2009 Virginia Polytechnic Institute and State University 2902-7022 Virginia Cooperative Extension programs and employment are open to all, regardless of race, color, national origin, sex, religion, age, disability, political beliefs, sexual orientation, or marital or family status. An equal opportunity/affirmative action employer. Issued in furtherance of Cooperative Extension work, Virginia Polytechnic Institute and State University, Virginia State University, and the U.S. Department of Agriculture cooperating. Mark A. McCann, Director, Virginia Cooperative Extension, Virginia Tech, Blacksburg; Alma C. Hobbs, Administrator, 1890 Extension Program, Virginia State, Petersburg.

FamiliesTakingCharge:SettingSpendingPrioritiesRevisedByCeliaRayHayhoe,Ph.D.,CFP®,FamilyResourceManagementSpecialist

Facedwithareducedincome,manyfamilies

waitsixmonthsorlongerbeforetheyreduce

theirspending,accumulatingdebtandunpaid

bills.Familiesneedtocutbackonspendingright

awaybydevelopingaspendingplantohelppay

theirbillsandlivingexpenses.

Manypeopletrytohidefinancialproblemsfrom

themselvesorfamilymembers.Notfacing

problemscanbeverydestructivebecausethe

worryandstresscausedbyfinancialuncertainty

andlackofcashmaybeworsethanthefinancial

problemitself.It’simportanttolookrealistically

atthesituationandactivelyseeksolutionsto

problems,despitethediscomfort.

Becausespendingdecisionsaffectthewhole

family,talkwiththefamilyaboutthesituation.

Letthemknowthefamilyneedstochangetheir

spending.Involvethemindecidingspending

priorities.Iffamilymembersunderstandthe

toughchoicesthatmustbemadeandhavea

voiceinmakingthedecisions,theywillbemorewillingtoacceptthedecisions.Asyourfamilytalksaboutwhat

ismostimportant,besuretolistentowhatotherssay.Supportingeachothercanhelpyoupulltogetherasa

familyandgetthroughthesehardtimes.

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HowOtherFamiliesHandleReducedIncomeStudiesshowfamiliesrespondtoreducedincomebycuttingbackontheirspending.Spendingfornonessentialssuchasluxuries,vacations,eatingout,andhomefurnishingsiseliminatedorreducedfirst.Astheperiodofunemploymentorreducedincomecontinues,manyfamiliesalsoreportreducedspendingforbasicneedsincludingfood,shelter,transportationandmedicalcare.Familiesalsosaytheyrevisetheirbudgets.Mostmakeanewspendingplanthatincludesarevisedplanforgettingthebillspaid.Thisisatimewhenyoumayfinditusefultouseawrittenspendingplan.Somefamiliesreportedusingmorecreditasawaytomanageduringunemployment.Borrowingorusingcredittopaybillsoftenbringsonlytemporaryrelief.Forthosefamilieswhodidincreasetheiruseofcredit,themoretheyborrowed,themoreunhappytheywerewiththeirfinancialsituation.Studiesalsofoundthatfamilieswhoquicklymadechangesintheirspendinghabitswerethemostsatisfiedwithhowtheyweremanagingduringunemployment.Familieswhodidn’tmakechangesfeltmoreoutofcontrolandmoredissatisfied.

MakingaSpendingPlanAspendingplanisalwaysaneffectivetooltohelpyougetthemostforyourmoney.Itisevenmoreimportantwhenyouhaveasuddenchangeinyourincome.Aspendingplanhelpsyou:• makedecisionsabouthowtospendyourmoney• provideforneedsbeforewants• matchyourspendingtoyourcurrentincome• preventfamilyargumentsovermoneyWorksheet1,“MonthlySpendingPlan,”canhelpyousetupaspendingplanforyourcurrentincome.Bycomparingyourincomeandplannedexpensesbeforeandafteryourincomewasreduced,youcanseewhatchangesareneeded.Step1YourIncome(Worksheet1A)Addupyourcurrenttotalfamilyincomefromallsources.IncludeUnemploymentCompensationaswellasincomefromotherfamilymembersifitisusedforfamilyexpenses.Usethetake‐homeamount,orwhatyouactuallyhavetospendafterdeductions.Doyoureceiveincomefromanyofthesesources?• Earningsfromemployedfamilymembers• UnemploymentCompensation,SocialSecurity• Giftsfromoutsidethefamily• Withdrawalsfromsavings• Tips,bonuses,andcommissions• Interestordividends• Childsupportoralimony• Publicassistance• Veteransbenefits

