My Personal Finance Blog

Once you know how to initially set up a family budget, figuring out what kind of budget you need is the next step. A common mistake is thinking there is only one kind, but in reality there are budgets that can help your monthly family spending, help create financial safety or help you and your family achieve your financial goals.

As I’m sure you’ve already read our article on how to set up a family budget, the next step is here- figuring out if you need a comprehensive, problem solving or planning budget.

1. Comprehensive Budget (used for general family budgeting)

i. This family budget can also be referred to as a Master Budget. This budget is for families on a limited income who is trying to limit spending. This budget would include making lists of your spending, with categories and exact numbers broken down by month. This comes in most handy when you need to cut down your family expenses because you have all your information in an organized list in front of you.

ii. This budget can also be used to review your spending over a long period of time, which is referred to as an overall budget.

2. Problem Solving Budget (used for creating financial safety for a family on a budget)

i. This type of family budgeting tool works off the comprehensive budget when you notice you are having problems keeping your spending down in a particular area. You create a more detailed list of the area so as to see exactly where your money is going and what areas you can afford to stop spending on.

ii. This budget is known for finding problem spending areas in a family budget and fixing them.

3. Planning Budget (used for achieving your family’s financial goals)

i. This budget works hand in hand with your family investments. If you are planning your budget specifically around an event or time in your life, this budget can help. It adds an extra category to your initial family budget for your goal.

ii. First, you pay for all other necessary expenses (rent, bills, groceries, etc.). With the leftover money, decide on an amount to set aside in this column for your investment. This is a category that does not show money spent, but money saved.

iii. This plan can be used for family savings as well as investments. This column does not need to be geared toward a specific goal; instead, it can be family savings or money for emergencies. Either way, it is an important category for both family budgeting and investing.

There’s a strange contradiction about insurance. It’s an annoying burden every month when the time to pay the premium comes around but, if the worst should happen, it’s a wonderful thing to have had that insurance policy in place. With the family budgets really tight as the recession shows little sign of going away, the monthly bank statement shows the insurance instalments disappearing. You look at your own health. That’s great. You have never had a day of serious illness in your life. It’s the same for your partner. You cannot avoid feeling a little resentful. All those dollars, every month. And then there’s an accident or one of you does unexpectedly fall ill. It’s then you discover whether that plan you have been paying into is actually worth the money.

The market for health plans is divided in a slightly complicated way. It’s really to ensure the insurance companies make a profit as the cost of treatment keeps on rising way faster than inflation. So it reflects a balancing act between allowing the patients some say, and denying them any real control, over access to treatment. The plan most popular with the insurance industry is Managed Care. This requires you to get the insurer’s permission before you attempt to access treatment. The first contact doctor must be from an approved list, and he or she must refer you on for further diagnostic tests or treatment. Failure to get this referral usually means the insurer will refuse to pay. The second option is a Fee For Service Plan where you pay a lump sum at the beginning of each year, followed by monthly instalments. This covers you for the medical services listed in your policy. Basic plans only cover consults with your doctor and a simple set of tests. More expensive plans have a better range of coverage but there are usually co-payments.

Health Maintenance Organizations (HMOs) are networks of healthcare professions. If you stay within the network, your medical needs are covered although, in most plans, co-payments will be required. The next step up is a Point of Service Plan (POS). This is a variation on the HMO and allows a networked doctor to refer you to an outside expert. Finally, there are Preferred Provider Organizations (PPOs) which offer more choice than an HMO or POS both in the doctors you can access and the treatments you can have, e.g. usually include preventative medicine.

Because the service offered by this site is free, you can get as many health insurance quotes as you like for each of the main types of plan. This gives you more information on which to make your decision. But it’s fair to say the decision is not an easy one unless you read the detail of each plan with some care. With all the health insurance quotes available, you are often forced to balance coverage against cost, i.e. you buy the amount of coverage you can afford. This makes the choices something of a gamble. Do you pick emergency care in the event of an accident or focus on a list of the most common diseases or disorders? Do you include long-term care against the possibility you might be more permanently disabled by whatever happens? There is no right or wrong answer to these questions. In the end, it all comes down to what you can afford and what helps you to sleep best at night.

If you were building a time machine, you need only find a way of travelling back two years to find a land of plenty. Remembering how good it was almost brings tears to your eyes. Every week a bank, credit card company or finance company would mail you their latest offers. Cheap overdrafts, reduced interest with expanding credit limits or yet another way of converting that positive housing equity into cash for spending. There seemed no possibility of this coming to an end. Yet suddenly the price of gas was up to $4 and more a gallon. That proved just a passing straw in the wind. A month or so later came the bank failures, the credit crunch and a full recession with major problems of unemployment. Comfortable lives disappeared. Family budgets suddenly had to pay for debt reduction. Everyone was looking for ways to save money.

