Your online resource: from shidduchim through shana rishona.

                               See the Directory LookingGood and Jewelers pages for shopping needs. 

                                                                   

Archived Articles:  Money Matters:

from the fall 2008 issue:

Spender or Saver, What's Your Score?

Tightwad,  responsible, or admirable?  Which one of these terms would you ascribe to someone who seeks to save money?  Would your spouse pick the same word? Attitudes toward spending are one of the major areas of conflict between spouses.  Those who are prone to impulse buying are seen as irresponsible by those who carefully plan their purchases according to their budget allocation.  From the perspective of the ones who see money as a means to buying whatever gives them pleasure, people who go out of their way to save money are tiresome.  Each one would view the other extreme as compulsive.  Where would you find yourself on the range between extreme saver and spender?  Take the quiz below to find out.

1. You want a caffeine fix while away from home, so you:

a) pour a cup of coffee from the thermos you brought along from home; the home brew comes out to 40 cents a cup.

b) get a cup for $1.50 at a bagel store.

c) pick up your daily cup of  Starbucks for $4.

2. When you go shopping you:

a) review store circulars to find which place has what on sale and bring just the amount of money you plan to spend and along with store or product coupons.

b) may look over a store’s ads then grab a credit card

c) don’t bother with circulars.  What’s the point when you will see what’s in the store for yourself anyway?  You bring at least 2 credit cards; you don’t want to miss a buying opportunity just because you’ve hit the max on the first card.

3. Your mode of operation on shopping for a pair of walking shoes is:

a) staying focused on what you need, ignoring all the dress shoes,  and looking at the price tags before you even consider a pair as a possible purchase.

b) looking  for a comfortable pair that fits well but also trying on a  pair of pumps in yours size that is within your price range and a basic you know you will use..

c) trying on whatever catches your eye and buying whatever looks good, regardless of price or present need; after all, you never know when that pair of lilac suede ballet flat will just make your outfit. 

4. A designer name on something indicates:

a) you’re paying too much for it.

b) it is more expensive but may be better than one without, so it is worth buying on sale..

c) you made the right choice because the name on the item tells the world you have good taste.

5. When you feel the need to cheer up, you:

a) do something constructive that will make you feel accomplished and thrifty like clearing the yard.

b) treat yourself to a bit of refreshment (low fat if watching your weight)

c) treat yourself to a little something like a cashmere sweater, earrings, or French perfume sold in tiny bottles.

6.  A trip to the city means an opportunity to:

a) take advantage of the many free attractions available.

b) an excursion out that may include a bite out and some browsing.

c) a chance to shop at some of the most fabulous stores.

7. Your car got splattered with mud, so you:

a) get out  sponges, cleanser, buckets, a hose, and your vacuum, roll up your arms and get to work.

b)  pull into a car wash that advertised an $8 special.

c) get the works for $195: washing, detailing, simonizing (whatever that is) and waxing, which reminds you to book a waxing for yourself.  Your car should look good but not better than you.

8. Your car is out of commission for a week while your mechanic awaits the part that needs to be replaced. You work out your commute to work by:

a) finding out which one of your coworkers you can go along with and offer to repay the favor or even form a carpool once your car is back.

b) taking public transportation or car service to get to work

c) taking the week off and seeing this as a perfect opportunity to take a vacation; after all, you can’t get to work without your car, so your boss would surely have to give you the time off.

9. Vacation conjures up the following images:

a) walking, bicycling, picnics, and attractions without entrance fees.

b) a place away from home reachable by car, motels, interesting places that are not tourist traps.

c) planes, exclusive hotels, elegant cuisine, luxury shopping,

10. Shopping at Wal*Mart is:

a) a good idea so long as you keep focused on buying only what you need and resist buying what you don’t just because the price is low.

b) a great choice for saving on certain grocery items and finding  accessories inexpensive to treat yourself to.

c)  not what I do.

11. When you think of dinner, the next thought is:

a) what you have in your refrigerator and freezer to be cooked

b) what you can pick up that is fast and easy

c) a new restaurant

12. You are contributing a fruit platter for a shower, so you:

a) select the fruit and cut it  up, arrange it, and wrap it up –cost $15.

b) pick  up some precut melons and berries, so you don’t have to do any cutting just arranging and wrapping –cost $28

c) phone in an order for one be delivered; that’s $55 for the platter plus $7 for delivery

13. When a hem falls on your skirt, you:

a) sew it up yourself.

b) find a seamstress to sew it for your.

c) toss it into the back of the closet and buy a new one; it’s obviously a sign that you should.

14. Your view on manicures:

a) pay someone to paint my nails?  Get real!

b) something to treat yourself to for special occasions.

c) standing  appointment every week are essential.

15. You get a tax refund of a thousand dollars, so you:

a) put it in a bank account and consider possible investments.

b) use half to splurge on a purchase normally beyond your budget and save the rest

c) go shopping  and then out to eat at the most expensive restaurant you can get to.

16. There’s a book you really want to read, so you:

a) put in a request for it at your library; you can enjoy reading it as much a month later as you would now.

b) check for the lowest price on it online to get it delivered within the week.

c) find a full-price bookstore that has it in stock so that you can get it immediately. Who wants to wait?

17. It’s your friend’s birthday, and you surprise her with:

a) a homemade cake in her favorite flavor and a card

b) a dinner for the two of you.

c) a party for 50 of her friends at an elegant restaurant.

18. An enjoyable date:

a) does not have to cost anything if you skip the overpriced drinks and places with admission charges.

b) often does cost something, but the real measure is the conversation

c) is one that cost a minimum of three figures.

19. Your selections of dishes for your home would be:

a) practical, inexpensive, and replaceable, as they are bound to break down the road.

b) something you like that won’t break your budget even when it breaks eventually, though you will try to get something not too delicate.

c) the height of elegance to reflect your refined taste; only the finest brand name china is fit to your grace your dinner table.

20.  Your view on credit card interest  is:

a) it should be avoided above all, even if that means always paying cash.

b) it may unavoidable if unexpected expenses have to be covered.

c) what has to be paid each month as part of the minimum payment on the statement.

Make sure you answer each question honestly.  Don’t have anyone peaking over your shoulder while you mark your choices, so that you incline toward what you believe would be expected of you.   Take 3 points for each A you select.  Take 2 points for each B you select.  Take 1 point for each C you select.

A score of 20-27 indicates that you view budgets the same way some do deadlines – as something put in place just to be broken.  With such spending tendencies, you could find yourself in debt even with a substantial income.  If your score is 53-60, you are a cautious person who can be counted on to stick to a budget.  You should be able to achieve goals such as owning a home, educating your children, and having enough saved to retire into a comfortable old age. But you would likely not be able to tolerate someone who buys first and thinks of bank balances. If you score 37-43, you are quite in the middle of the range between spending and saving. However, there is not just a single center. If you score 28-36, then you have a tendency to some extravagance, which may need to be checked if your income does not keep pace with your tendency to spend. If you score 44-52 you have a tilt toward thrift which should serve you well in keeping on a sound financial course, though you would not be strictly rigid about saving all the time.  

