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Tips and Tricks: Vacation Budget

July 30, 2011 By Leave a Comment

Here are some tips for budgeting for a vacation that won’t follow you home:

  1. Plan, plan, plan. Where do you want to go and how much will it cost? Can you travel cheaply or are you going all-out?
  2. Once you have a budget in mind, start saving for the trip. Don’t forget the extra costs of food, gas (if you have a car) and attractions.
  3. Set aside a portion of the cost each month in your budget. For example if the trip will cost $1,000 and you want to leave in 10 months, set aside $100 per month.
  4. Remember to budget extra cash for the trip, in case of ememrgencies or for unplanned activities.
  5. Take a debit card or cash with you. If you are traveling to Europe get a pre-paid chip-and-pin debit card. Our magnetic cards are going out of style in Europe.
  6. Pack light and avoid baggage fees if you are using air travel.
  7. Last but not least, if you are going overseas, do forget the cost of the passport in your budget.

Recently I found that we had a lot of last minute purchases that really added up: books for the airplane, snacks, new shoes for hiking around… Try and think of all expenses. It may even help you to pack your bag months before leaving to give you time think about what you forgot! Follow these suggestions to get pointed in the right direction for your next vacation budget.

Tim and Kathryn Gerken are Financial Coaches in Newcastle, WA. They serve the community in the greater Seattle area.

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Kids and Money: Ages 2-4

June 29, 2011 By Leave a Comment

Today’s children are the most marketed to generation in history. They are bombarded by television, movies and peers talking about the latest and greatest toy, game or upgrade.

It starts earlier and earlier, so that even a 3-year-old who sees a McDonald’s sign knows that there is a happy meal toy waiting for them behind that door. It is important, while our kids are young, to begin equating money with work so they understand that money is finite and that someone has to do actual work to acquire it.

As soon as your child becomes a consumer and can say (or scream) “I want it!” at the top of their lungs in a grocery or toy store, it is time to start teaching them about money. This can be as simple as counting pennies, dimes and nickels, but it needs to instill the concept that work equals money.

I am not saying that your 3-year-old needs to get a job, but when he helps picks up his toys or puts his garbage in the trash or feeds the dog, he can be rewarded with a quarter or even a dollar teaching him that his work equals money.

Some families that I know will go to the dollar store and stock up on small items with which they stock a “family store” where the kids can purchase items with “daddy dollars”. This concept is fine as well, but I would suggest mixing in real money too. Your kids know the difference between real money and “daddy dollars” and will be more apt to work for real money that they can take to a real store.

Any money that your child earns should be divided into three envelopes or containers, one for giving, one for spending and one for saving. This way they have their own spending goals and begin to get in the habit of doing all three as well. As your children grow and become larger consumers these habits will serve them well on their path to financial knowledge.

Kathryn Gerken is a financial coach in Newcastle, WA along with her husband Tim. Their website is www.GerkenFinancialCoaching.com

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Vacation Budget: You Gotta Have One!

May 1, 2011 By Leave a Comment

This time of year, thousands of people take to the roads and airways to get away from life for a while and enjoy a vacation. Whether it is a weekend get-away or a month long trip, the idea of a vacation is to relax and spend time with family and friends. However, if you do not plan and save for  your vacation, it may follow you home in the form of credit card debt, which  will cause that stress to return and negate the fun of the trip.

The saying goes that planning the trip is half the fun. This is a time  to dream about what your trip will be like and how you will spend your time and resources. It is also a time to research costs and start making a budget for your trip. Whether it is $500 or $5,000, a budget is essential to  the planning process. Remember to project the costs of traveling, such as gas or airfare, food, lodging, and souvenirs. If you are going someplace special, you may also want to budget for a tour or equipment rental. Researching as much as you can ahead of time will help you more accurately estimate the cost of the trip.

If you are planning a cruise, which many people consider all inclusive, do not forget to plan for excursion expenses, and tipping of the staff. This can often times add hundreds of dollars to a travel budget without  blinking an eye.

Once you have established a budget, it is time to start saving. If your trip is $5,000 and you are leaving in 5 months then you will have to save $1,000 per month. The same is true if you are leaving in 10 months and need to save $500 per month. Simply take your total expenses and divide by the time you have left before the trip or before the payment is due.

If you cannot save enough before the trip begins, consider postponing or moving the date of the trip. This is another important reason to plan ahead. Another option would be to have a garage sale or take a temporary extra job to obtain the cash that you need by your due date. The whole idea is to have the money prior to the vacation, so that when you come home relaxed and happy you can stay that way because of the financial serenity you will have when only the memories and not the bills followed you home.

