LeeAnne Neilson

FCS 3450
November 21, 2015
Project 2--Spending Plan Option
EXPLANATION OF PLAN
I am creating this spending plan for Marion and Adam, a couple who wish to retire in five
years. They have been in a pretty good financial situation for the last few years and have not had to
maintain a strict monthly budget. However, because retirement is drawing near, Marion would like
to alter their budget plan to increase their monthly savings and reduce frivolous spending. They have
never participated in equal payment plans concerning utilities, so my first step in creating their
spending plan was to enroll them in such a plan. An equal payment plan will eliminate the seasonal
ups and downs in a yearly financial plan. This type of spending plan will prepare this couple for
retirement when finances are tighter and health costs may increase.
While discussing this couples financial goals and evaluating their two-month actual
spending totals, we decided to try the envelope system for the upcoming year. Marion was cognizant
of the fact that they have not been aggressively adding to their emergency savings account as
originally planned when they switched to a lower health insurance premium and are actually drawing
from their savings more frequently than intended.
During my tracking period, they spent $1,909.54 on tuition for their daughter. They desire to
continue helping their daughter with college expenses, which is why the yearly spending plan
includes a monthly figure of $370 for tuition. This is contingent upon an agreement with their
daughter that she will pay $1,000 per semester, go to school full time, maintain her scholarship, and
work seasonally at PJs bookstore. This expenditure is doable for the couple because they put part of
their inheritance money in an account for such a purpose.

Another large expense that I recorded during the tracking period for this couple was
$1,325.93 spent on their vacation. In actuality, the cost of the vacation totaled $3,500; the couple had
prepaid the airfare and some of the activities. Vacations are extremely important to Adam. He feels
they create priceless memories. Marion is content to have staycations and is satisfied with attending
community events. As a compromise, after an expensive vacation, the next couple of years the
vacations are cheaper. My spending plan reflects this compromise, and each month $119 will be
dedicated to a modest vacation fund for the upcoming year.
The telephone bills interested me. This couple spends on average $83 a month on a landline,
which includes internet connection. In October, they prepaid $25 for one of their cell phones. This
$25 is the minimum amount they can load on their cell phone, which expires within a three-month
period of time. They have two prepaid cell phone plans, one of which rarely gets used. Since their
financial situation is quite good and they feel more secure if their daughter has a cell phone for
emergency use, I feel the $17 allotted each month for the cell phone plans is justifiable. It would not
be a financially wise move to disconnect the landline because this couple is grandfathered in to a $31
a month internet fee. There are three people in the household and to switch totally to cell phones
would be more costly.
In September, this couple spent $79.74 for home repairs and nothing in October. I included
$67 per month in their spending plan to incorporate a couple of their home improvement goals for the
year 2016. Adam wants to reroof the shed and pour a concrete slab. Marion desires to repaint the
master bedroom and get new window coverings. The allocated $67 per month should cover those
expenses and will stop them from pulling money out of their emergency savings account.
Marion and Adam spent $234.93 on groceries in the month of September. The October value
was skewed because of the vacation they went one and not going to the grocery store one week. I
also noticed that they spent $181.48 on food storage items in the month of September. Thus, I

increased the monthly grocery budget to $300 to allow for replenishment of food storage items as
they come on sale throughout the year. This increase in their grocery allowance also provides for
special food items to be purchased for birthdays and holidays.
Considering that Marion tends to be quite frugal, it shocked me that in the month of
September this couple spent $94.46 on dining out. That is more than they spend on groceries each
week. This couple enjoys eating out occasionally and so I suggested that they take a step down in the
amount of money they spend on dining out. Their allowance for dining out each month is $60 and
will allow them to eat out two to three times a month. This adjustment to their spending habit will
help to contribute to their goal of saving $492 each month.
This couple has chosen to pay their car insurance yearly, which occurs in September and
costs $729. In the yearly plan, I elected to have them save $61 a month and set it aside in a separate
dedicated savings account for their car insurance premium. This type of discipline will make sure
that they do not dip into their emergency savings account in order to pay the car insurance. Marion
hopes that this plan will help resurrect the former strict financial spending habits they had employed
in the early years of their marriage.
During my tracking period, Marion and Adam had one car repair expense of $596.01. My
yearly spending plan for them reflects a potential predicted need for them to set aside $1,728 for car
repairs. This is based on the current age of their cars (twelve and fifteen years old) and the expenses
for maintenance they incurred during the past year. Their philosophy concerning vehicles is to buy
used and make them last twenty years. At this point, they feel that it is still prudent to pay about
$1,700 for car repairs per year. The age of their cars also allows them to carry collision insurance
versus the more costly comprehensive premiums. However, they realize that within a few years they
will need to replace a vehicle. Thus, the spending plan has included a significant increase in savings
each month as a preparedness factor for the day that they will need to replace their vehicle.

