Leadership and Executive Development for women of all races, cultures and backgrounds
Issue link: https://diversitywoman.epubxp.com/i/343997
36 D I V E R S I T Y W O M A N Summer 2014 d i v e r s i t y w o m a n . c o m DW Life > About 25 years ago, Edrie Pfeiffer found herself feeling increasingly frustrated. When she and her husband were newlyweds, they never went on a date because "he didn't know if we had enough money to go out," she says. To solve this problem, the couple instituted a system of cash in envelopes. "We have a safe in our house, and inside the safe we have envelopes for entertainment money, clothing money, vacation money, etcetera," says Pfeiffer, owner of and attorney at Hampton Roads Legal Services in Virginia Beach, Virginia. "Whenever we got a raise, we would increase our savings in those envelopes. It has worked really well." The envelope method is a well-respect- ed mode of saving in many circles, pri- marily because it involves cash. "One way to control impulse buying is with actual cash," says Coleen Pantalone, professor at Northeastern University's D'Amore-McKim School of Business in Boston. "And by cash, I don't mean debit cards. If you have to wander off to an ATM to withdraw money, that wandering gives you time to think about what you really want." How do you account for impulse purchases? A. I spend money on things I think are fun when I want to. B. I work hard, so I feel like it is okay to go shopping every once in a while. I don't really track that spending, though. C. I save cash for fun purchases. When it's gone, it's gone. Answer: C Do you plan for one-off expenses? A. Yes. I think ahead to what might be coming and am almost always ready for it. B. I live paycheck to paycheck; there is no way I can do that. When something comes up, it goes on my credit card. C. I have a small emergency fund, but it seems to get liquidated often, and I have a hard time replenishing it. Answer: A One-off expenses can feel like the bane of our existence—unless we plan for them. Kelly and his wife do this by keeping what they call a "momen- tum" account. "We tried to factor in what our life really looks like, and we stopped having emergencies," he says. This meant not worrying when their car needed new tires ($600) or when his wife needed a colonoscopy ($3,000) that insurance may not cover. "We know the tires will last about three years, so we divide $600 into 36 months and try saving month by month," he says. "My wife will need another colonoscopy in fve years, so we've started saving to have $3,000 by then." Kelly's momentum account is dedi- cated to other-than-monthly expenses, and while it doesn't always pay for every unplanned occurrence, it does help. "I recommend getting started by giving your life some thought," says Kelly. "For example, if you are 25 years old, you will most likely have a summer in the next fve years that will include seven weddings. It is some- thing to think about and plan for." Do you know how much you bring in and spend every month? A. I know how much I make and have a good idea of how much I spend, but I don't know the number down to the dollar. B. I have no idea. C. Yes, I meticulously track my money on a daily/weekly basis and try not to spend more than I make. Answer: C Many of us know what we make and have a rough idea of what we spend, but are often disappointed when the end of the month arrives and there isn't anything left. This lack of aware- ness continues the cycle of mindless spending. "In order to fgure out a realistic bud- get, you need to know where you are spending your money," says Annalee Leonard, founder and president of Mainstay Financial Group in Pensa- cola, Florida. "I had a client who made really good money but wasn't saving anything because she didn't know where she spent her money." Leonard tasked her client with writing down exactly what she spent money on (down to the penny) for a full month. "She came back, and it was like a lightbulb had gone off; she never realized she was throwing so much money away," Leonard notes. While you may want to jump in and build a budget right away, try this step frst. It will tell you exactly where you stand—a good thing to know for any budgeting exercise.