Outside Economics

Four Simple Steps to an Effective Budget

Posted by Wendell Brock, MBA, ChFC on Fri, May 26, 2017

We typically know how much we spend each month, but do we really know the details? Budgeting is the process of creating a physical plan for the uses of our monthly/annual cash flow. A budget therefore is a spending plan, it is the document that tells you and others how and where the money will go. While that is the basic concept there are several aspects of putting together and implementing a budget, namely finding the data, drafting an effective budget, agreeing to the budget, and using a budget. Budgeting is an essential building block to personal finance. I hope to bring about a positive mindset about using budget, so lets explore these items: 

Finding the Data

Right off the top this can be a task of self examination! I ask clients to go back through four months of check book statements and list and total where money was spent. Where people spend money tells a lot about what is important to them. The reason I ask for three months, some quarters may have a funny month of spending, it may require some extra data mining from another month or two in order to get enough accurate information. 

Don’t forget to list all the sources of income. Often the focus is solely on the spending, but listing income is important too. List bonuses, or second jobs, etc., an accurate income figure is especially important if it varies monthly due to commissions, overtime, or other factors. bigstock-Budget-Finance-Cash-Fund-Savin-95460770.jpg

When assembling this information determine the level of detail to categorize the spending. For example there are several items that I buy at a grocery store that are not actually “food”, but since I bought them there, I put them in the grocery category. I try to keep it simple, otherwise I could end up separating items on one receipt, calculate the proper tax, and then put them in their proper category.

Next arrange where the spending has been based on “Needs” vs “Wants”. This is really important as it helps to prioritize our spending. Maybe you value your entertainment budget, but most likely it’s not more important than your mortgage.

Drafting the Budget

Once the data is organized, it is easy to see where and how much money has been spent. This becomes our basis for drafting the budget. Make sure at the top of the budget is the line “Pay Myself First”. Successful budgeters realize that they don’t save what is left over, they save first and spend what is left over.

Add a bottom line figure of approximately ten percent of the spending part of the budget for “TIF” - Things I Forgot. We all forget items or things pop-up which need some attention. This is where those items go.

After subtracting the savings, spending, and TIF, from the income, the bottom line should equal a “0” - zero! This is called Zero Based Budgeting. If the figure is positive put more into savings, if it is negative, then look to the wants section for items which may be easier to live without. 

This is where each person needs to come to grips with the “needs vs. wants” in the family finances. Focus on the needs then prioritize the wants and make things stretch as far as possible. However, do not eliminate or cut into savings. Savings is not the float figure in the budget!

Agreeing to the Budget

Now that the budget is drafted, it has to be agreed upon. It is critical that spouses agree to the budget, particularly if this process is to be successful and effective. Both spouses must be “All In”; one can’t simply dip a toe, while the other dives in. I cannot emphasize this enough. It does not work well if one spouse works within the budget and the other spends what ever they want, after all they should be on the same team.

Because things change, spouses should have a monthly meeting about their budget items to review what was done the past month and what the plan is for the next month. This little meeting should be taken seriously, by calendaring and keeping the meeting time sacred - do everything possible to make it happen. Needed changes should be noted and agreed upon and then move forward. 

Using the Budget

The budget is a financial tool, a spending plan - where dollars are told what their job is and sent off to do that task, in an effort to accomplish certain goals. What a budget is not, is a form of punishment! A budget should free us from many financial decisions that may be thrown at us on a daily basis through various forms of media. A budget is a way of disciplining ourselves by keeping our needs and wants in check.

We all have wants, a new TV, automobile, vacation, etc.. A budget helps us get these items by structuring how and when we get them. It keeps us from impulse buying, by predetermining how and where we are going to spend our hard earned money. This means that all these wants, can be had in their proper time, when the money is saved to make such purchases. This is a category I call “save to spend”. My mother use to remind me as a young boy, “You can only spend it once!”

Let the budget work for you by developing the habit of using it. Make your monthly meetings effective, at times they may take only a few minutes to simply review and say, “no changes needed”. Good, move on and have fun. Other times the meeting may take a little more time due to larger up-coming changes as to where money needs to go. Once this begins to happen regularly, recognizable progress will come. 