A person who is basically centered but tends  to give in to strong  temptations to spend could be counterbalanced by a spouse who tends toward the other end.   While opposites may initially attract, two people at opposite ends are likely to clash because their perspectives are fundamentally different, which would make it very difficult for them to come to an agreement about their finances. On the other hand, the middle of the road individual, who is conscious of both the need for budgeting and the temptation of treating oneself with something extravagant is probably the best choice for either extreme.  Someone who is in the center can possibly curb the  tendency of the spendthrift or influence the saver to relax the virtue of thrift  when appropriate with a sympathetic understanding of the forces that drive another into more extreme behavior.

From the Summer 2006 issue

Containing Wedding Costs

“Yasis alayich Elokayich kimsos chasson al kallah.”  The joy of a chasunah serves as the comparison for the joy at the ultimate redemption, for there is nothing else that comes close.  It is the supreme event in most of our lives.  But it can also be fraught with anxiety over its cost.  There is no question that the simcha of a wedding entails considerable expense.  While many is the related industries will tempt to throw all caution to the wind and just follow your heart’s delight in your selection, that may not make you happy in the long-term. Even some who do have enough to produce a truly lavish affair prefer to spare some of the money to help the young couple set up house.

            Think of the wedding not just as an end in itself but as the celebration to mark the beginning of a new life.  You do not want that new life to be overshadowed by crushing debt (even if that debt is owed by your parents rather than yourself).   To maximize your simcha while minimizing cost, you have to plan, prioritize, and budget.   While you may not be able to afford the top of the line of everything, there may be a particular area that you do not want to stint on.  That’s fine, so long as it is counterbalanced by another area, so that the total still comes out within budget.  While you cannot eliminate your costs, you can exercise control to contain them.  The following are some of the areas to be evaluated in planning your wedding budget.

Flowers: This is one item with a great range in cost.  You can easily spend tens of thousands of dollars on center pieces and bouquets, but you don’t have to.   Talk with your florist about using seasonal flowers, which are far less costly than specialty imports.  You also have the option of silk arrangements that can be rented or even purchased for a fraction of the cost of fresh flowers. There is also the possibility of a combination -- with silk for centerpieces and arches but fresh for bouquets, corsages, etc.  For the lowest possible cost, there are gmachs for simcha centerpieces, as listed on kallahmagazine.com.

The Dress:  The cost for buying usually goes from a few hundred for samples up to as many thousands as you care to spend, depending on where you shop and what you pick.  The cheapest gowns, offered by places with many off the rack styles rarely come with the sleeves and necklines required for a frum wedding and would require some alteration, which, of course, adds to the cost.   Remember, it is easier and therefore, less costly to lengthen sleeves than to build up the whole top for a strapless style.  However, alteration expenses can double the cost of your gown if you are not clear on exactly what the charges are.  To avoid the need to build up, you can go to places that cater to the frum clientele with appropriate cuts, as well as places that will custom make the dress to your specifications.  Renting costs you less than buying when it comes to the more expensive gowns, but there are gowns available for sale for less than the usual rental fee.  While it usually costs less to borrow or rent from a gmach, it is not free.  Some places that purport to be gmachs charge full rental rates.  That is why this magazine’s gmach listing warns you to ask about fees in advance.  You will find some gmachs that  only ask for an amount to cover cleaning and maintenance.  Others leave it up to you to have the dress cleaned. 

Unavoidable Dress Costs: Be aware that the cleaning can easily cost upward of $100 and even $200.  That is one cost that is hard to avoid no matter which option you choose.  Even if you borrow at no cost from a friend or relative, it is only right to return it clean.  Another cost usually entailed by borrowing is alteration.  Even if you are the exact same size as the former bride you are borrowing from, odds are that you are not exactly the same shape.  So be certain you have her permission to alter it to fit you perfectly.  You may also wish for an alteration of sleeve style or other detail.  Usually that will not cost you very much, so it is worthwhile to spend it to make you feel that the dress is reflects your taste and style.  Don’t begrudge yourself that.   A friend of mine wore her aunt’s dress, which was in good condition but in the late 1960’s style, which was not retro chic in the 90’s. She probably felt virtuous for not spending on herself, but such savings are so minimal that it was not worth the sacrifice of looking dowdy at one’s own wedding.

Headpieces:  Happily, there is no tznius factor for headpieces, so you can shop around for them anywhere and check out styles and prices online before going to stores.   You may have seen a stunning headpiece that cost $500, but you may also find one that looks great with your dress for under $100.  So do look around.  As a headpiece is not something you are likely to wear again, so you may wish to rent.  Just be sure you are not spending more on the rental than it would have cost you to buy.  Also, as with dresses, you can borrow from friends, relatives, or gmachs.  Another advantage of borrowing the headpiece is that, unlike the gown, it will not require an expensive cleaning.

Invitations:  You can choose smaller, less elaborate invitations to save not only on the invitations themselves but on the postage cost.  Heavier envelops will require more than the standard first class stamp.  That adds up when you have to mail hundreds of them.

The Numbers Game: When giving the caterer the final count for the dinner and for dessert, bear in mind that not all guests show up even when they have responded that they would.  Plan tables for 10 so that you can add up to 12 or subtract down to 8 without the tables getting too crowded or empty. Another thing to consider is the duration of their stay.  Guests tend to leave before a weeknight wedding is over, as they have to get home to children and be up for work the next day.  Also couples usually leave earlier from events that are separate seating (as observed by one contributor.)   If the wedding drags on too long as the couple remains in a photo shoot that extends for over an hour, you run the risk of the guests having to leave even before the first round of dancing.  That would result in your dinner guests not staying long enough to even have their dinners served.

Package Deals:  The “standard package” offered by your caterer or photographer may be more than you need.  Think about what is essential to you in terms of menu, pictures, albums, etc.  Plan out your own package deal and ask for a price on it.  You may feel that you can forego the extra course or choice of main dish, or follow in the steps of some shuls and ban hard liquor from your simcha.  If you don’t want to have to sort thousands of proofs and are not concerned about the loss of a possible shot, you can say that you don’t need two camera crews.  On the other hand, if it is important to you that the photographers are present until the very last moment of the wedding, then be sure to have that in the contract with the amount due made clear.  Otherwise, you can find yourself forced on the spot to decide whether to have the photographers leave after their stipulated number of hour are over or to have them stay longer with overtime pay.  The same goes for the band and catering service.  In these cases keeping things on time will help keep you on budget.

Timing is Everything:  Supply and demand determine price, so popular times could cost you more.  Check with the halls you’re interested in if they offer different rates for different times.  You may find that it will cost you less to have a Sunday afternoon wedding than weeknight affair.  It also may prove more convenient for your guests.  On the other hand, you may wish to pick a less convenient time if your list of must-invite guests truly does exceed your budget. 

