ORONO, Maine — One woman’s furnace was condemned this winter. Another woman said the two cars belonging to her family members needed thousands of dollars of work a few months ago.
“Yes, in theory, we’re all supposed to have this emergency stash of money, but it seems like things pop up too quickly to actually build up that cash,” the second woman said. “In December we had $3,000 in unexpected car repairs and it’s like, that’ll blow your budget for a few months. These things haunt you, and how do you account for that?”
The two women were among five members of the public seeking help with their household budgets who attended the first personal finance workshop in the University of Maine Financial Education Program, which was held Thursday afternoon in the Walker Room of UMaine’s Memorial Union.
The series, which will be held Thursdays, is free and open to the public. Attendees may remain anonymous and do not have to reveal any financial information.
The program is organized by three graduate students in economics. Sharon Hageman, who is directing the program, and fellow student Glen McDermott led Thursday’s workshop. Hugh Stevens also is a graduate student involved in the program.
“We just noticed there’s a huge lack of financial education, anywhere from kindergarten all the way through college,” Hageman said. “How many people get their first credit card and were never taught how to use these things?”
That’s the goal of the series — to provide assistance and information about common personal finance issues such as the use of credit cards. Thursday’s workshop was titled “Budgeting and Finance: Making Ends Meet.”
A budget, McDermott said, forces people to take a hard look at where money goes and how it can be better spent.
“It’s getting people to step back and really look at their financial landscape,” he said. “What are the decisions that brought them to where they are? What is it they’d like to keep, of the decisions they’ve made? How is their life different? Where are they going? And how do you make the cash commitments work with you instead of against you?”
The organizers, who are working with UMaine professor and School of Economics chairman George Criner, said they didn’t plan for the seminars to fall during tax season. For most people, however, the concept of spring cleaning can clearly translate to a cleaning of one’s budget.
“At the time we started there was the issue of the rising gas and oil prices,” Hageman said. “We initially started because of that, because Maine is so oil-dependent. Then oil prices went down, but now we have a recession.”
Future topics will include mortgages and managing debt. Each workshop is intended as a stand-alone session, but the sessions are designed to complement one another.
Hageman and McDermott distributed handouts with budgetary advice and sample graphics. Most of the information was generated by the graduate students.
“I’ve been doing [budgeting] for a long time and a good portion of this is just the common sense nuts and bolts of what I’ve discovered, with some information from Web sites,” said McDermott. “I’ve found, frankly, most sites are inadequate. They make a budget look like 12 different numbers, and that doesn’t help.”
The key, the students said, is to make a budget work for you, and to find the tricks to do that. No matter how you choose to keep the budget, the eventual goal is to make inflows match outflows — in other words, income has to match expenses.
The process of beginning a budget comes down to a few steps. First, Hageman and McDermott said, write down everything on which you spend money.
“Even though you don’t want to [write things down], you kind of have to audit your life,” Hageman said. “It’s the only way that you’re going to be accurate, if you write down every single thing. It’s the first step to make to see where you can make changes.”
McDermott suggested potential budgeters keep records for several months. The more of a history you have — 60 days should be a bare minimum, McDermott said — the more accurate a picture you can paint.
Next, the collected information has to be converted to a consistent unit. If you know you’re going to need to buy oil for the year, for example, add up the amount you expect to spend and divide it into an amount per quarter, month or week. The unit will be based on your own budget.
The next step is to come up with categories in which to put expenses. It’s not an easy task, McDermott said. If your categories are too general, you miss out on potential savings. If the categories are too specific, a budget can quickly become time-consuming.
The two basic budget categories are discretionary spending, which is the type of spending we can choose or not choose, such as dining out, entertainment and clothing, and nondiscretionary spending, which includes items such as rent or mortgage, heat and electricity.
Once expenses are determined, the next step is to determine inflows such as income from a job, cash distribution from investments, gifts, a tax refund or government transfers such as Social Security or food stamps.
When those numbers are broken down in the same consistent unit as expenses, you can get a picture of where you stand. If inflows are less than outflows, expenses need to be cut. If income exceeds expenses, think about where the difference can be used, such as saving for kids’ college expenses.
Other issues discussed Thursday included budgeting when there are two people sharing money, cutting costs at the grocery store, and getting discounts on insurance.
McDermott said students at UMaine campuses in Fort Kent, Machias, Presque Isle and Farmington are working to develop similar programs. The UMaine students plan to refine and package their presentations and handouts so other campuses can use them.
Bangor resident Vicky Blanchette, who does marketing for UMaine’s College of Engineering, said the workshop gave her a new outlook on her own budget.
“I liked looking at how [McDermott] broke down all these categories, the research that he’s done,” she said. “It’s helpful to get a fresh look at things. I do [the budget] on [Microsoft] Excel, but you never know what comes up. I look at it like a challenge. It’s a balance of getting these things instituted into your life in a way that works. It takes time, but it’s helpful.”
So what happens when emergencies happen — when the furnace breaks or the car needs work? You can look at a budget, McDermott said, to help get in the mind-set of setting aside money for those moments.
“You want to count on something major in your house going. It’s just part of responsible ownership,” he said. “That gives you a way to start [thinking of] what [you] need to do in order to meet those requirements.”
For information about the UMaine Financial Education program, call Hageman at 581-1853 or e-mail email@example.com