Don't let the on-going meetings be the weakness that kills the process. Remember the meeting may only need to be ten minutes to review and discuss the next month. The habit and discipline of monthly meetings will be what greatly increases your success of sticking to your spending plan. Steven R. Covey said, “The power to make and keep commitments to ourselves is the essence of developing the basic habits of effectiveness.” Keep it simple, but make it happen. With a new mindset about the use of a budget, your financial effectiveness will increase by keeping the commitment to properly manage your cash flow. Effective money management buys you financial freedom.

For more information you can see this article: Budgeting 101 and you may download my FREE simple Effective Budget Spreadsheet here.



"Kindness is a language which the deaf can hear and the blind can see." ~ Mark Twain

Topics: Budget, budgeting, personal finances, financial freedom, Effective Money Management

Insider’s Clever Quotes From Wall Street

Posted by Wendell Brock, MBA, ChFC on Fri, May 19, 2017

“Nothing can make the spirit fly higher than finding a bargain when you’re the buyer. And nothing can make the spirit sink deeper than finding it later a whole lot cheaper.” Has been one of my favorite sayings over the years. A few years ago I submitted that saying to my friend, Mark Skousen who was writing a book, The Maxims of Wall Street. Maxims of Wall Street.jpg

I went a few months ago to listen to Mark speak at a conference and to my surprise he quoted this saying in his presentation; he told my he uses it in all his presentations now and always gets a good laugh! (It's very important for an economist to get a laugh!)

Mark is considered to be one of the top twenty economists in the country, and is frequently interviewed by various news outlets on economic issues. 

This book is full of whit and wisdom from many of Wall Street’s finest investors, some of our nations greatest thinkers, and many brokers is a fun read. Many of the sayings are very true and others are … clever old sayings.

Some sections include: How to Make a Million, Market Timing, Bargain Hunting, Contrary Investing, Only a fool holds out for top dollar, Risk and Reward, Leverage and Debt, Fear and Greed, you get the idea. If there was a Maxim on Wall Street it is in the book.

Allow me to entertain you with a few exerts from his book:

“A mariner does not become skilled by always sailing on a calm sea.” - Heber J. Grant

“The market does what it should do, but not always when.” - Jesse Livermore

“I am often in error, but seldom in doubt.” - Ira Cobleigh

“One of the most dangerous enemies to a trader is a magnetic personality.” - Edwin Lefevre

“A trend in motion stays in motion, until it stops.” - Jim Dines

“Don’t confuse brains with a bull market.” - Humphrey B. Neill

“If you are a long term investor, you will view a bear market as an opportunity to make money.” - John Templeton

“Haste makes waste.” - Ben Franklin

“You should give your kids enough money to do anything but not enough money to do nothing.” - Warren Buffett

“Bad news travels faster than good news.” - Poor Richard’s Almanac

Now that you have a feel for what is in the book - go get a copy! 

Wall Street and the entire financial industry has certainly produced some interesting characters over the years. I don’t recall promoting or reviewing a book before on my blog, so let me know what you think? Some maxims are true while others are false, which adds to the humor of this book. The maxims clearly provide a little insight into the person who said it. You can get a copy of Mark’s book by clicking here. It certainly is a fun read!



"The worst thing that can happen to an investor is to make money on his first trade. He thinks investing is easy."

- Mark Skousen

Topics: Economists, Wall Street, Mark Skousen

Why On Earth, Would Someone Insure Their Children?

Posted by Wendell Brock, MBA, ChFC on Fri, May 12, 2017

Children are near and dear to most everyone’s heart. This week being Mother’s Day, I want to address the need for insuring our children - there I said it yes - the need to place life insurance on our children. Many will say that children do not need life insurance simply because they do not have an “economic value”, after all they are not a bread winner of a family. Perhaps there are some other reasons to insure your children (this also applies to grandparents insuring their grandchildren), lets explore a few.

WTB Brock Kids.jpgWhen I was in college I remember an employer, who had five incredible children, tell me that every child is born with a bank account. There is always a way to raise a child. Many years later I would have to agree. My wonderful wife and I are the parents of six children whom we love and are proud of. They bring more joy into our lives than we thought could be possible. We hope they live long healthy lives. 