Crowd Control:  I was told of one person who found himself in the position of having to invite 3000 guests.  That was far beyond what he could afford.  It is also a number that most halls cannot accommodate.  So he selected a time and location that had the effect of cutting down 2/3 of the guests who would be able to come. With smaller numbers, you can even out the crowd by inviting some for the chuppah only or to come later, as many others are already leaving, to the “Simchas Chasson v’Kallah,” usually assigned for 9:30 PM, when the dinner guests are beginning to leave.

Equitable Distribution In dividing costs between the 2 sets of parents, 50-50 is not necessarily equitable if one family invites 500 guests while the other only has 75.  Come up with an agreement about proportional cost.  If one side really wants a particular frill or extra that you consider completely unnecessary, you can be gracious about it by offering them the option to include it if they pay for it.  For example, if one side wants favors for the guests, and the other side has no such desire, they can agree to allow the one who wants it to order and pay for the favors.

Accounting: One reader wrote in this suggestion:  It was hard for us to keep track of which checks were going for regular household bills and which for our daughter’s wedding costs.  So my husband and I decided to open a separate account expressly for wedding expenses.  That way we avoided mix-up and knew what was spent on the wedding.  When all the checks were cashed, we just closed the account.

From the Summer 2007 issue

Do-it-Yourself Options for a Simcha

From the Spring 2006 issue:

                                   Tax Time:  the Basics You Need to Know

Growing up can be painful, especially when it comes to the duty imposed on us to file our tax returns.  You can’t avoid it even if you hire an accountant because you will still have to gather and present all the required papers so that the return is completed accurately and takes advantage of the deductions you are entitled to.  Personally, I’ve found the tax return software to be a great help.  That is not to say that you can’t fill out the forms by hand, but with my handwriting a computerized form is definitely prefereable.  The programs don’t ony save you time this year, but if you use a program again the following year, it will pick up last year’s return informatin, which could save you time on the data input for all variables that are unchanged. Plus, the software programs guide you through the various categories, which inspires more confidence than just reading the form directions and hoping you put the figures in the correct spaces.   And if you live or work in New York State,  getting the state version of the software will save you some headaches because the New York form takes the most convoluted approach imaginable to arrive at the figure for your taxes.   It’s about as direct as using your left foot to scratch your ear.  Oh, and if you live in one state and work in another, or if you were a part-yer resident in a state, you can have the fun of filling out not just one but two state returns. 

Among the many advantages of marriage is the opportunity to do things together with your spouse, which in this case means you can file a joint return.  That translates into just one federal and one state form for the two of you (assuming you don’t have an obligatin to another state). But just as you can’t have your cake and eat it, too, you can’t claim yourself as exemptions if your parents are taking you as dependents for the year.  So before you commit yourself to paper, find out what they’re planning. 

I. On Exemptions:  Ascertain if you can claim yourself on the return, or are your parents claiming you.

Taxpayers can claim a personal exemption for themselves and any dependents they support.  If someone else can claim you as a dependent, then you cannot claim your own personal exemption. Also, taxpayers cannot claim as a dependent anyone who files a joint tax return with his or her spouse.  Spouses filing a joint return can claim two personal exemptions, one for each spouse, even if one spouse earns all the income. If one spouse is supported by someone else, then that other person can claim the dependent and the personal exemption only if the spouses file separate returns. That’s something to consult your parents on.

.

II. Standard Deduction vs. Itemized Deductions

It is possible that all the receipts you saved may not be needed after all.  For most young people, there are not enough qualifying expenses to make it worthwhile to itemize deductions on your tax return.  If the total dollar amount of itemized deductions does not exceed the amount allowed for the standard deduction, you are better off just taking the standard deduction, and you’ll save yourself time.  But first you need to know the numbers. 

Standard Deductions For 200

Single: $5,000
Head of Household: $7,300              
Married Filing Joint: $10,000
Married Filing Separately: $5,000

To decide if you should itemize,  see if you fit into the major categories for itemizing deductions.  They include:

Home mortgage interest expense. You may generally deduct the mortgage interest you pay on your residential mortgage for up to $1 million for the purchase of the home and $100,000 in home equity debt.  It is the interest only – not the amount that counts for the principle – that is deductible. You can refer to IRS Pub 936 for more info.

Real estate taxes. Property taxes that you pay on your home.  If you live in NJ or on Long Island, this is probably a very substantial amount.

Medical and dental expenses. There is a common misconception that this expense is completely deductible.  In fact you can only deduct qualified medical and dental expenses that exceed 7.5% of your adjusted gross income (AGI). For example, if you have an adjusted gross income (Form 1040, line 36) of $30,000, then your threshold amount for medical expenses is $2,250. Only the amount of medical, dental, and other health care expenses that exceed this number can be deducted. Let's say that your total health care expenses for the year was $3,000. Your deductible amount is $3,000 minus $2,250, or $750.. See IRS pub. 502 for more information.

Miscellaneous expenses. (Schedule A, lines 20-26) are deductible only if they exceed 2% of your adjusted gross income.   Miscellaneous expenses are generally unreimbursed expenses that are related to your performance of a job such as travel, but not your daily commute to work. For example, if you have an adjusted gross income of $30,000, then your threshold amount for miscellaneous deductions is $600. Only the amount of qualified deductions that exceed this number can be deducted. Let's say your total job-related expenses for the year was $1,000. Your deductible amount is $1,000 minus $600, or $400. Refer to IRS Pub 529 for more info.

Contributions to charitable organizations. The IRS allows you to deduct contributions of money or property to a qualified organization for its use. Refer to IRS Pub 526 for the criterion. Charitable contributions (Schedule A, lines 15-18) are fully deductible only to the extent that your total contributions are less than 50% of your adjusted gross income (Form 1040, line 36). If you donate stocks, bonds, works of art, or other assets on which you would have paid capital gains tax, your contribution is limited to 30% of your adjusted gross income. Any excess charitable contributions may be carried over to next year's tax return (and if not used up next year, may be carried forward for a total of five years). For example, Dina has an adjusted gross income of $30,000. If she opts to give tzedakah to qualifying organizations, she can take the full deduction for up to $15,000 in cash or up to $9,000 in stocks, bonds, or works of art.  If Dina decides to donate $10,000 in appreciated stocks to her alma mater (assuming this is not to cover tuition expenses and is a voluntary donation) Dina is limited to the tax deduction of $9,000 on her tax return.  That doesn’t mean that she’s completely lost credit for the additional  thousand; she can carry forward the excess $1,000 to next year's return. Why do people donate appreciated stock rather than liquidating the stock and donating the cash?  By giving the stock directly, they avoid capital gains tax, in addition to benefiting from the tax deduction of the donation.