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MonthlySpendingPlan(Worksheet1A)Step1–YourIncome(Take‐Home)* BeforeReduction AdjustedAmountSalary,wages $ $UnemploymentCompensation $ $Cashgifts $ $Publicassistance $ $Tips,bonusesandcommissions $ $SocialSecurity,RailroadRetirementorVeteransbenefits $ $Withdrawalsfromsavings $ $Childsupportand/oralimony $ $Interestanddividends $ $OtherIncome $ $A.TotalMonthlyIncome $ $Step2YourMonthlyExpenses(Worksheet1B)Ifyouhadaspendingplanbeforeyourincomewasreduced,youprobablyknowhowmuchyouwerespendingformonthlyexpenses.Ifnot,useoldrecords,canceledchecks,billsandreceiptstofigureouthowmuchyouspentonthefollowingcategories.• Housing—mortgageorrentpayments,(propertytaxes&homeinsuranceifincludedinyourmortgage

payment)• Utilities—electricity,gas,oil,phone,water,cableTV• Food—groceries,eatingout,schoollunches• Transportation—gas,carrepairsandmaintenance,parking,bus,taxifares• Medicalcare—doctor,dentist,clinic,hospital,medicine,glasses• Creditpayments—carpayments,installmentloans,creditcards,chargeaccounts• HouseholdExpensesandMaintenance—repairs,cleaningsupplies,papersupplies,towels,equipment• ClothingandPersonalCare—newclothingpurchases,laundry,drycleaning,haircare,cosmetics,

toiletries• EducationandRecreation—books,magazines,newspapers,lessons,tuition,hobbies,clubdues,sports,

petexpenses,entertainment,vacation,alcohol,tobacco• Miscellaneous—childcare,regularcontributions,personalallowances,childsupportpaid,alimonypaid.

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Asyouthinkaboutwhatyouwerespendingandtrytoplanhowmuchyoucannowspend,askyourselfthesequestions:• Whichexpensesareessentialtoyourfamily’swell‐being?• Whichexpenseshavethehighestpriority?Publication354‐101inthisseries,“HowtoDecide

WhichBillstoPayFirst,”canhelpyoudeterminethis.• Whichareascanyoureducetokeepyourspendingwithinyourincome?• Howmuchcanyouaffordtospendineachcategory?Adjusttheamountsyouspendineachexpensecategoryandenterthenewamountinthecolumnlabeled“AdjustedAmount”onthespendingplanworksheet.

MonthlySpendingPlan(Worksheet1B)Step2–MonthlyExpenses BeforeReduction AdjustedAmountHousing–mortgageorrentpayment $ $Utilities–electric,gas,water,phone,cellphone $ $Food–athomeandaway $ $Transportation–gas,carrepairs $ SMedicalCare–doctor,dentist,hospital,prescriptions $ $CreditandLoanPayments–loans,health,car,property $ $HouseholdOperationsandMaintenance–repairs,cleaningsupplies,etc.

$ $

ClothingandPersonalCare–clothes,laundry,toiletries,haircuts,etc. $

$

EducationandRecreation–movierentals,vacations,cable,schoolsupplies

$$

Childcareandallowances $ $

Miscellaneous $$

Savingsand/orfundssetasideforseasonalandoccasionalexpenses.Seeworksheet2

$$

B.TotalMonthlyExpenses $ $Remember,notallyourexpensesaremonthly.Propertytaxes,insurancepremiumsandholidaygiftscomeonceortwiceayear.It’seasytoforgetandthennothavethemoneytopayforthem.Worksheet2,“OccasionalandSeasonalExpenses,”canhelpyouidentifyandanticipatetheseexpenses.Youwillneedtosetasidesomemoneyinyourmonthlyspendingplantomeettheseoccasionalcosts.YouwillneedtocompletethisworksheetbeforeyoucanfinishWorksheet1B.

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OccasionalandSeasonalExpenses(Worksheet2)Somebigexpenseslikepropertytaxes(carandlandifnotincludedinthepayment),licenseplatesandcarinspections,anddifferenttypesofinsurancepremiumscomeuponlyonceortwiceayear.Othersareseasonal,suchasschoolclothesinthefallandholidaygiftsinDecemberandspecialholidaymeals.Someexpenses,likegifts,happenmoreoftenbutnoteverymonth.Usethischarttohelpyouestimatetheseexpensesandincludetheminyourspendingplan.Totalalltheexpenses,divideby12,andputthatamountintherowbeforeTotalMonthlyExpenses.Forexample,ifyourexpensesaddto$480,then480/12=$40.Youwouldenter$40intherowbeforetotalexpenses.

