Evaluate Sam and Sally Spender!

This exercise is to help you evaluate your own budget and see if you are living within your means. There will be three steps:
  1. Examine the Spender family budget.
  2. Offer suggestions to help them not overspend and achieve their financial goals.
  3. Apply this to your budget. What can you do to limit overspending and achieve your financial goals?

Step 1

Below you will find the Spender family budget. See if you can determine where they could reduce some of their expenses. Sam has been employed in manufacturing for 15 years; Sally is a part time kindergarten teacher at a local elementary school. Sally only works 9 months out of the year, but her checks come spread over 12 months. They have 3 children, Seth an 18 year old boy, Samantha a 15 year old girl, and Suzanne a 12 year old girl. The Spender family lives 10 miles from the center of town where the school and their jobs are located. Their area has great accommodations like a bus system, many choices for shopping and recreation.

Monthly Take-home Pay $3500
Monthly Housing Expenses Amount
Mortgage: $1015
Utilities: $150
Monthly Insurance Expenses Amount
Car Insurance: $230
Health/Dental/Disability Insurance: taken out of pay check
Monthly Debt Expenses Amount
Medical: $45
Credit Card: $20
Sam’s car loan: $230
Seth’s car loan: $145
Monthly Phone Expenses Amount
Home Phone: $35
Sam’s cell phone: $50
Sally’s cell phone: $50
Seth’s cell phone: $45
Samantha’s cell phone: $29.99
Monthly Food Expenses Amount
Groceries: $300
Eating out: $120
School lunches for the kids: $165
Work lunches for Sam and Sally: $180
Monthly Transportation Expenses Amount
Gas for Sam’s car: $80
Gas for Sally’s car: $60
Gas for Seth’s car: $60
Car maintenance: $20
Parking fee for Sam: $10
Monthly Entertainment Expenses Amount
Cable: $65
Internet: $50
Entertainment: $100
Monthly Lessons Expenses Amount
Samantha and Suzanne’s dance lessons: $80
Seth’s karate lessons: $60
Monthly Miscellaneous Expenses Amount
Allowances for kids: $150
Newspaper: $12
Dog food: $40
Clothing: $85

Step 2

Each month the Spender’s seem to go over budget by about $200. They would like to have a savings account for emergencies but just can’t seem to get started. Use the following questions to offer suggestions to the Spenders.

  • What expenses appear to be high?
  • Where do you think the Spender’s could cut back?
  • Is it possible for the Spender’s to increase their income?

Possible Solutions

There are basically three ways to improve a budget.

  1. Increase income
  2. Decrease expenses
  3. Do a combination of both

Increase income. To increase income, the children could get jobs in the summer and buy some of their own clothes and pay for some of their own entertainment with friends. Seth, being close to graduation, could find better employment and perhaps pay for his own car insurance, gas, and cell phone bill.

Decrease expenses. The Spenders could decrease their expenses by implementing the step down principle for their variable expenses. They could reduce the number of times they eat out each month, or go to a less expensive restaurant, each family member could reduce lunch expenses by taking a sack lunch when appropriate. To save on gas and wear for the vehicles, the bus system could be utilized. Any clothing purchases could be made at less expensive stores. The girls could consider sharing some items. The Spenders could look into a family cell phone plan and see if their current home phone has any features they could do with out. The cable TV plan could be reduced. The Internet service could combine into one package with the cable.

Do a combination of both. As the Spender’s decide to cut back and start saving for the future, it is also a good time to help their children learn to save. If the Spenders’ decide to keep the allowances at $50 per child, a savings account could be opened for each child. As the parents put money into their savings accounts, the children could do the same.

Remember, to make this work the Spenders will need to have good communication with each other and understand that the main goal is to start a savings account for emergencies. Having a specific goal will help the Spenders stay focused and be successful. Once the Spenders decide where to reduce their expenses they can make their goal more specific. For example, if the Spenders can reduce their monthly expenses by $300, then their goal could be, save $50 each month for a year to get a total of $600 in their emergency savings. After that year is over, they could increase the amount to save or leave it the same.

Step 3

Now that you have evaluated the Spender’s budget, take another look at how much you are spending. What can you do to live within your means and start realizing your financial goals?