Wednesday, March 10, 2010

A quick $200 per month?

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Some of my newest clients are young adult children of longstanding clients. I’m enjoying the challenge of responding to their youthful adult needs and their thirst to learn from my sage financial and tax wisdom.

Last Saturday I met with a young couple and the topic of budgeting came up in our discussion. They were thirsty for knowledge and tips. They wanted to know if they should contribute to a tax-advantaged retirement account to save taxes.

Upon further discussion I learned that, in addition to a home loan, they both had car loans and a student loan from recently-completed graduate school. Furthermore, their savings had been recently depleted, to an unsafe three-digit amount, for a bathroom remodel. She was pregnant expecting their first child in a few months.

“Can you survive and pay the cost of doing business as a family if one of you lost your income?” I asked to which they replied no they could not.

So my advice was to forego tax-advantaged retirement contributions at this time and instead concentrate on rebuilding a prudent financial reserve, eliminating unnecessary discretionary spending and paying off their auto and student loans. Tax-advantaged retirement savings will come later is what I told them.

With regard to eliminating unnecessary discretionary spending, I encouraged them to examine the amount they spend on food and beverages as this is an area where we can all cinch our financial belt a notch or two.

After they left, the shadow of the advice I had given them began to shine in my face as I wondered how much more “fat” could be shed from this hyper-frugal middle-age man’s spending to supplement the great job that his hyper-frugal spouse is already doing. I quickly came up with three “opportunities”.

For starters, I could eliminate my morning stop at Starbuck’s and save $2 per day. If I replace this with buying and making my own, I estimate a monthly savings of $40.

I could reduce our weekly church contribution from $50 to $25 and save another $100 per month.

I could continue my intermittent fasting lifestyle which I estimate reduces my food consumption by about 30 to 40 percent. I’m not sure how much it costs to feed this middle-age man beast if I eat like most middle-age man beasts. For the sake of this blogflection, let’s say $200 per month so a 30 percent reduction in food consumption saves $60 per month.

I’m not saying that I’ll do any of these but they are there for the taking if it ever becomes necessary. How’s that for a quick $200 per month?

Pax Domini sit semper vobiscum


fishhead said...

Sounds like they need to read Dave Ramsey's "Finanicial Peace". I thorougly enjoy living debt free!!!

I'm officially middle-aged today. Should I be happy about that? Happy I'm above ground instead of under it :)

pierini said...

Happy birthday!

Middle-agehood is wonderful.