“Tools for the Journey”Tracking Your Money

“Which of you wishing to construct a tower does not first sit down and calculate the cost to see if there is enough for its completion? Otherwise, after laying the foundation and finding himself unable to finish the work the onlookers should laugh at him and say, ‘This one began to build but did not have the resources to finish.’” – Luke 14:28-30

Who should track &

budget their money?

Why track & budget your

money?

Do your finances have control of you?

† Is your checking account frequently overdrawn?

† Are you still paying bills from purchases made a year ago?

† Do you feel out of control when faced with a buying decision?

†Do you race to the bank to deposit your paycheck before the checks come in?

† Do you ever feel free to spend more after clearing up a debt?

†Would a small reduction in your income or an unusual expense force you to neglect your obligation to creditors?

†Do you hope that your children will handle money better than you do?

“Like an open city with no defense is the man with no check on his feelings” – Proverbs 25:28

Personal Finance Statistics† According to the Wall Street Journal nearly 70% of consumers live

paycheck to paycheck.

† A Marist Institute poll published in the USA Today stated that 55% of Americans always or sometimes worry about their money.

† According to CNN, the average credit card debt per household reached a record $9,312 in 2004. That's an increase of 116% over the past 10 years.

† Only 25% of Americans feel that they are well informed about managing their personal finances. (1)

† Approximately 40% of families live off 110% of their incomes. (2)

(1) FleetBoston(2) The Observer; Jan 12, 2004

“The plans of the diligent are sure of profit, but all rash haste leads certainly to poverty” – Proverbs 21:5

Personal Finance Statistics† According to ADP, 20% of workers would not be able to make a

mortgage, utility, or credit card payment if they missed a paycheck.

† Money magazine states that 75% of families will have a major negative financial event ($10,000) in any ten-year period.

† A survey by Thrivent Financial for Lutherans estimates that one in five pre-retirees age 50 to 64 has less than $5,000 accumulated for retirement.

† According to studies performed by Empty Tomb, Inc., in 2003, Catholics gave 1.2% to their churches.

(1) http://www.family.org/cforum/fosi/marriage/divorce/a0037056.cfm

“Honor the Lord with your wealth, with first fruits of all your produce” – Proverbs 3:9

† Fifty percent of all marriages end in divorce, and money issues are pointed to as a significant cause of many breakups. (1)

Questionnaire Results

(1) http://www.family.org/cforum/fosi/marriage/divorce/a0037056.cfm

“Like an open city with no defense is the man with no check on his feelings” – Proverbs 25:28

• 83% have tracked their money before

• 58% reconcile their checking account

• 75% have created a household budget└ 67% used the budget for less than 3 months

└ 89% saw benefits of doing the budget

• 83% worry about money “moderately” to “a lot”└ 67% worry about money “a lot”

• 92% would be in a tight spot if they missed a paycheck

• 83% do not feel good when making discretionary purchases

• 60% do not discuss finances with their spouse

• 75% pray about their finances

(1) http://www.family.org/cforum/fosi/marriage/divorce/a0037056.cfm

“Take good care of your flocks, give careful attention to your herds” – Proverbs 27:23

• Fears of tracking & Budgeting:

└ 50% have a fear of failure└ 42% have a fear of forcing discipline on themselves

└ 0% have a fear of learning something new

• 75% do not feel they do an adequate job at saving money

• 50% know what there assets & liabilities are

• 92% have debt outside of a mortgage

• 92% know what they spend on groceries each month

Questionnaire Results

Ministry Objectives

† To understand where you spend your money

† To gain control of out-of-control spending

† To reduce debt, increase savings, establish emergency fund,

increase Net Worth, etc.

† To feel good when you make purchases

† To improve ability to help others

† To improve communication with your spouse

“Then he said to the crowd, "Take care to guard against all greed, for though one may be rich, one's life does not consist of possessions.”” – Luke 12:15

TO BECOME A GOOD STEWARD OF GOD’S BLESSINGS

Keys to Success

GOD

Face your fears

Work as a Team

Believe you can

do it

Be ready

for failure

Be proactive,

not a victim

Never stop

Practical Tools for the Journey

“but everything must be done properly and in order” – 1st Corinthians 14:40

† Create a Balance Sheet

† Track your moneyo Tools overviewo Giving every $ a name

† Debt Paydown Tool

† Cash Flow Planningo Creating a budgeto Savings tracker

The Balance Sheet

Balance Sheet

†Net Worth = Assets less Liabilities (What you own less what you owe)

†Net Worth is a snapshot of your financial worth and will help you reflect on the direction you have taken in buying, investing, or insuring against financial risks.

