Budgeting at the Coffee Shop: A Personal Finance Story (Chap. 1)

Cash Register Close UP

Authors’ note: 

Explaining accounting and finance can be pretty dull. That’s a problem, if you need to learn accounting or finance.

On a plane from St. Louis to Seattle, I decided to try and fix the problem. What if I could wrap some accounting concepts inside of a quirky (funny?) short story? My goal here is to present some information, and then add another step to the story. So, when you get to the end, you’ve been reminded of an accounting or finance concept- but you’ve received the information in a light-hearted way.

Anyway, that’s the goal here. The stories are written in chapter order, so that there is a logical flow for the reader. Enjoy!

‘Excuse me- is that you in that poster?”

Greg glance at the older woman, smiling, then turned back to the poster at the gym. The poster was promoting a workout program for retirees, and it had a picture of an older guy looking at the camera while do a push up. He’s got to be 10 years older than me, thought Greg.

He laughed. “No, I’m sorry it’s not me- I guess they wanted someone more famous.”

“Oh, I wasn’t sure”, the woman said. “I thought that the gym might use someone who worked out here. Anyway have a good day!”

How old do I really look? Greg thought, as he drove to the coffee shop to meet Tony. Maybe I am starting to go down hill.

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Tony was an old friend who had always seem to have his act together from a financial standpoint. It was clear that Tony followed some type of plan for his finances, and that was something Greg lacked.

“Yea, so things are a mess, and I figured you could help”, Greg said as they sat at down at The Ground Round, the local coffee shop. “In fact, I brought some stuff with me…..wait sec, I need my reading glasses”.

Greg rummaged about in his backpack until he found the glasses. As he put them on, the type on his bank statement didn’t seem as large as normal. “Do me a favor”, Greg asked. “Can you look on the side of the glasses and tell me what strength they are? It’s like I need reading glasses to find out the strength of my reading glasses!”

‘Uhhhh….they are 2.0” said Tony, as he handed them back and took a sip of coffee. “So, tell me what’s going on- just generally. You don’t have to dig out your records”.

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Greg leaned back and sighed. “Well, I’m just not able to save any money each month. You know, Layla and I used to be good at saving money, but over the last few years, it’s gotten away from us. So, I’m asking for help.”

“OK, you’ve got a notepad out”, Tony said. “Let’s start this way: take a black page and write your after-tax income for the month at the top left corner of the page. Then, write “Fixed Expenses” below that, skip about half way down the page and write “Variable Expenses”.

Greg jotted down his gross monthly income of $6,000, then added to two categories.

‘By the way. I went up and ordered a black coffee and the hipsters looked at me like I was crazy” Tony smiled. “OK, now think about the fixed expenses you have every month and list a description on the left below fixed expenses”.

So, Greg listed his home mortgage, car payments and insurance payments. After some more thought, he listed some other items. I wrote down the description and the amounts and handed the notepad to Tony.

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“So……the total is $4,500. That means that you have to fit your variable expenses and your savings into the remaining $1,500 each month. And variable expenses are the ones you have some control over. Maybe rather than eat out three times a month, you only go twice. Or another one- you brew coffee a home three days a week, rather than come here.”

Tony looked around. “Besides, I don’t think the coffee’s all that good anyway. So, take a shot at that. And one more thing- the first thing you do each month is pull out your budgeted savings amount and more it into a separate bank account. That way you don’t spend it.”

They got up to leave. “There are lots of mobile apps to monitor this stuff. But the key is to plan your spending and review where you are a few times a month”. Tony pushed open the door. “Give it a try”.

This is for educational purposes only. As always, consult a CPA or a financial advisor for specific advice.

Action Steps To Consider:

Create a budget, even if that budget is simply on notebook paper. Separate your expenses between fixed and variable, and take a hard look at your variable spending. Take steps to cut your variable expenses each month and put the amount you save into a separate savings account.

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) http://www.accountingaccidentally.com/

(you tube channel) kenboydstl



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