Note:  deductions are sometimes limited to a certain threshold amount. And your overall total itemized deductions may be limited.  For 2005, you begin to lose some of your itemized deductions when adjusted gross income reaches $145,950. (For married taxpayers filing a separate return, the income phase out amount is $72,975.)

III.               IRA:  Tax Deferred or Tax Free

There are two types of IRA accounts: the traditional and the Roth.  The difference between the two is when you will be taxed on the money.  If you qualify, based on your income and situation of other retirement savings plans and other limitations, you can take a tax deduction for the amount of money you put into a traditional IRA.  Do bear in mind, though, that this does not make the money tax free.  It is tax deferred, meaning that you will have to pay taxes on both the principle and interest or capital gains earned when you withdraw the money.  You can begin withdrawals some months after you achieve you 59^th birthday.  However, you are not compelled to make withdrawals for about another decade.  At that point, you must start taking some of the money out and pay taxes due.

On the other hand, a Roth IRA does not allow you take a tax deduction for the money you put in, but the money you take out when you reach the qualifying age is tax free, a rare and wonderful thing.  It also has some other flexible options, not available for the traditional IRA.  So if you skip the tax deduction at this point, you could end up saving far more in taxes when you retire.

 Do not think that you cannot afford to put money aside for retirement now because you may need it for other expense incurred much earlier.  IRA rules now allow penalty-free withdrawals for qualifying home purchases and college tuition.  But if you do tap the money, I would advise you to do that only with the traditional IRA, so that you don’t lose out on the tax free benefit of the Roth, which is reserved only for withdrawal upon retirement.

Another thing to bear in mind is that your IRA categorization is not etched in stone.  You have options to convert a traditional IRA to a Roth, but you would incur the taxes due for the year of the conversion.  You can also recharacterize your contributions from one type of IRA to another.  As for the year of the contributions, you are not limited to the calendar year.  If you qualified based on your income and other factors, you can still make a contribution to an IRA and assign it to count for 2005 until the tax filing deadline.  That way you still have 2006 open to you to make the maximum allowable contribution for the year on top of what you assigned to 2005. 

IV.              The Consequence of Procrastination

The IRS knows that not everyone plans well enough to meet the April deadline.   That’s why there is an option (though not one I can recommend) to file an extension, which buys you’re an additional six month. Form 4868 will extend the deadline for you to file your return to October 16, 2006. However, don’t think for a minute that an extension of time to file is an extension of time to pay—not when you owe the IRS.  If you think you may owe taxes, you have to run through some calculations to estimate how much and send a check in.  If you fail to pay what you owe, you will be assessed interest, and, most likely, penalties as well.  (Note:  this does not work in reverse; if you delay filing and are owed a refund, you will in effect delay your refund.) So if you are a procrastinator, don’t procrastinate altogether.  Sometime before the deadline, you must:

1.   Create a rough draft of your tax return. Get an idea of approximately how much you owe.

2.   Download the PDF called Automatic Extension Form.  Fill it out, and write a check for the amount of money you estimate that you owe.

3.  Even if you have to stand on line at the post office, you’ll have to be sure that you mail the extension form with your check by April 17th.

4.  Don’t wait till October 15^th to start on your complete tax return.

V.                 Tax Refunds:  Is this great or what?

Of course, you should rejoice over the apparent good fortune of a tax refund, just as you should rejoice over all the event of your life and say “gam zu letova!” But a refund actually falls into the “or what” category.  You have to realize that though it seems like a bonus, in fact a tax refund is only a return of your own money, which had been withheld from you for months.  So it should not be regarded as winning a prize or finding money (with none of the simanim obligating a return); rather, it is like finding the accumulation of change you had dropped in the couch cushions that you are reunited with after Pesach cleaning.  It was always rightfully yours, though you did not have access to it.

Really, for optimal financial planning, you should have just the right amount of taxes deducted.  You don’t want to end up owing the IRS or the state government because they are likely to hit you with interest and penalties. On the other hand, having them owe you actually leaves you with less disposable income for most of the year.  Getting it all in a lump sum may make you feel that you’ve had a windfall, but if you had the money all along, you could have increased your savings, investments, or avoided some debt that costs you more in interest.  For example, in September you purchase a sofa for $799.  You only have $400 saved toward its cost, so the balance you can’t cover goes into credit card debt.  You continue making the minimum payment on the card for months because that is all you can afford.  Once you get your tax refund, you can pay off the entire debt.  But if you had the money in hand, you would not have had to assume the debt to make the purchase at all, and that would have saved you a substantial amount in interest payments.  Nevertheless, when it comes to money due, it is better to receive than to give, for the IRS does not like to effectively extend loans.  So if you're not certain about the correct amount of tax you should have deducted from your salary, it is better to err on the side of the IRS and then get the excess amount refunded.  Should you try to do it the other way around, you will fall out of the good graces of the IRS.

------------------------------------------------------------------------------------------------------------------------------------

From the winter 2005 issue of Kallah Magazine: Take Charge!

Are you armed and dangerous?  A credit card in your wallet could turn into a loaded weapon, triggered by your spending habits and aimed at your credit score.  A credit card has great potential – it can prove greatly beneficial or seriously harmful.  Misused, a credit card may be one of the most dangerous things to have in your possession.  Alternatively, if you maintain control over it, your credit card can actually serve as a tool to build your credit and assist you in tracking your expenditures.  Think of it as a force like that of water: you can harness its power to your advantage.  On the other hand, if it breaks beyond set boundaries, you will be lost in the depths

Would you take out a loan at a rate of interest of about 20%?  How high is that?  It is about triple the rate you would be paying on a mortgage and, unlike mortgage or home equity loans, this interest is not at all tax deductible.  Another way to appreciate how much it costs you to effectively borrow from your credit card by not paying your entire bill is to look at what banks pay you.  Right now a saving account or CD may yield somewhere around 3.5%.  Given those numbers, it is mind-boggling that many people consider it a virtue to put aside some money in their savings accounts while they continue to make only the minimum payments on their credit cards.  They are paying 20% or so to keep back money that will earn less than a fifth of that!  Yes, saving is important, but it is more important to cut down costly debt.

Carrying credit card debt is a very expensive long-term venture for millions of Americans who cannot pay off their credit card bills.  As interest rates have risen, carrying credit card debt costs consumers even more..  The problem has grown to such proportions that, according to a Wall Street Journal  report, the government is now stepping in, requiring higher minimum payments for credit card monthly statements to force people to start digging themselves out of the debt that mounts with each purchase and each month’s accumulation of interest and finance charges.  The government mandate compels people’s minimum payments to include a portion that will chip away at the debt, rather than merely satisfying interest payment.

