Basic Budgeting & Financial Literacy, Part 1

Richard F. Kontz, Executive Director, Gallup Housing Authority

Inflation is creating tough times for many people. – some have lost jobs or have reduced income which requires us to tighten our belts with regard to how we use our money. Limited funds require less spending. The key is using what limited funds we have to continue to meet our basic needs. Therefore, GHA wishes to host a series on “Basic Budgeting and Financial Literacy”. There is a verse in the bible which states: “My people suffer for lack of knowledge”. So, I want to share some basic knowledge which will benefit all.

[1] – Why manage Money – Why Plan? – The answer is very simple “Everything you need to live requires money”. Your standard of living depends upon financial resources available and how you manage those financial resources. And, “Failure to plan is simply Planning for Failure”.

[2] – How to set New Vision and Goals – First, define the box you live in now – limited education, no money to meet all my needs, living paycheck to paycheck, living in an abusive relationship which inhibits growth, bad credit, etc. Then, define what you would like your future box to look like – get the education you need to move to the next level, seek employment opportunities which pay more, seek counseling and support to have better relationships, have a good credit score. Lastly, identify the specific task, activity or steps to get from the current box to the future box and put these into SMART Goals.

[3] What are S-M-A-R-T Goals? – Goals are statements of what you want to achieve. This is how you will reach your vision for the future. It is best to set them in time frames: Within 3 – 6 months, I want to get my spending under control; within 1 year I want to get my GED since I didn't finish High School and maybe get in the local branch college; within 3-5 years I want to save for a down payment on a car; within 5 – 10 years I want to be financially secure where I don't have to live paycheck to paycheck. Set goals that are S – Specific, M – Measurable, A –Achievable, R – Results-Oriented and T – Trackable.

[4] Planning for Life Events – Events [good or bad] happen in life so it is wise to plan for them. For example: Getting married, getting divorced, having a child, seeking more education, car repairs and maintenance, losing a job or getting a new job which may required moving, buying a home or selling a home, major illness or death and retirement. These are all things that happen and “cost” money whether we like it or not. So, it is best to have a plan on how those additional expenses will be covered.

[5] Establishing a “Rainy Day” fund – The key to managing additional costs for “Life Events” is planning. Remember: “Failure to plan is simply Planning for Failure”. You need to set aside some funds for the occurrence of such events just in case they happen. For instance: If you lose your job, do you have enough funds saved to cover your bills and expenses until you get another job? Let's say your take home pay is $900 per month and you monthly expenses are $800, and you expect it will take 4 months to find another similar or better paying job. So, you need to save $800 X 4 = $3,200 to cover that period of time. And, you can save $50.00 per month as long as you are employed, so divide $3,200 by $50 and it will take you 64 months to reach that goal. In closing, this may seem like a lot but it is achievable. It is all a matter of knowing how to manage limited resources. Believe me, I speak from experience. I hope this helps you and comments or questions are welcome.