A Diva’s Budget

  • NEW Everyday Diva Logo PNGPutting together a budget is an extremely helpful tool for someone trying to get their financial house in order. During the process, they can find out what expenses are necessary, what expenses aren’t and what expenses they should start to incur.

Prepare the Budget with an Advisor

I recently sat down with an opera singer who is a friend of mine to go over her budget. For some time she’s had the feeling that she was making a pretty penny but didn’t have anything to show for it.

During the review we were able to determine that certain bills had to be paid. They included rent, car, power, medical insurance, student loans, retirement savings and a number of other necessary bills.

Know the Goals and Outcome of a Budget Review

Now part of the reason that she wanted to go through the exercise was to determine how she could set aside money for simple savings for a rainy day but also carve out a portion of her income for continuing her opera lessons.

With this review we also came across expenses that where secretly and subtly draining her pocket book. Namely food. This included not only the food that she bought for the home but also what she spent every day for breakfast, lunch and dinner. It was adding up.

On top of those expenses she noticed that going out with her friends was hurting her finances. She realized that she was spending too much going to dinners, movies, and generally hanging out with her friends.

Do What the Budget Plan Recommends

Now to be fair, the review was not designed to say that she should stop doing what she was doing all together. It was however designed to let her know where the challenges where and how to fix them. Namely watching what she buys outside the home for lifestyle.

This part of the review is critical. Once we identified what needed to be done she needed to do it. This is not to say that she won’t spend a little extra here and there but she needed to follow the plan to make it work. That way she can achieve a healthy financial balance in her life.

Putting together a budget with a financial advisor can go a long way in getting ones financial house in order. They provide independent, expert eyes that can look at the finances of their clients and determine what the best use of money is and where they can make improvements.

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You Cannot Deduct Your Commuting Expenses

SONY DSCEvery so often during tax season I get a client that wants to deduct the expense of going back and forth to work on their taxes. They cannot do it. Here is what the IRS says about it:

“You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. These costs are personal commuting expenses. You cannot deduct commuting expenses no matter how far your home is from your regular place of work. You cannot deduct commuting expenses even if you work during the commuting trip.

Example. You sometimes use your cell phone to make business calls while commuting to and from work. Sometimes business associates ride with you to and from work, and you have a business discussion in the car. These activities do not change the trip from personal to business. You cannot deduct your commuting expenses.”

 

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Financial Living after Bankruptcy

Internecine_BradyAllen_700xBankruptcy for many Americans is the only option that can help them get a handle on their financial life. Most, if not all, of the people in my profession recommend bankruptcy only as a last resort. Therefore, anyone considering it should think long and hard about it. And then, think again.

Why do advisors say this? Bankruptcy hurts a person’s chances of buying in the future.  This includes buying daily lifestyle items like a home, car and other items.

It can hurt a person’s chances of renting an apartment. It may even hurt a person’s chances of landing a job in the future. How? Many employers and landlords make a credit check part of a background review and if they see a bankruptcy on the report they may want an explanation as to why it’s there. If they don’t like the response, they may use that to disqualify an applicant.

Bankruptcy Starts a New Financial Life

Giving advice on what to do after a bankruptcy filing is the situation I found myself in when a very dear friend of mine asked me, “how and where do I begin to rebuild credit as well as devise and develop a budget and retirement plans after filing for bankruptcy.”

The first piece of advice I gave her was to stay upbeat, positive and look forward to her new financial life. This advice is something she and anyone else who files for bankruptcy should embrace. They’ve come out of the filing experience with a fresh start. That being the case, on one hand, they should simply let the past be the past and leave it there.

On the other hand, there new financial life also offers them an opportunity for soul searching. Here’s how. If the bankruptcy was caused by too much spending, then that needs an honest review. If it was caused by a crazy lifestyle, then that’s cause for a long hard look. If it was caused by a health problem (as most are) and it couldn’t be helped, then they need to move on and not look back.

Put a Budget on Paper

The next piece of advice I gave to my dear friend (and anyone else who has filed for bankruptcy) was to create a budget and put it on paper.

The first step in that process would be to take a piece of paper and draw a line down the middle from top to bottom. On the top left hand side of the page, they should write down how much they make every month.

Next, on the top right hand side of the page, they should start writing down how much they spend every month. The important part with this step is that they are brutally honest. If they spend $150 a month on what they call the “Charlie Sheen Lifestyle,” then they need to put that down. Not writing it down does them no favors and only cheats their future.

Once they get all the expense numbers on the page, they need to add them up. The same should be done for the income in the left hand column. Obviously, they want the totals in the income column to be great then the totals in the expense column.

If not, they can start the process of cutting expenses where possible. In doing this they should also keep in mind that the budget is a living breathing document.  Therefore, they should try to keep it in a place where they can reference it quickly and easily.

If they have to spend more than they make, there may be a need for the individual to do a number of things to increase their income. That may include looking for a better paying job or a second job; maybe even starting a side business.

Set Up and Contribute to Savings and Retirement Accounts

The next step in the rebuilding process involves setting up a savings account and a retirement account. The important part about that is that they contribute to the accounts on a consistent basis. The trick being that they contribute whatever works for the budget. Even if that amount is $5 a month (they can always increase the amount), they should do it and not touch it for any reason. To set up the accounts they can without difficulty go to a bank or brokerage and have a representative set up the accounts.

Again, for many Americans bankruptcy is a difficult time on a number of levels. However, it’s not the end of the world. People who file should try as best as possible to learn from the experience and move forward in a positive and meaningful way. Doing that not only helps them and their life but helps the lives of those around them that love and care about them.

 

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