How do so many people fall into credit card debt?  Often it starts with a faulty assumption.  People justify buying what they really cannot afford by positing that their income will rise in the future.  Their position is that they may as well buy the furniture, entertainments system, or vacation package they wish to enjoy now, and they will be able to pay it off as their income rises to meet their expenditures.  Now it is true that people’s incomes to tend to rise as they gain success and advancement in their careers.  However, the unfortunate fact of life is that our cost of living tends to rise even faster.  It is not just a question of inflation but of the increased expenses that inevitably are incurred by growing families.  You can spend a lot less on food and clothes as a couple than you can as a family of four, and when you add child care and tuition costs into the picture, it is very clear that a much higher income would be needed just to stay afloat. 

Consequently, the philosophy of “Buy now; pay later,” often used to sell bigger ticket items can cost you big time.  If you cannot pick up the tab later, you are forced to get into deeper and deeper debt.  In the end the $2000 vacation package that was just too good a deal to pass up can prove far more expensive when you add in all the interest charges you incur.  Once you start failing to pay your credit card debt in full, you are in danger of falling  down, down down --  much like Alice descended in the rabbit hole – as you find yourself deeper in debts.  It requires a great deal of effort to pull yourself out, and it gets more difficult to dig yourself out of that hole as time goes on.  That is why many people can stay in debt for decades .

With the possibility for such dire consequences, why do people ever venture on applying for a credit card – or rather accepting one of the many offers that comes in the mail?  The fact is that there are real benefits to using a credit card.  But, as with so many other key issues in life, you have to know yourself.  If you are the type of person who buys things just to have something to do, or to cheer yourself up, and you don’t have the disposable income to keep pace with your spending, a credit card in your hands may turn into a ticking bomb that can destroy your budget and leave a negative mark on your credit history.  You also shouldn’t continue to carry a credit card if someone else has gotten hold of the information because their charges will become your liability.  Always check your statement for unauthorized charges and bring them to the attention of the credit card company immediately.  Demand that they be investigated, and if there is evidence that someone is making charges on your card, cancel it.

  However, that does not mean everyone should shun credit cards.  They can prove useful and offer several advantages:

I. Convenience:

1)freedom from carrying cash to pay for purchases

2)ability to pay for purchase without worrying that there is enough in the account now to cover the check

3)ability to make purchases over the phone and internet

4)ability to place reservations at hotels, etc.

II.Consumer protection:  In cases when you have received damaged or the wrong merchandise, your credit card company can freeze the charges to the merchant in question until the matter is settled.  If you have paid cash, you are in a far less favorable position to recover the cost.

III. Establishment of  credit history:  A favorable credit score, which grants you the reward of lower mortgage rates and sometimes even lower insurance rates, is the result of establishing your credit.  In order to accomplish that, you have to not only abstain from not paying debt, you have to prove yourself responsible by having handled credit well.  In order to do that, some people actually take out loans they don’t even need just to pay them back to establish themselves as credit-worthy.  But paying your credit card bills in full can have the same effect with no interest charges.  

IV.Other benefits:

  1) Some credit cards “reward” you with miles, merchandise, or rebates on purchases.  For example, the credit card I use is linked to gas station, allowing me to earn free gas at the rate of 1% of my purchases. 

2) Another extra, I get with my credit card is a contribution to yeshivas.  My MasterCard is registered with both eScrip and Count on Me, programs that contribute about 3% of purchases to the designated organization at participating stores.   I also have it registered with UPromise, which is supposed to build up a college savings account based on the percentage return at participating merchants..

You can enjoy all the advantages above without getting burned by the dangers if you keep yourself and your expenditures under control.  Once you establish yourself as a good credit bet, you will be presented with the most favorable loan and financing rates, which could save you substantial amounts over the life of the loan.  You also gain more respectable standing for those who hold your debt, so that a minor lapse on your part will more likely be forgiven than your less well-established counterpart.  For example, it has happened to me that the check I mailed to pay off my statement never arrived at the destination.  As soon as that fact came to my attention, I contacted the company.  The phone representative then reviewed my payment history, and on that basis waived the finance fees.  Had my history shown that neglecting to pay was an ingrained habit, I would have had to pay over $100 over the charges.  A good reputation is indeed worthwhile.  It is somewhat comforting to think that virtue can get you more than its own reward.  So take charge of your credit!

from the spring 2007 issue:  ISO Home Sweet Home

When you first entered “the parsha” of shidduchim, you had to relearn the meaning of certain words in context of  a shidduch.  So you had to make mental adjustments to make sense the rankings implicit in the term “best bochur” in contrast to “top boy,” “good boy, “a learning boy,” or the “boy with good middos.”  “A really great girl” generally is the frum-speak equivalent of the phrase “has a great personality” with all it connotes of qualities present and absent.  .  You learned that when  a girl uses the word “tall” to describe a qualification for a shidduch that she in reality is encoding the fact that looks are important to her.  A boy, on the other hand, could say outright that “pretty” and “thin” is a prerequisite without fear of reprisal.  Oh, yes, and “thin” is applied to just about any girl, regardless of her size, imply that she is good-looking.   In all right-learning circles, career or job were words not to be used, though “parnassah” could perhaps be alluded to.  Then, on families, you realized that there are even finer gradations than “yeshivish,” “modernish,” “traditional,” (usually in connection to relaying the background of someone moving in a particular direction) “chassidish,” or some hyphenated combination of those terms.  There is also  “haimish” or “heimisch” means something quite different from “balabatish.”  So you got through all the hurdles, broke your teeth on all the terms, found your one and only bashert and are now set to find that home to be the “bayis” part of the “bayis ne’eman.”  But that search is fraught with perils of its own.

If you are venturing into that world as you seek a new home, you may be disconcerted by the discrepancy you find between ad descriptions and the house you encounter in the flesh.  In most cases, that is not the result of deliberate false advertising but of the encoded terms specific to the real estate industry.  As with any foreign language, the key to understanding those who speak it is to learn the vocabulary and not be confused by words you believe to be synonymous with their homonyms in English.    You may have find yourself scanning the MLS (Multiple Listing Service) listings online and feel surprised at the recommendatory state of homes for sale.  The majority of homes are reported to be in a condition termed “excellent”; many others are called “very good,” and smaller number merely “good,” while some are distinguished as “mint” or “diamond.”  While the accompanying photographs of some of the houses do not look as flattering as the descriptive terms, you believe that a house described as “excellent” should be in satisfactory condition.  Confident in the state of repair of the house you are interested in, you make an appointment me to see the house. 

Once you arrive, you are likely to notice that the windows are the ones that were put in the house when built – about 50 years ago.  The roof looks not much newer than that.  The paint on the façade is faded and peeling.  Inside you’ll notice that the advertised hard-wood floor are indeed there but are scratched and dull.  You’ll see evidence of a bout of redecorating in the 1970’s, as evidenced by wood paneling and uninhibited application of avocado green highlighted with golden orange as a decorating motif.  The real estate agent may enthusiastically point out the space for a second sink in the kitchen while turning a blind eye to the custom colored refrigerator, designed to match the vintage ugly wallpaper and the linoleum that is curling up at the edges.

