Allergic to being broke

Budgets are the hardest sale. People frequently approach me to "help them get their money right," but NO ONE wants to create - and stick to - a budget. The thing is, budgets are anathema to being broke.

Just ask McDonald's. Or Detroit.

What can I get for $.99?

I commend McDonald's on taking steps to help their employees build wealth. The company partnered with Visa and this web site to demonstrate the ease and advantage of creating a budget to its work force. McDonald's encourages economic literacy: they want their employees to not just receive a check, but to be acutely aware of how their lives are impacted by money received.

In economics, we know that money changes people. Our behavior changes based on how our cash flow changes. We may spend more if we earn more money. Or we may save more. When a recession occurs, and jobs (and income) become scarce, Americans generally spend less and save more.

So yeah, Mickey D's advocates ECONtrepreneurship: that blissful marriage of economics and entrepreneurship. The adage says teach a (wo)man to fish and she'll never go hungry. Nor her family. So the franchise teaches its employees how not to be broke. I guarantee, if you know that you're dangerously flirting with a zero balance days before payday, you will change your spending behavior (or at minimum, flirt with the idea). Choosing not to know (ignorance) will leave you blissful and broke.

Social media lambasted the sesame seed bun merchant for suggesting that fast food employees would need a second job in order to stay above water in the American economy (on average, workers earn $8.25/hour, about a buck above the Federal minimum wage). Rather, I believe it sparked some positive dialogue on job mobility, goal-setting and money management.

A sound budget will look at what you earn (INCOME) and what you pay out (EXPENSES) and what you owe (DEBT). Subtracting the latter two from your income leaves you with your NET WORTH, a powerful indicator of WEALTH.

Here's the golden arches' budget, followed by some real critique:

• Assumes a person earns $2,060 after taxes, no distinction between gross and take-home pay. Payroll tax increases changed our behavior in January.
• Bills, debt and insurance payments total $1,160 or 56% of the budget. Savings is 5% and monthly spending is 39%. The spending-saving ratio is totally distorted and is unsustainable.
• What about energy costs like gasoline, heating or bus fare? What about food expenses like groceries?
• $20 health insurance premiums? Not even Obamacare can boast that one (sans expected tax credits).

Make a budget. There's no amount of income too small to track. There's no financial goal too big too justify procrastinating. Make it realistic. Make it stick.

Prosperity,

delasol