Currently, they only saved $187 during the tracking period. They will now need to save $492 per
month. This is a challenging but realistic goal because when they were saving for a down payment
for their home many years ago, they were able to save $500 a month and did that for one year. This
couple is disciplined when they have a set financial goal.
Since they have no mortgage, they are responsible for paying their house insurance and
property taxes each year. Neither of these expenses was seen in the tracking period. Their property
taxes are due each November. In 2015, they will pay $1,795.49 in property taxes. So, my spending
plan reflects this amount by having this couple save $150 a month for property taxes. Their home
insurance is due in August of each year. In 2015, their premium was $470. By setting aside $40 each
month in the spending plan, they will have $480 in which to pay their premium in August.
Marion and Adam are taking advantage of having their health insurance premium taken out
before taxes. A couple of years ago they opted to select a health insurance plan with a lower monthly
premium and a higher deductible. After carefully calculating the difference between the two plans,
they figured that if they went with the lower premium/higher deductable plan and had to pay $2,000
in out-of-pocket expenses, they would still break even with the higher premium/lower deductable
plan. Unfortunately, their daughter needed major surgery this past summer and they ended up paying
approximately $4,000 in co-pays. This was not reflected during the tracking period when they paid
about $40 a month for co-pays. For the coming year they are hopeful that their out-of-pocket
expenses will be no more than $2,000, and that is why I have apportioned $167 each month for copays. An additional reason that I have suggested they save $492 a month in a dedicated savings
account is to have extra money for unexpected medical needs.
The personal category has implemented some significant changes from the tracking period.
Adam felt that budgeting $50 a month for clothing was ridiculous because he rarely buys clothing.
However, Marion has a better handle on the true costs for clothing needs for her family. By using the

envelope system and tracking clothing expenditures for a year, Adam will gain an understanding of
the true cost associated with clothing needs.
The couple also felt a need to reduce how much they spent on gifts each month. During the
tracking period, their average cost for gifts was $95 a month. I chose to reduce this expense by $15
per month, and this will save them $180 a year. I also added a mad cash section to the personal
spend category. Adam sometimes feels that the budget is too strict and this will allow him some cash
he can spend without having to account for it.
DISSCUSSION SECTION
Marion and Adams highest priority concerning a general spending plan principle is to stay
out of debt and live within their means. They are pretty good at identifying needs versus wants and
are able to delay gratifications. For instance, they are content to wait until a movie comes to the
dollar theater or is available at their local library versus paying $8 a ticket. Another example
involves their home phones. Two out of three of their home phones have recently broken and have
not yet been replaced. Marion laughs that it has increased her physical exercise as she runs up and
down the stairs to answer the phone.
They also live the step-down principle, especially concerning transportation needs. Instead
of buying a third car for their daughters needs, Marion chose to share her car with the daughter. The
daughter agreed to also take advantage of the free TRAX perk associated with her enrollment at the
University of Utah. This arrangement fits their budget and reduces the amount of money spent on
car insurance, maintenance, and gasoline. This compromise fits the middle option in the step-down
principle concerning transportation for this situation.
Financial retirement goals have also been implemented in their spending plan. A portion of
their retirement/pension funds has been linked to the stock market. The stock market has not been
friendly to this couple this past year. They have experienced a loss in the growth of their retirement

account. On analyzing their current retirement savings, they personally are only saving 4.26% of
their gross income for retirement purposes. Thus, with the spending plan I have created, it will bring
this figure up to 8.52% and closer to the recommended goal of paying yourself 10% first.
QUESTION SECTION
How do you feel about having/creating a spending plan? Creating a spending plan instills a sense
of peace within this couple. It also helps them to evaluate their current spending habits they have
slipped into and refocus on living more frugally. It is frugality that has helped them reach their
current healthy financial status.
Were these months typical of your spending? If not, how did you account for the abnormality
in your yearly projections? The two months I tracked for this couple were not typical of basic
monthly spending habits because of their vacation and financial contribution to their daughters
college education. They also had an increased number of occasions necessitating the purchase of
gifts. I accounted for this abnormality by budgeting money throughout the year for these categories
and reducing the allotted amount for next years vacation.
How are you going to reallocate your spending in the future? In other words, how are you
going to change how you have been spending in the past? In order to reallocate financial
expenses for this couple, I have put them on equal payment plans for utilities and created monthly
budget figures for specific expenditures. The couple will also continue to track their expenses and
stay within the agreed upon amount for each category. If they discover that their financial figures do
not cover the necessary expenses for a category, they will readjust the amount and reduce money in
another category. If needed, they will choose a want that they can forgo.

What was the most interesting thing you learned about yourself in the creation of your
spending plan? This couple realized that on their modest income they have quite a rich lifestyle.
There is plenty of money for recreational activities. However, they also recognized that they need to
buckle down and be more serious about increasing their savings.
How will having a spending plan affect your future? A spending plan will help to always meet
this couples financial obligations and help them prioritize how to spend their extra cash. It will
allow them to be the boss of their money and empower them to say no when expenditures are not in
the plan.
How will having a spending plan affect your immediate family? A spending plan will cause this
couples married children to become more self-sufficient and responsible for their own financial
well-being because Marion and Adam will not freely give so much money to their children since it is
not in their budget.
How will having a spending plan affect society? In other words, if every American had a
spending plan, what effect would that have on the economy? The economy would become
financially healthier if everyone made a spending plan and stuck to it. Less money would be spent
on credit card interest payments and government-sponsored welfare programs.

/8 points for completing the process accurately, following directions, and attaching supporting
documents
/2 points for clarity in describing the process of project creation
/3 points for completely and thoroughly answering the questions
/2 points for correct grammar (e.g., NO CONTRACTIONS USED, following the guidelines listed
in the Pitfalls Document).
/15 total