No, you are not mistaken.  The house is described as “excellent” because in real estate terms that is the correct rank.  The mistake is to assume that the terms in real estate mean the same thing they do for the rest of the world.  They don’t.  In order to make sense of the terms applied by real estate agents to the condition of the houses they sell, you have to put the usual definitions out of your mind.  Instead, think of the terms as the equivalent of stars assigned by restaurant of movie ratings.  What is called “good” is one star, which in the non-realty world is poor.  A house described as “good” would qualify for condemnation; it is not inhabitable by human beings until it has undergone extensive renovations.  A house that has experienced a fire, requiring dousing by two fire engines for a couple of hours until it is thoroughly marred by flames, smoke, and water, may, for example, be described as “good.”  For “good +” rankings, add a half a star, but don’t set your expectations much higher.  “Very Good” is the equivalent of two stars.  A house with that description is what is known in layman’s terms as a “dump,” a term a real estate agent will never apply to one of her listings (in your hearing, that is).  Thus that house that you were disappointed in because your picture of “excellent” condition did not correspond to the condition you found it in actually was not mislabeled if you understand that the movie with three stars will have some obvious shortcoming as does the house.

If you want something that will not have such obvious flaws (though, in reality, all houses are bound to have some flaws even if hidden), you need a house that is rated “mint”.  No, that does not connote that the house is painted pale green or scented with toothpaste.  “Mint” in real estate lingo translates into what you thought “very good” or “excellent” meant.   Sometimes a term like “diamond,” which connotes a slightly higher standing through its association with wealth and distinction, or “move-in condition,” for the practical-minded is substituted.  Do bear in mind, though, that such could apply to the most hideously decorated house you could imagine, so long as the day glo paint is not peeling and the carpeting that clashes with all your furniture is not threadbare.  A house could be described as “mint” even if it has not been renovated in the past 5-10 years, so long as it is updated enough not to require an immediate overhaul of the kitchen or bathroom.  But don’t get your hopes up for the granite kitchen with top name appliances unless such is stipulated in the ad. 

Also beware of the condition resulting from an agent’s idea of averaging.  Let me explain.   As “mint” denotes move-in but not necessarily spectacular condition, other terms are put in to signal a house’s superior state.  If “Diamond” has become to overused to indicate a superior grade, the house may be called “mint +++,” and if it is indeed new, that is the term that will be adopted to describe its condition.  But what do you do with a house that has been renovated in part but not completely?  Apparently, some agents solve that problem by coming up with an average rank that favors the house’s positive attributes.  In my brief bout in real estate, I once showed a house that the listing agent described as “mint.”  While in fact, some of its features were even better than mint, extra-large master bedroom and completely redone full tile bathrooms, etc., it also had features that might have been called only “very good” to “excellent.”  Half the windows clearly needed to be replaced, and the kitchen was both small and outdated.  Like in math, average rankings can be misleading, leading you to expect a certain consistency that in fact is not in place. 

Another ranking to be wary of is one that is absent.   Obviously if the house would have any possible claim to the rank of “mint,” its ad would declare it so.  Consequently, an absence of a condition indicator means that the house will not be in move-in condition and may even rank below “excellent.”  Not wanting to turn people off of the house, the agent may leave out this piece of information from the ad, hoping to lure buyers interested in location, lot size, price, or other attraction that will be stressed by the ad.  If a house’s asking price is on the high side and the condition is not indicated, the agent knows that the seller is asking too much for the house and does not want people to reach the same conclusion before they come to see it. Coming to that conclusion before seeing the house eliminate any possibility of a deal, so the agent wants buyers to indicate their level of interest and what they would bid to get the owner to come down in price.   The educated buyer knows that an “excellent” house will need work and should calculate how much it is indeed worth in negotiating over the purchase price.

 Now that you’ve read this article, even if you have not been through learning the hard way and experienced your own series of unfortunate events that are all too common in real estate transaction, you are on the path to becoming an educated buyer.  Even if you do not yet feel full conversant in the language of realtors, you are aware that you should not mistake their terms for standard English.  Once you adjust your expectations, you should no longer feel unnerved by your encounters with realtors and should actually be able to use the services they offer to your advantage.  Just remember what the lingo means and you won’t be taken unawares.  To be forewarned is to be forearmed, and you certainly will need as many arms as possible to handle your move and new home plans.   

From the first issue:

 Considering Cost: Medical Insurance

                                             by Ariella Brown

            When you get married, you have to reassess your situation and insurance needs.  You need to get adequate coverage for your car, home, and, -- when you have or are about to have dependents – your life.  Most important of all is insuring your health.   While you may think you cannot afford adequate health insurance, the fact is that you cannot afford to be without it. As obstetrical and hospital costs have skyrocketed, it is important to be adequately covered.  Even the least complicated births can amount to $10,000.   When choosing your coverage, you have to not only consider the costs of the premiums but of the deductible and co-insurance amounts.  Be aware of both the range and limitations of your coverage, so you know which doctors you can choose from at full coverage and which will cost you out of pocket.  Also be aware of what is considered your responsibility.  Do not agree to pay your doctor directly and then get reimbursed by your insurance until you’ve ascertained that your plan is structured that way.  Many insurances policies do not issue checks to the policy holders but pay doctors according less than what they would bill you for according to their contract agreement.   You have to educate yourself about your policy’s options, so that you do not put yourself in a situation which gives your insurance an excuse not to cover your costs.

            Each of my children was born into a different health insurance plan.  So I got to learn that changes policies can result in huge differences in one’s out of pocket costs.

With my first child, I had the traditional type of insurance that after a deductible covers 80% of medical expenses.  Of course, the remaining 20% came out of my pocket.  Now 20% may not sound like a lot, but it adds up to well over a thousand dollars in the course of a completely uncomplicated pregnancy and delivery.  The doctor’s fee alone was $5000 (this was 12 years ago).  That fee did not include the cost of lab work, ultrasounds, or the hospital stay.  At Columbia Presbyterian at the time, the rate for a semi-private room, for which expectant moms were encouraged to bring our own pillows from home and nursing attention that reflected an attitude of not altogether benign neglect, the charge was $1225 per day.  The nursery care was $750 per day.  Any pain killers would incur additional charges, but they didn’t offer me anything when I was in labor despite my complaints about the pain.   Oh, yes, there also is a delivery room charge, but since my baby was born in the elevator (after waiting in the hospital for some 16 hours – but that’s another story), they couldn’t tack that one on to my bill.  So even in the simplest of deliveries without even the aid of the episiotomy that they seemed to have planned for me, my share of the maternity care costs was significant.