One quick lesson on life insurance. Insurance in general is based on risk that a particular event will happen - in the case of life insurance, the risk event is death. Because it is anticipated that we will all live a long life, the older we get the more expensive life insurance costs. This is for two reasons: 

1. We are potentially closer to death so the risk of dying goes up dramatically. 

2. The death benefit is funded by the reserves of the insurance company, which are built by many people paying premiums to the company. Even if you lived to be age 100, a person 55 years old would have a shorter period of time to pay the premiums into the reserves than a ten year old, thus requiring more premium. There are other factors at work as well, but these are two basic reasons it is inexpensive to insure children.

As adults, we do all we can to protect our children. Unfortunately, after all we can do, death can still happen. Children die for many reasons or causes: illness, automobile accidents, drowning (according to the CDC, it’s still the number one cause of death in children ages 1-4), and acts of violence, to name a few. I believe when parents have children, they look forward to a brighter future, thinking that their children are going to grow up and do something great. As parents we visualize our children’s beautiful wedding, college graduation, having children of their own, as well as their successful career. Back to some reasons to insure children:

Life Lessons

One reason to place insurance on a child is to teach them some of life's financial lessons. Many of these lessons are best taught while young. Teaching children about money and its uses in life can be enhanced with the added lesson of life insurance, what it is for, how it is used and the simple fact that life is fragile and we have an obligation to protect it. Sometimes these lessons may include a long-term vision of life and the expenses we may inccur throughout our entire life, in other words some expenses never go away

Child’s health

Life insurance is issued based on a person’s health. People must be able to prove they are of a certain health standard in order to be offered a policy. Most children are born very healthy and yet over time in their youth they develop certain childhood diseases that may cause simple to dramatic health issues later in life. These health issues can prevent them from obtaining life insurance when they are older and are a “bread winner” of their family. Or they may be able to obtain life insurance but it is dramatically more expensive due to the extra health risks caused by the ongoing disease. The healthier a person is, the cheaper their life insurance will be.

For example, one disease many children get is diabetes. According to the CDC, by age 20, 4.3 million people are diagnosed with diabetes. Any one disease can cause a policy to be issued at less than a standard rating, which cause premiums to go up. Many illnesses prevent children from obtaining insurance at all, simply because their risk of death is now too great.

By obtaining a policy when a child is young and potentially at their healthiest point in their lives is a wise move. The premiums on a ten year old are much less expensive than a 30 year old young married mother or father. With the right policy the premiums will never increase for the rest of their lives, from age ten to 100. This insures that they will have at least some amount insurance when they are older.

Economic Value

While children are not the bread winners, they do have economic value. After all parents invest a lot of money in their children, all with the idea that they learn through their education and extracurricular activities to be successful someday. I am in no means suggesting that the insurance is a way to profit from the death of a child - that is completely sick and wrong. What I am suggesting is that children do have economic value.

Once I was visiting with a friend a church, who happened to be a mortician. His funeral home had recently handled the death of a child and he mentioned to me that the worse part of his business was seeing a family go into debt to pay for the death of a child. His answer to that problem was that he wished every parent had insurance on their children. 

For parents the birth of a child and the death a child are both expensive. While you hope the latter comes much later in life, unfortunately for many it does not and when parents are grieving their loss to add the expensive burden of a funeral, that only adds to the grief.

Other Reasons

Families often ask: How to save for college? One method is with a permanent policy that builds cash value, those funds can be used to help pay for college expenses. A friend has paid for all three of his daughter’s college education from the cash values of his children’s policies. In this way the family is using their dollars very efficiently - while building cash reserves, they are also providing protection for their children. For every premium dollar invested there are multiple benefits that can be achieved.

Here is an example of a range of rates, insuring a child age 5 can be as low as $395 per year for a $100,000 death benefit. A 15 year old is only $637 for the same benefit. 

While this is a sensitive subject to discuss, I wish all children well and pray they have the best in all they pursue. I hope this information offers greater understanding about the value of life insurance for children. Insuring children while they are young and healthy, teaching them about financial literacy, helping them realize they do and will contribute to society, and helping them prepare and save for their future are great reasons to get them insured now. Considering the above - I think the question is: Why on earth would someone NOT insure their children?