†What should be included in a balance sheet:Assets:CashChecking AccountsRetirement Accounts Stocks & BondsProperty Vehicles Household Contents

Liabilities:Credit CardsMortgagesHome Equity LoansStudent LoansVehicle LoansPersonal LoansOther debts

“Precious treasure remains in the house of the wise, but the fool consumes it.” – Proverbs 21:20

Sample Balance Sheet

Assets:Cash Savings 5,000 Checking Account 1,000 Stock 5,000 401K 10,000 Property: Home 185,000 Property: Contents 30,000 Property: Automobiles 10,000

Total Assets 246,000

Liabilities:Mortgage 164,000 Credit Cards 5,000 Auto Loan 18,500 Student Loan 7,500

Total Liabilities 195,000

NET WORTH (Assets less Liab) 51,000

What can you learn?

†Do you have an adequate emergency fund?

†Did you discover any surprises, like excess debt or forgotten assets?

†Is your insurance coverage adequate to cover the value of your property?

†Are your invested assets working for you to increase your net worth?

†How does your debt compare to your assets?• Debt-to-Asset ratio of less than 50%

†Are you building financial resources to help you achieve your long-term goals?

† Track over time to see how your balance sheet improves

source: www.uwex.edu

CLASS EXERCISE:

CREATE BALANCE SHEET FOR “YOU INCORPORATED”

(see handout)

~ 5 minutes ~

Exercise AnswerBalance Sheet

You Incorporated as of 1/21/2009

FACT#1 FACT#2 FACT#3 FACT#4 FACT#5 FACT#6 TOTAL

ASSETS - What You Own$'s $'s $'s $'s $'s $'s $'s

Cash/Cash EquivalentsCash - Checking 5,000 5,000 Cash - Savings 6,000 (500) 5,500 Cash - Money Market -

Total Cash - 11,000 - - - (500) 10,500

InvestmentsBrokerage Account 4,000 4,000 Retirement Accounts 25,000 (1,000) 24,000 Education Savings 7,000 7,000 Business or Rental Investment -

Total Investments - 36,000 - - - (1,000) 35,000

Use AssetsHome 175,000 175,000 Personal Property - Autos 11,000 1,500 12,500 Other -

Total Use Assets 175,000 - 11,000 - - 1,500 187,500

TOTAL ASSETS 175,000 47,000 11,000 - - - 233,000

LIABILITIES - What You Owe$'s $'s $'s $'s $'s $'s $'s

LiabilitiesMortgage Loan 158,000 158,000 Home Equity Loan - Credit Card Balances 7,400 7,400 Auto Loans - Student Loans - Installment Loans - Business Debt - Other (Loans from Family, Retirement - Plans, Life Insurance) -

TOTAL LIABILITIES 158,000 - - 7,400 - - 165,400

TOTAL NET WORTH (EQUITY) 17,000 47,000 11,000 (7,400) - - 67,600

Tracking Your Money

Tracking Objectives

In other words, produce a periodic view of cash flows by income and expense categories

Take an unmanageable, unconsolidated amount of data and turn it into something we can obtain meaningful information from.

Month 1 Month 2 Month 3

INCOME 1,000 1,200 1,000

Expenses:AAA 150 100 200BBB 100 150 175CCC 50 150 150DDD 200 100 100EEE 75 200 200FFF 25 75 200

Total Expenses 600 775 1,025

TOTAL CASH FLOW 400 425 (25)

Categories† You do not want too many categories:

Too much to review Too much to update Dollars spread over too broad a space – can be hard to establish trends

† When you start you will feel like more is better – this is ok.

† You do not want too few categories: Categories will have so much in them the trends will not be meaningful You will lose visibility Can be difficult for you to easily identify what is in that category Makes it difficult to plan for one-time expenses.

† 25-40 categories is ideal - time will tell what is right for you

† Everyone will be unique, different

Basic Tracking StepsStep 1: Have online access to your checking and savings

accounts.

Step 2: Choose tracking/budgeting tool(s).

Step 5: Review transaction history to ensure proper categorization of spending. Fix any miscategorizations.

Step 6: Keep receipts and split out categories for general merchandise vendors.

Step 4: Download your transactions into the tool.

Step 3: Select categories and setup in tool.