Kathryn Gerken is a financial coach in Newcastle, WA along with her husband Tim. Their website is www.GerkenFinancialCoaching.com

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We Do Not Borrow Money

March 20, 2011 By Leave a Comment

“It is hard to budget when you don’t know what expenses or sales will come up next month.” This word of understanding was muttered by our 16 year old exchange student, who is trying to save enough money to buy an Xbox before he returns to Brazil, but keeps getting distracted by sales at Hollister. He is typical of most of us who are trying to save, but get distracted by shiny things and abandon the plan.

We do not borrow money. We do not have a credit card or even a credit score. So, if we want to make a major purchase we have to save the money first. To help do this we keep a prioritized list of things we need or want to save for in the short-term. This list is essential to meet our “needs” and “wants” goals.

“Short-term savings” is anything that you wish to purchase within the next three to five years. Anything further out than 5 years would fall under long-term savings or investing. To create your list, you and your spouse should first make individual lists of your own needs and wants. How do you tell the difference between a “need” and a “want”? Ask yourselves these two simple questions…

“If I did not buy this item this year (or, now) would my life be impacted in any significant way? If the answer is, “no,” then the item is really a “want” and not a “need”. Once you each have a list, sit down and combine the “wants” from both lists and the “needs” from both lists. Now, it is time to prioritize.

“If I could only save for one item this year, which one on the list would be first?” This becomes the first item on your “needs” list. Continue down both the needs and wants lists until you have them prioritized. My husband and I revisit our “wants list” periodically to see if these items are still wants or if other items have popped up in our lives that we may want more.

After making the needs list, place a dollar amount next to each item. Take the first item on your list and divide by 12 or 6 depending on when you are looking to buy. When you have saved enough money, you can go out and buy that item! Without feeling guilty! As an example, our two sons are soon to enroll in driver’s education class. We intend for them to take driver’s education in the fall, so we have 6 months between now and then to save. If driver’s education costs (as an example) $600 per person, then we would need $1200 this autumn. That means we need to save $200 per month ($1200 divided by 6 months). Coming up with $200 a month (if we start now) is a lot easier than trying to find $1200 come September. And remember … we don’t borrow money. We save now so we can pay later.

This planning method will help you to establish savings goals short-term and help you to stay out of debt when buying the items that you need and want. By using this method, once you are out of debt, you will never go back into the bondage to the credit card companies and banks. Next week, I will discuss long-term savings goals of 3-5 years or more.

Kathryn Gerken is a financial coach in Newcastle, WA along with her husband Tim. Their website is www.GerkenFinancialCoaching.com

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Why Are We In This Handbasket?

March 7, 2011 By Leave a Comment

Did your Grandparents ever say to you, “Your generation is going nowhere?” Now that you are older how do you feel about the current generation and how do you see the next generation of young people. Does it occur to you that the teens of today will be running the country when we are grandparents? Does it occur to you that the teens of today will be fueling our future economy? How much accountability are we giving this “next generation” now to raise them up into a generation that we will be proud of and comfortable running our affairs when we are old?

It is time to start teaching the teens of today accountability. One way to do this is to model it for them with our own good behaviors. Another way is to teach them the way that they should go, so when they are older they will continue to follow the path.

One thing we absolutely must teach them today is about personal finance. Before you let a teen out into the world, it should be your responsibility to teach them how to balance a check book, how to earn a living and how to live on less than they make. The best way to do this is to model this lifestyle before they leave. Another is to teach them personal finance right along with you. Teach them how to make and live on a budget before they go to college. Help them to figure out how much it will cost and how much they need to earn before, during and after college to pay all or part of their expenses. Teach them about purchasing a low mileage, low-cost used car with cash that they have saved rather than financing a car and incurring debt that they do not need when starting out in life.

Teach them the power of “No”. No, you do not need (or can’t have) – fill in the blank – if you do not have the cash to pay for it. Save some money and buy it when you have the cash. No, you don’t need to go to private school, state school is more in our or your budget and the list goes on. Children buy what feels good in the moment, but adults devise a plan and follow it. Help your teen become a mature financial planner. There is no reason to teach them about debt except how to avoid it.

We do not need more debt in this country’s future, whether your teen will help to run the government or run their own business. A strong background in personal finance could make all the difference when we are 84.

Kathryn Gerken is a financial coach in Newcastle, WA along with her husband Tim. Their website is www.GerkenFinancialCoaching.com

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