#Household Math - Searching for better income and the financial impact of the search...

Question

Let's say someone is earning $18/hr, working 40 hours per week. That person really wants to earn $20/hr but is unable to get that raise with their current employer. If the person quits work to seek out a $20/hr position, how many hours will have to be worked at the $20/hr job to make up for the lost $18/hr?

Answer

The answer depends on the time unemployed. It takes 9 hours at the higher wage to make up for every hour of being unemployed, 9 days for each day unemployed, 9 months for each month, etc...

Analysis

This question hinges on the time the person is out of work looking for a higher paying job. We can find an expression that will give us that relation.

Let's first look at the money being lost by looking for a new job. That can be expressed as 18N, where N is the number of working hours you aren't working (you are uNemployed).

Each day, where N = 8, you lose $18 X 8 = $144

Ok, so now to the amount of money you'll be making. We need to see that, once we're working again, we can essentially look at it as earning the $18/hr, plus earning an additional $2/hr that will make up for the unemployed time.

For each hour where that person could have been earning $18/hr, it'll take 9 hours for the $2/hr to make up for it. And so it'll take 9 days for each day of being unemployed.

If it takes a month to find the job, it'll be 9 months.

And so the message here is this - if the job search is liable to drag on, it might be advisable to find alternate means of earning more income.

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Questions and comments always welcome

#Budgeting, #Household Math - Budgeting Basics - Expenses

Question

How do I budget for expenses? 

Answer

This will take a few posts to do, but in this one we simply identify all the possible outlays you experience and put them in a spreadsheet.

Analysis

As we start preparing a budget, it's important to first identify where money goes. Do you pay rent or a mortgage? Pay for a car? Insurance? Gas? Or perhaps transit - maybe a daily fare or a monthly transit pass? Utilities? Cable? Phone (landline and/or mobile)? Food?

Let's first list out those items that you know about into a list (we'll be modifying the list, and so using a program like Excel (PC), Numbers (Mac), or Sheets (Google - it's free and can be used online). Here's a sample:

Mortgage
Condo Fees
Condo Insurance

Water
Electricity
Gas (Note: the heater and stove are natural gas)
Cable

Phone, landline
Phone, mobile

Groceries

Dining out

Auto payment
Auto insurance
Auto fuel
Auto maintenance, repairs


And perhaps you have other expenses that need to be added into this list. If you think of it, write it down!

Once you've done that, take a look at your credit card statement for the past few months. Do you see things there that aren't on the list? Clothing? Add it. Video games? Add it. Go ahead and put in all the categories you think of.

I've built a google spreadsheet to follow along with these posts (it's view only):

https://docs.google.com/spreadsheets/d/1ZxwZz7Nn5ZYVV-x6HgPavTP6wkfIswP8-NTvV9gTTR4/edit?usp=sharing

In our next step, we'll add numbers.

This post is part of a series on budgeting - Budgeting 101

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As always, questions and comments welcome!

#Budgeting, #Household Math - Budgeting - Why?

Question

Why should I budget? What's the point?

Answer

Much like a doctor's visit when you feel ill or are having a check-up, a budget acts that way for someone's financial life.

Analysis

There are many ways to talk about budgeting and finances that keep the topic strictly focused on dollars and cents (or whatever the names are for your particular currency!). But I'd like to talk about it in a more holistic fashion.

Let's talk about "health". What does it mean to be "healthy"?

Probably the most common way "health" is referred to is with "physical health". When we're ill, we reach for some sort of medicine (whether traditional, Eastern, Western, alternative, or whatever modality you typically reach for) or perhaps go to see a medical professional. Perhaps we even see the doctor once per year for a physical to help find illnesses that are lurking silently within our bodies.

There are other types of health as well. Mental health, for instance, refers to the health of the mind, the intellect, and the emotions. Spiritual health refers to feeling a healthy connection to God/the Universe/Life/whatever name you choose to refer to it.

All these different types of health all impact one another. For example, poor physical health can lead to depression (poor mental health) and poor spiritual health ("Why do bad things happen to good people?"). Each of these factors can impact the others.

And so now let's talk about "Financial health". Being unhealthy financially can (and I'd argue, will) impact your other health aspects: physical, mental, spiritual, and others. And conversely, being unhealthy in other areas of your life can (and again I'd argue, will) affect your financial health.

Aside from the more obvious examples of how your financial life can be impacted (physical sickness making employment difficult, reducing income and increasing medical bills), there are the sneaky ways that financial health can be impacted. One example is of "retail therapy" - spending money in order to feel better. And this type of therapy can sneak up on us - online shopping, buying large amounts of "comfort foods" and "comfort drinks" - think high fat, moocho-yummy coffee drinks all the way up to alcoholic drinks - and other types of purchases. All of this can turn into a vicious cycle where spending is conducted to counteract the feeling of depression from an unhealthy financial situation.

And this is where a budget can help.

A budget is akin to going to the doctor - it allows for an examination of what is going on in someone's financial life, to have facts and not feelings on something (it's far better to know that way too much money is being spent on Starbucks than simply feeling that it's the case).

A budget is also akin to getting a physical - financial health can be examined and areas found that can be tweaked so that even better financial health can be achieved.

This post is part of a series on budgeting - Budgeting 101

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As always, questions and comments are always welcome!