Tuesday, February 12, 2013

The Handy Adder – A Blast from the Past

In the Kemp household, whenever we have a lively dinner table conversation, inevitably, my work as a financial planner comes into play. Recently, my son asked me about these red mechanisms with buttons he’s been observing at his job at the local grocery store. After some discussion, we determined that it was a Handy Adder - a true blast from the past.

After that, everyone was very interested in what the Handy Adder is and why my son was seeing people use it.  The Handy Adder is a small handheld adding machine.  I explained that it wasn't long ago that people used cash or personal checks at the grocery store instead of credit cards.  They had to make sure they had enough cash in their wallet or money in their checking account to cover the bill, so every dollar and cent mattered.  The Handy Adder is an effective way to track each item you plan on purchasing to keep your budget under control.

This prompted a series of questions from my son and my other two children.  We spent time discussing that not long ago most people lived within a budget.  People watched what they spent and if they ran out of money before month’s end, they had to make cuts and eat a lot of potato soup or spaghetti without meat sauce.  We talked about what it means to live frugally and below our means.

My son further mentioned that he only sees a handful of frugal customers.  Most people don't notice what they're spending and just put it on a credit card.  It’s not necessarily using a Handy Adder that matters, but living within your means and having a budget. A Handy Adder is a great way to track costs, but there are many other ways that might be just as effective; it’s a matter of personal preference and personal financial discipline.

Creating a budget in the modern world is not as difficult as many think it is, and you can do it all without a Handy Adder! Just look at your monthly income, subtract your general monthly costs such as rent, utilities, transportation bills and savings, then split the remainder of it into the number of days in that month. Keep-your-cash.com suggests you “look seriously at how much you need to spend to cover the basic dietary needs and so on, with enough daily perks of satisfaction to keep you motivated. This will be your daily personal budget. Then take the remaining amount per day and multiply it by the number of days to see your potential savings for that month. This should leave a decent amount to use for something really worthwhile when the opportunity arises.” Too many people neglect these simple steps to creating a daily budget, which can lead to debt in the future.

One very modern way of developing an ongoing monthly and yearly budget is by using software programs and apps. You Need a Budget (YNAB) is probably the best budgeting software we’ve seen. It has features that allow you to track and set aside dollars. It even has an ebook on budgeting you can download. You can also use Mvelopes software or Mint.com, both of which are free.

To make a paradigm shift in your financial situation as you plan for your retirement, beginning to practice good budgeting habits is a must. Having money will not solve all of life’s problems, but being financially secure can give your family and loved ones peace of mind.

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