Worksheet2‐ExpenseAmountJanuary July

February August

March September

April October

May November

June December

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Step3—BalanceIncomeandExpensesAddupyouradjustedexpensesandcomparethetotaltoyourcurrentincome.Whenyourincomeisreduced,itmaybeverydifficulttostaywithinyourincome.Whatcanyoudoifyourexpensesaregreaterthanyourincome?• Cutbackonspending.SeePublication354‐098inthisseries,“Spending

Less,”forsuggestions,particularlyforreducingflexibleexpenses.

• Increaseyourincome.Whatarethepossibilitiesforpart‐timeortemporaryworktohelpsupplementyourincomeduringthisperiodofunemployment?Useyournon‐dollarresources.

• Lookatyourassets.Whatsavings,investmentsorpropertydoyouhavethatcouldbeusedorconverted

tocashtomeetexpenses?Keepinmindthatborrowingandusingsavingsmaybeonlytemporarysolutions.

• Reduceyourfixedexpenses.Iftoomuchofyourincomeisgoingtofixedexpensessuchashousingor

debtpayments,theremaynotbeenoughmoneylefttocoveryourotherlivingexpenses.Youmayneedtorefinanceyourloans,movetolower‐costhousing,orsurrenderthepropertytoyourcreditortogetoutfromundersomeofyourdebt.

Step3–BalanceIncomeandExpenses

TotalMonthlyIncome(1A) TotalMonthlyExpenses(1B) TotalMonthlyIncome(1A)shouldbethesameasTotalMonthlyExpenses(1B)

MakingYourSpendingPlanWorkOnceyouhaveaspendingplanthatsetsspendingamountsforessentialfamilyneedsandbalancesyourspendingwithyourincome,you’llhavetosticktoit.Writingitdownisnotenough.Youmustusetheplantoguideyourspending.Keeptrackofyourspendingtobesureyoudon’texceedthespendingamountsyousetinyourspendingplan.Keeparecordofwhatyouspendineachexpensecategorytobesureyoudon’texceedtheamountonyourspendingplan.Bykeepingtrackofwhatyouhavespent,it’seasiertocontrolyourspendingandlivewithinyourincome.

ManagingonaSeasonalorIrregularIncomeIfyouareself‐employed,seasonallyemployedorreceiveincomefromtipsorcommissions,yourfamilyincomemaychangealotfrommonthtomonth.Inthatcase,lookaheadandcarefullyestimateyourincome.Itmaybehelpfultoestimateyourincomeforawholeyearsoyoucanseewhenandhowmuchitchanges.

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Eventhoughyourincomemaychangefromonemonthtothenext,manyofyourlivingexpensesarethesameeachmonth.Thismismatchofincomeandexpensescreatesuncertaintythatcancausefeelingsofinsecurityandincreasefamilytension.Reducethisuncertaintybyestablishingamonthlyfamilylivingallowance.Useexpensesyouidentifiedaspartofyourspendingplantodetermineyourmonthlylivingallowance,orwhatitcostsyourfamilytoliveeachmonth.Whenyoureceiveincome,depositamajorportionofitinaspecialsavingsormoneymarketaccountwhereitwillearninterestbutstillbereadilyavailable.Then,payyourselfeachmonthbywithdrawingtheamountofyourfamilylivingallowanceandputtingitintoyourcheckingaccounttopayyourbills.Avoidthetemptationtospendmoremoneyinthemonthswhenyourincomeisgreater.Asafamilyonaseasonalorirregularincome,youmaywanttoschedulesomemajorexpensessuchasinsurancepremiums,clothingpurchases,andnon‐emergencymedicalanddentalcaretocoincidewithtimesofmoreincome.

SummaryLivingonareducedincomemaybetemporaryorprolonged.Gettingthemostfromyourincomeduringthistimerequirescarefulplanningandwisespendingdecisions.ReferencesBoelter,Linda.“SettingSpendingPriorities.”CooperativeExtension,UniversityofWisconsin‐Extension.1991.TexasAgriculturalExtensionService.“CopingwithUnemployment.”1986.Wilhelm,M.S.,D.R.Iams,andC.A.Ridley.“ChangesinConsumptionManagementDuringUnemploymentandTheirImpactonEconomicSatisfaction.”UniversityofArizona.1987.OriginalbyIreneLeech,ExtensionSpecialist,ConsumerEducation,VirginiaTech,withtheassistanceofDonCloud.Reviewers:CristinSprenger,ExtensionAgent,FamilyandConsumerSciences,AugustaCountyKimberlyCardwell,ExtensionAgent,FamilyandConsumerSciences,SpotsylvaniaCounty