If you have any questions or you would like more information feel free to drop me a note. 


"Little choices we make will be bundled together and show clearly what we value. Those choices will also show clearly what we are."  Boyd K. Packer


Topics: life insurance, Children, How to save, insure

Personal Finances and The Distractions of Life

Posted by Wendell Brock, MBA, ChFC on Fri, May 05, 2017

Years ago I use to teach seminars about personal finances and one thing we use to talk about was what I will call the distractions of life. We all live busy lives, some extremely busy, and so we end up living by the rule “if it ain’t broken don’t fix it”. Often we all create our own busyness and the level of “busy” is largely up to us. Yes we have work and family obligations, but we are in control of many of those obligations.

Yesterday I was visiting with a client, we belong to the same social club and he asked about the annual picnic being canceled, since I attend the board meetings he figured I would have some insight. I told him that there simply was not a Saturday in May that worked; too many other functions were already planned. After all May starts graduation season for college and high school, it has the Memorial Day Holiday, and you could also throw in the beginning of the wedding season. Who does not know of someone getting married during the months of May or  June?

As a result of our busy lives our personal finances get left to what ever benefits our employer offers and then we simply hope for the best with everything else. It has been said that the average family spends more time planning their annual vacation than their family finances. series of ocean-waves.jpg

The distractions of life seem to come in waves and they are timed just like the waves at the beach, some are larger than others, but they come regularly and timely. Here are some examples:

We start every new year working to get caught up from the holidays, then it is Valentines Day, the world tells us we have to do something really special for our sweetheart and we respond. If we know what's good for us we'd better!

Next is Easter and Tax season, so we say to ourselves and others “I will attend to my personal finances after I finish my taxes.” So lets meet after tax season is over. Tax season ends and…

It is graduation/wedding season and my child is graduating from high school and my nieces best friend is getting married, so out goes May and June - just too busy. Lets meet in July…

Well July comes and we have again the wonderful holiday we call the 4th, Independence Day! (Wouldn’t it be wonderful to be truly financially independent on Independence Day?) And it is also vacation season, with August on its tail. Things will settle down after we return from vacation and we will have time to work on our finances…

Here we are at the end of August and into September back from vacation, but life is so crazy with trying to get the kids settled back in school and the Labor Day holiday, we just can’t find time to visit… 

Then October starts and it is the beginning of the fourth quarter, work gets demanding simply because we have to make a strong push for the end of the year, the hours at work are so crazy, maybe it will slow down next month…

Next month is the beginning of the holiday season, with Thanksgiving (my personal favorite). Then Christmas and New Years and we all know how busy the holiday season is so we simply can’t meet then… 

Soon enough we are right back where we started at the new year with little to no progress on our personal finances. The waves keep coming. At some point we have to stop and take control of our lives and our finances. It is all a matter of priorities. If we wait until its broke, then often we can’t fix it. If all we do is take what is offered to us as benefits from work, then what happens if we are unlucky and get the dreaded pink slip? Poof, just like that, our benefits are gone, and we have a personal financial crisis.

I have a client in that very situation who was hit by a storm. During his last job, he developed an illness that prevents him from obtaining life insurance. He lost his job and benefits, he always thought that he would have enough wealth so he could as the drive-by’s say “self insure his life”. With the large amount of money he has, he still has two young children, he still needs some life insurance. A little time and planning would have helped a lot.

Don’t put things off, get things organized, see a professional financial advisor, make sure they at least have a professional designation, that requires them to have some level of financial education and a code of ethics, the best are: ChFC, CFP, and CPA. As a ChFC (Chartered Financial Consultant) I understand the education, rigorous exams, and practical experience necessary to obtain such a designation, my clients have benefited from this additional training. I am always happy to help people prepare and become independent, so, for more information give me a call. 

Get started today, after all the waves will always come regardless, and so will the storms. Don’t let the waves get in the way of preparing for the storms!



"Opportunity abounds in alleged bad times."
"True optimism includes realistically looking for opportunities among bad developments" ~ Howard Ruff


Topics: personal financial crisis, personal finances, Family Finances


Wendell W. Brock, MBA, ChFC

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