Just after my first was born, we switched to US Healthcare and to a doctor affiliated with Einstein.  As in the case for most HMO’s, all maternity costs were covered 100% for in-network service providers.  In this case, we did not have an uncomplicated birth.  In the beginning of my seventh month, I had a placental abruption and an emergency C-Section.  As a result, I had to stay in the hospital for 4 days, and my baby had to be in the NICU for 3 weeks.   Even after she was discharged, my preemie had several appointments with specialists that are not necessary in normal births.  I don’t know what the total fees amounted to because I was not responsible for them, but I would estimate that the hospitalization and doctors’ bills would have amounted to $20,000 or more due to all the additional procedures and the extended stay.  That does not mean that the insurance paid the doctors that amount.  They only pay the set contract amount, which is often far lower than the fees charged to individuals would be, so don’t feel too indebted to your insurance carrier for paying your medical expenses. 

When I was expecting my third, we were on Oxford insurance and living in New Jersey.  Though it carried much higher co-payments, Oxford’s coverage, like US Healthcare’s,  was designed to cover maternity costs 100%.  So I was surprised that the office demanded $20 from me each time I came in.  By the third time, I figured out something didn’t jive.  Then they told me that the doctor had not yet entered the pregnancy diagnosis and so was billing the insurance – and me – for each visit separately, rather than chalking them up to set fee for maternity care.   Unfortunately, the doctors I went to (who were recommended) were not content with the fee set by the Oxford contract even though they had bound themselves to it.  So they come up with a plan to circumvent the limitations and get a few hundred dollars more out of Oxford and $60 more out of me.  When I voiced my objections, the office manager said, “$60 is not so much to pay to have a healthy baby.”  That response ignores the fact that those doctors were not only cheating me, but cheating the insurance and all the people whose premiums go into maintaining the insurance.   While I tried to report this to Oxford, the “customer service” people didn’t do anything about it and did not seem to be the least bit concerned about being defrauded.  So I complained to the insurance agent of my husband’s employer.  She took action to force the doctors to refund the co-payments they collected beyond the first visit.  What was the doctors’ response?  They sent a cool letter refusing to keep me on.  That was a consequence I could live with.  I found another practice that proved quite competent, as well as honest.  I staid with them for the duration of my stay in the Garden State, including the birth of my fourth.   While there were insurance changes for that one, they did not have a major impact.

Based on my experience, I would recommend you get an insurance plan that gives you 100% coverage for maternity.  Even though 10% of the cost of a standard delivery may be manageable within your budget, the costs can shoot up if something unexpected happens while you’re expecting.   When your income is limited, such expenses can be devastating. However, you also have to consider if the doctors and hospitals you prefer are included in the plan.  Remember to review all the options, including premium costs, out of pocket expenses, and in network limitations, so that you make the choice that’s best for you.      

-----------------------------------------------------------------------------------------------------------------

From the fall 2006 issue:   The Bandwagon Versus the Budget

When you start setting up a new household, you will find that there are many things you need.  The basics include something to sleep in, something to sit on, something to eat at, something to eat with, and something to prepare your food in.  The cost of the basic bed, chair, table, pots, and pans should fit within your budget.  The question is can you stretch you budget beyond the basics?

            While shopping for the basic necessities, your eye will inevitably be drawn to the more luxurious offerings.  Then you may start thinking:  “Why should I settle for just a bed and a dresser when I could have a beautiful bedroom suite in mahogany?  Why do I have to choose my linen from the clearance bins instead of the stunning 500 thread count designer sets?”  Your voice of reason would answer:  “A thousand dollars is the maximum you can spend on the bedroom, including all furnishings, pillows, sheets, and blankets.  That is why you cannot buy the designer pieces.”  As you are a reasonable person, you resolve to stick to your budget.  But then you hear another voice pipe up, “But everyone today starts out with a full bedroom set and top of the line linen.”

            Where did that voice come from?   It could be from a friend, a relative, or even inside your own head.  It is the voice of the bandwagon argument, named for the image of jumping on the bandwagon to join everyone else.  It is an argument frequently used in advertising, most obviously in slogans such as, “Everyone is doing it.”  What is understood by that statement is if everyone is doing something, then you must follow suit.  When you were in school, you may have tried that argument on your own mother by saying, “Every girl goes to Florida without her parents for winter break.”  Likely, you mother would have responded:  “Well, ‘everyone’ is not my daughter,” or more classically, “If ‘everyone’ decided to jump off a bridge, would you do it, too?”  Of course, for teenagers who are easily swayed by peer pressure, the answer would actually be “yes.”         

            But your mother was correct in not being swayed by the fact that other people were doing what you wanted to do. Following the latest fads or emulating whatever the “in” group appears to be doing is a form of behavior that is alien to our core values.  Such conduct is based on the logic of the bandwagon argument, but that logic is faulty.   Though we do say “acharey rabbim lehatos,” that only holds for competent Torah authorities.  The truth is that you cannot ascertain that something is right for you to do on the basis that other people are doing it.  For that reason, the bandwagon argument is one of the logical fallacies that students of rhetoric are trained to look out for.  It is a fallacy because something does not become valid or necessary simply because many people pursue it.   Should you find yourself in the unwelcome situation of being surrounded by smokers, would you light up also?  If you are still in possession of the sense that has become all too uncommon, you would not only resist but remove yourself, or get them to move, so that you can breathe.  On the hand, you would accept their offer of a cigarette and light and proceed to inhale carcinogens if you opt to follow the bandwagon..

The bandwagon fallacy is something you must train yourself to look out for when planning your purchases.  If you are not aware of its hazards, then you may find yourself riding the wagon right over the bridge your mother referred to, but in this case, the bridge is your budget that keeps you from falling into the pit of debt.  To avoid that danger you must learn to distinguish between what you really need to meet the basic requirement of food, clothing, shelter, and some recreation in accordance to your income, and what you could think you should have because other people have it.  For instance, all your friends started out in a 2 bedroom apartment.  After doing the math you find that a budget based on your income will only cover the rent for a one bedroom.   Will your home decision be based on the reality of your situation or on joining the bandwagon?   Even if you could swing the larger apartment if you dip into your savings, consider this: living within your means will allow you to keep that safety net of savings growing so that there will more there for you when you really need it.  Stint as a couple so that you will not need to stint when your family grows and you really do need more space, food, and diapers. 

 The Gemara’s recommendation when planning one’s budget is to dress within one’s means, to eat below one’s means, and to honor one’s wife above one’s means.   Notice there is nothing about one’s neighbor’s means.  You have to consider your budget from the perspective of your own income, and even then, you should not spend the maximum that you could afford.  The advice is to dress within your means but not below it:  so your clothes should be as good as you can afford within your budget.  That means you shop within your price range and forego a bandwagon trip to the exclusive boutique where your neighbor picked up a frilly skirt for $350.  Food should take up less of your budget than what you may consider given your income.  For example, say you really could afford to eat lunch out everyday as you see the people all around you do.  What will decide you?  On the one hand is the appeal of the bandwagon – seeing what the crowd does and following suit; on the other hand is the significant amount of money that can be save by brown bagging your lunch.  Let’s say you want to enjoy a tuna salad and iced tea:  you can either pay upwards of $6 for it, or prepare it at home for a total cost of $2 (or less).  That $4 (or more) a day turns into $20 a week, which adds up to over $1000 in a year!

