum payments required at 4% of the existing balance–some cards presently require less than that at closer to 2%)

• Card 1: Balance $2,743 @ 21% APR, current minimum payment $109
• Card 2: Balance $566 @ 30% APR, current minimum payment $23
• Card 3: Balance $1,396 @ 28% APR, current minimum payment, $56
• Card 4: Balance $4,587 @ 25% APR, current minimum payment, $184

The Spendthrifts have a whopping $ 9,282 in unsecured debt.  We’re not even thinking about the $83k left to pay on their house or the $ 15,732 they still owe on Sue’s car.  These cards currently require $372 in minimum payments, but with those huge interest rates, they’re not going to get them paid off any time soon.

So where does this leave the Spendthrifts?  Looking at monthly totals alone, not counting saving for a contingency fund, they have a total of $3029 a month.

The bad news?  Bob and Sue only make $3200 a month, combined.  That means that with their current lifestyle, they only have $171 a month left to cover unexpected expenses, savings, and paying off their debts.

What are Bob and Sue to do?  Well, you’ll have to tune back in to find out. 

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