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Fiscal fitness

It's not a budget, it's a spending plan

If you can look yourself in the mirror and say, with a straight face, that you can pay off all of your debts - mortgage and car loan aside - by the end of the month, you are one minister in many.

If you are in this situation, you probably don't have to think twice about how you're managing your money. Either you've been very careful, you're earning enough so that spending isn't an issue, or you've managed to do both.

But if you owe more than you can pay off this month or next or in several months to come, it may be time to deal with that dreaded B-word: budget. Despite the images it evokes - that of a straitjacket or a full-body cast - budget is really just another word for spending plan.

Your money comes and it goes. With a spending plan, you allocate your income so that the money going out is covered by the money coming in. Ideally, when you've paid your regular bills, paid your tithe, and added to the emergency fund you've set up (or would like to set up) to cover unexpected expenses like repairs on the car, a leaky roof, an appliance that gives up the ghost, or a medical bill not covered by your health plan, you'll have enough left over to pay for something you enjoy, to invest for some future goal, or to help a friend in need.

How to map things out. Since the majority of your bills are due once a month, a monthly plan often works better than an annual one - and the numbers are easier to deal with. If you keep a close eye on your accounts, especially when you're getting your plan off the ground, you can adjust your spending quickly enough to keep what's coming in and going out in balance. One caution, though: Remember to set aside money every month for expenses that are billed quarterly or annually, like insurance or property taxes. Otherwise, they'll put your plan in a tailspin.

Sometimes it's easier to keep track of your money if you set up separate accounts: a household account, a savings account (which can serve as your emergency fund, provide money for short-term goals, and accumulate money for investing), and a discretionary account.

Few ministers have the option of having their paychecks direct-deposited. If you are one who does, you can probably arrange to have it split between at least two different accounts (on either a percentage or dollar-amount basis). Or, if you have to divide the money yourself, do it each time you're paid so you can keep track of where your money goes. One hint: Be sure your bank lets you combine the value of your accounts to meet the minimum balance to qualify for free checking, online banking, and ATM use; if not, find a new bank.

Trim the fat. Your household account is likely to be the largest and least flexible. Your mortgage or rent is probably fixed, and you may not have much leeway with utilities, healthcare, transportation, and food (though meals you eat away from home are a prime target for economizing). If you pay all of these bills out of your household account, and don't tap it for anything else, you'll know quickly if this part of your plan is realistic. And if you keep track of all your payments for a month or two, you'll also know exactly where the money is going and where you can trim.

If you can manage to reduce your major expenses such as housing costs or transportation, you obviously will have more flexibility for spending in other areas. Or you'll be able to boost the amount you're investing (probably in your 403(b) plan). Many ministers don't have the opportunity to significantly reduce housing costs since they live in church-owned housing. But if you provide your own housing, the location and size of your house can have a major impact on housing costs.

Here are a couple more ideas to trim the fat:

* Explore the new generic products. You could always save money buying a retailer's generic version of branded products. Before, the price of generics was good, but the quality wasn't always great. Today's story is the rise of branded generics, where the retailer creates and promotes a brand name for its line of generics.

Branded generics cost about 30% less than national brands. That's less than the 50% or so that the old-style generics used to save you, but the quality of today's store-brand generics is excellent.

* Pay less for long distance. Twenty years ago, a one-minute long-distance call averaged 69 cents. Today, if you have a cell phone, you can get long distance at no extra charge as part of your calling plan. Or purchase prepaid long-distance calling cards at retail stores. Cost: Less than 3.5 cents a minute. If you have a speed-dial feature on your phone, you can program in the calling-card number for inexpensive calls with less hassle.

If you prefer the convenience of dialing from home without punching in lengthy code numbers, try www.zoneld.com. Cost: 4 cents a minute to any five states you designate and 4.5 cents to other states.

Maximize your dollars. The next step in making your money-management plan work is trying to get the most for what you spend rather than just concentrating on cutting back. If you're ready for a different car, dealers are offering 0% financing on new cars. Millions of cars are coming off lease and the used-car market is flooded with two- and three-year-old models. The price of a new Mazda MPV LX minivan is about $23,200. A used 2001 model runs as low as $16,600, according to the Kelley Blue Book.

Similar 0% financing is available for major appliances, furniture, and other big-ticket items offering up to a year without finance charges. But be careful: If you don't pay off the full balance by the end of the grace period, it could cost you a bundle.

Travelers used to pick a vacation destination and then decide when to go. Today, it's best to do it the other way around. Schedule your vacation time first. Then, as your departure date approaches, shop among all the travel bargains available for the cheapest package at the time you plan to go.

To find deals, register for free weekly email notification of fare sales at all the airline Web sites. Also, check:

* www.travelzoo.com

* www.orbitz.com

* www.expedia.com

* www.travelocity.com

The best hotel deals can be found on:

* www.hotwire.com

* www.priceline.com

Between the economic slowdown and post-9/11 jitters, you can get some fabulous travel bargains - as long as you're flexible about destinations. And if you're willing to travel off-season, you can find hotel rooms at 50% or more off prime rates.

by Dan Busby, CPA