So what are to make of the counsel to honor one’s wife above one’s means?  The measure here again is internal, not based on what other wives are getting.  For instance, a husband who plans to buy himself a new Yom Tov outfit and allocates X amount for it should be willing to allot his wife a greater amount.  Yet, that does not mean that she should blow the whole year’s budget on a couture outfit – even if her neighbor just got one.  Similarly, someone earning $40,000 a year would not be obligated to buy his wife a $4000 fur coat (or, more commonly, a custom sheitel).  Of course, honor to one’s wife can be accomplished without spending a cent, by demonstrating consideration in conversation and in household chores. Complimenting her on the way she looks in what she does have may make her feel better than telling her to buy something new.  But the bandwagon doesn’t show such private practices.  Admittedly, it does take more effort to show honor without money, but you cannot always have your wallet do the talking for you if you are to have an emotionally rewarding relationship in which the measure of all things is not how much it costs in dollars.

 Living within your budgeting does not mean leading a life devoid of fun.  Just as you must budget for the basic necessities of life, you must budget for recreation.  Yet, again, it must not be determined by what others do, but by what is affordable for your income range.  You may have neighbors who summer on Fire Island, winter in Puerto Rico, spend Pesach in Switzerland, and hold season tickets for the Yankees, Knicks, and Rangers.  Can you keep pace with them?  Unless you’ve just won the lottery, don’t even try.  Yet you can find vacations and forms of entertainment that will not leave you paying off credit card debt.   Don’t focus on what you cannot do but on what you can.    Your three day trip to Boston may leave you with as many fond memories as the trip to Europe your rich friend took.  A good book could take you places in your imagination.  A good shiur could take you to new levels of inspiration.  A free show or concert in the park can be as enjoyable as one on Broadway.   But not if you’re watching what’s happening on the bandwagon instead of enjoying what you are doing.  Just let that bandwagon go by and enjoy the show.  You’ll not only be more secure emotionally, but financially, as well. 

From the winter 2006 issue:

Budgeting Tool #1: Monthly Budget Tracking and Budget Summary by Sephardi Lady

As promised in Budgeting, Credit, and Debt II, I will be blogging about three budgeting tools that I think are very helpful: 1. Monthly budget tracking and budget summary. 2. Cash Flow Analysis. 3. Assets and Liabilities monitor. When tool #1 (the topic of this post) and tool #3 are used in conjunction, I believe a very solid analysis of one's financial position can be drawn.

Chances are most people know how much they spend on their rent or their mortgage. And, chances are that most people know how much they spend on car insurance, or a car payment. But, what about other expenses? Do you know what you spent on food last month? Two months ago? Three months ago? And what about consumer goods? Or gas? Or utilities? And, what about tuition or camp? Most people probably know their tuition obligations. But, do they know how much the "extras" cost them? Expenses add up and they add up quick. $5 here, $10 there, and $20 someplace else quickly can become $100 dollars, $200, and more.

I've found the best way to stay within a budget and make appropriate adjustments is to monitor the budget closely by careful tracking and monitoring. Your budget should provide you will information on where your income is coming from and where it is being spent. This tool alone will not provide a complete picture of your financial situation, but it should provide you with the information that can be used to make adjustments to your expense patterns.

-----------------------------------------------------------------------------------------------
How to get started with creating a monthly budget (if you haven't already done so):
1. Record all expenses for a month on paper, in Excel, or using another software program. How you record expenses depends a lot on your current situation.
If you always pay your credit card in full every month, I recommend recording credit card expenses in the month that they are paid in, even if the expense took place in an earlier month. This minimizes bookkeeping.
If you do not pay your credit card in full every month, I recommend recording expenses (and accumulating interest) in the month that the expenses occur. If you were to only record the expenses that are being paid, you may not get an accurate idea of what you are spending.

2. Categorize those expenses and calculate total in each category. Chances are you will adjust categories over time as your spending patterns change and as your need for information changes. I recommend broader categories over more narrow categories to start with. Information overload will just make the budgeting process more arduous.
 Some suggested categories: mortgage or rent, homeowner's association dues, tuition, extracurriculars, day care, food and supplies, gas and tolls, utilities, communications, tuition, consumer goods, dining or take-out, insurance, car payments, vehicle maintenance, medical, tzedakah, etc.

3. Organize your expense categories by "fixed" and "variable" to isolate areas you want to concentrate on reducing. For ease, let's define "fixed" as something that would require great difficulty to change, like rent/mortgage or tuition obligations and "variable" as something that could be changed with more concentration.

4. Record all income that is not "off-limits," i.e. income that you (and your spouse agree) is available to spend (although actually spending every penny probably won't prove to be a smart way to manage that money).
We record only "take home" income, tax refunds, and other small cash inflows such as reimbursements from our Health Savings Plan, product rebates, small birthday gifts, and "cash back" from our credit card.
We do not record interest income from our savings account, as we view this income as "off limits at this point in our lives. Nor do we record pre-tax income that went straight into the retirement account, or any unrealized gains (don't count your chickens before they hatch).
 We do not record any gifts (or income) designated for our children. It is our view (which I have discovered is not shared by all) that we have a fiduciary duty to safeguard their assets at least until they have the capacity to make informed decisions for themselves.

5. Once you have recorded your monthly income and expenses for about 3 months, you can set the expense side by side and calculate an average amount for each category for each month to budget around. Knowing when your expenses fall is important for cash flow (tool #2) which we can discuss later.

-----------------------------------------------------------------------------------------------

Seeing a budget on "paper" is extremely important. It lays everything out in "black" and "red" and lets an individual or a family deal with the reality. Hopefully, the picture can inspire a family to get to work, rather than argue.

Some notes:
 While most expenses should be categorized and "public," not every expense needs to be accounted for. Couples need to have some individual freedom. So it is wise to designate an amount for each spouse that can be spent without questions. (Hopefully this is tenable.) I've heard of husbands giving their wives an "allowance." This is a subject for another post. But I find the idea of an allowance degrading and much prefer a team effort with two informed parties.
When you set out to make adjustments, don't give up. It may take a few months to see the adjustments pay off.
Set aside a regular time to go through the budgeting process so that you don't fall behind. Once you are behind, catching up can seem impossible.

SephardiLady holds a BA in accounting.  She has worked in government audits, and currently freelances in accounting and tax. Visit her blog at http://orthonomics.blogspot.com/  for sound advice and insight – not just for finance.

----------------------------------------------

from the Summer 2008 issue

 Take a Break Without Breaking Your Budget by Ariella Brown