Step 7: Run cash flow report to evaluate spending trends and habits

Tracking Tools

† Quicken Online (free)

† Mvelopes (monthly fee)

† You Need a Budget.com (monthly fee)

†Excel (Advanced version will be discussed during Cash Flow Planning session)

†Yodlee.com (free)

†Quicken Desktop (software purchase)

Ministry Supported

Other Tools

† Mint.com (free)

† Microsoft Money (software purchase)

Basic WorksheetMonth 1 Month 2 Month 3

$ % of

Income $

% ofIncome

$ % of

Income

TOTAL INCOME 0.0% 0.0% 0.0%

Fixed Expenses:Donations 0.0% 0.0% 0.0%Mortgage 0.0% 0.0% 0.0%Car Payment 0.0% 0.0% 0.0%Insurance - Home & Auto 0.0% 0.0% 0.0%Insurance - Supplemental 0.0% 0.0% 0.0%Phone - Home/Cellular 0.0% 0.0% 0.0%Home Alarm 0.0% 0.0% 0.0%Cable/Internet 0.0% 0.0% 0.0%Subtotal - 0.0% - 0.0% - 0.0%

Variable Non-Discretionary:Groceries 0.0% 0.0% 0.0%Utilities: Electricity 0.0% 0.0% 0.0%Utilities: Gas 0.0% 0.0% 0.0%Utilities: Water 0.0% 0.0% 0.0%Household Supplies 0.0% 0.0% 0.0%Medical Expenses 0.0% 0.0% 0.0%Repairs & Maintenance 0.0% 0.0% 0.0%Clothing 0.0% 0.0% 0.0%Auto: Gas, Services, Fees, etc 0.0% 0.0% 0.0%Personal Care 0.0% 0.0% 0.0%Dry Cleaning 0.0% 0.0% 0.0%Animals 0.0% 0.0% 0.0%Subtotal - 0.0% - 0.0% - 0.0%

Discretionary Expenses:Dining 0.0% 0.0% 0.0%Misc Entertainment 0.0% 0.0% 0.0%Furniture/Appliances/Electronics 0.0% 0.0% 0.0%Fitness 0.0% 0.0% 0.0%ATM Withdrawals 0.0% 0.0% 0.0%Travel 0.0% 0.0% 0.0%Gifts 0.0% 0.0% 0.0%Subtotal - 0.0% - 0.0% - 0.0%

Other Activity:Other Income 0.0% 0.0% 0.0%Bank Account Fees 0.0% 0.0% 0.0%Property Taxes/Home Owners Fees 0.0% 0.0% 0.0%Credit Card Payments 0.0% 0.0% 0.0%Miscellaneous 0.0% 0.0% 0.0%Subtotal - 0.0% - 0.0% - 0.0%

SAVINGS 0.0% 0.0% 0.0%

CHECKING CASH FLOW - 0.0% - 0.0% - 0.0%

CHANGE IN SAVINGS ACCOUNT - - -

TOTAL CASH FLOW - - -

Yodlee & QuickenYodlee Quicken

Pro’s:• Very easy to setup• Currently free of charge• Free transaction downloads• Strong login security• Ability to group accounts• Free Billpay• Robust alerts settings• Easy to create a budget• Can split transactions• Can add sub-categories

Con’s:• No cash flow reports (use pivot table in excel)

• Only allows one budget period• Cannot create categories• No account reconciliation• Must remember where you left off

with transaction categorization• Takes several days for manual

adjustments to show

Pro’s:• Desktop solution• Manual downloads are free• Account reconciliations• Can split transactions• Can add/delete categories• Customizable cash flow reports• Allows multiple budget periods• Keeps transactions in separate

window until you have categorized

Con’s:• Software purchase• Possible bank fee for auto

downloads• Budget tool is more difficult to use• Setup time is more time consuming

Yodlee.com

Yodlee.com

To change category simply click and select from list

Yodlee.com

Quicken Desktop (Main View)

Quicken Desktop (Cash Flow Report)

Quicken Desktop (Cash Flow Report)

Quicken Desktop (Downloading Transactions)

What to Expect

† Shock – this may uncover some unrealized & very negative spending habits.

† Frustration – with the initial setup (learning something new) and with the changes in spending habits you may need to make.

† Sense of empowerment – you will gain more control over your finances and will have a sense of accomplishment.

† Sense of prudence – you will become a better steward of God’s Gifts.

† Happier spending – you will feel better about some of the discretionary purchases.

Testimonial

HomeworkCome to January 23rd Workshop

Manually track 3 months of income & expenses using Basic Worksheet

Select tracking & budgeting tool

Purchase tool (if needed)

Setup categories in tool

Download transactions & categorize

Review trends & get ready to budget

“By wisdom is a house built, by understanding is it made firm; And by knowledge are its rooms filled with every precious and pleasing possession.” – Proverbs 24:3-4

Q&A