Lives must go on but the problem was how to stay mobile. During the good times, towns and cities had exploded. Gone where the high density housing developments close to workplaces. In their place came suburbs and then exurbs. People were organizing their lives around private transport and expecting to commute further and further to get anything done. What do you do when you find you cannot afford to replace your current vehicles but live too far away from work, schools and convenient shops? There is no private transport so, as a first response, you are looking at constantly patching up your old vehicles to keep them moving. But small repairs become major repairs, particularly if your mileage is high or you get into a traffic accident. You look around the neighborhood for carpools. This can work for routine journeys, but it ties you to other people’s timetables. That leaves renting.

If you decide to drive other people around and take payment, you need to check whether your existing policy covers you. The majority of insurers believe taking money makes you a taxi business and they want a higher premium. As with all insurance, use the online search engines to find affordable cover. But, in some parts of the US, it’s now economic to give up ownership. There are new rental systems allowing you to take a vehicle from a local pick-up point as and when you need it. Booking online, you only pay for the vehicle for the hours you use it. Economists have calculated the average yearly spend on car ownership is about $8,000. The average hourly rental rate is $15. That’s 533 hours a year in a rental car before you pay more than an owner. But here comes the warning. The rental car always comes with cheap auto insurance, but the companies are only interested in protecting their capital. You are usually asked to pay more to top up on cover against medical expenses for your own injuries. But even with this extra premium, it’s often significantly cheaper to rent as needed. Even better, you do not pick up from local offices where sales agents pitch extra options. Pick-ups and drop-offs are in local garages with no formalities. Check out what services are on offer in your area. If the cheap auto insurance terms are right, you will save to go down this road.

The world of travel is changing. Next one and or two years will be travel business influenced by financial crisis. There is no doubt about reducing in family budgets. It makes sense that first what is going to be reduced are holidays, vacations or trips. Furthermore there is no wonder that according to report of PWC hotels are managing in a downturn. Niels Pedersen Managing Director (Supranational Hotels, November 2008) stated: “In 2009 hotel revenues typically will drop 20 per cent, with the five-star market hardest hit, four star properties down by a quarter, three stars dropping 10-15 per cent, and budget hotels remaining static”. In other words by a top executive with an international luxury hotel chain, who did not want his name used for fear of losing his job, told me recently that the dominoes are falling among full-service hotels frequented by business travelers in London, Tokyo, Hong Kong, Shanghai, Paris, Prague and even New York. Until recently, hotel rates in New York were buoyed by robust demand by financial services executives and by foreigners lured by a favorable exchange rate (stated in The New York Times, November 2008).

Hotel business is going to challenge against poor periods. The first question is rising: “Is there any change for travellers to retain with their customs?” From text and figure above is obvious that in summary they will be willing to spend less amount of money for the same standard of staying. My words can be confirmed by article of David King (Chief Marketer, 2008). Once more: “Is there any solution for travellers?”

Yes, there is. Recently more and more people are being aware of possibility of serviced apartment staying. If you don’t know what such apartment staying could look like please e.g. visit Prague City Apartments. Maybe you can oppose that apartment staying is valuable just for long term stay. Or you can say that you need service of the hotel or it is less secure or there is missing maid service and etc. So that is not true.

If I am back with some Apartment providers, these companies are able to cover all of mentioned issues:

 

Apartment provider can provide high security facilities (cameras, electronic key/cards, 24 hour reception)

Apartment provider is running 24 hours reception (so PCA is able to react to unexpected situation anytime)

Apartment provider is running maid service (cleaning) everyday

Apartment provider is offering short term stay

The second and the most important question is: “Does it worth?” Of course, it does. By using the information from Server Royals of Rent we can see that apartment has:

+ more space

+ layout may offer more privacy than a hotel would (separated rooms)

+ more freedom

+ more freedom to entertain guests the way you want to

+ more privacy

+ more homely feel

+ apartment embraces the culture of the local area more than a hotel room

+ pets usually welcome

+ you don’t have to eat out all the time

+ a refrigerator stocked with your favourite foods

+ a fry-pan in the kitchen

+ a washer and dryer in the apartment instead of continually sending clothes out for cleaning

+ rates are per apartment and not per person so there can be significant financial savings from sharing the apartment

+ for longer period might be financially more reasonable than a hotel

However I cannot agree with last point. Especially from the point of view of longer period. Nowadays it is more reasonable for short term staying and why? Because of PRICE. Average savings with regards to rate analysis by The Apartment Service 2008 Global Survey:

 



I think I can conclude this article „No More Hotels“ by this statement.

Hope you get more insights into the apartment staying and you will not cancel your trip because of financial crisis.

 

For more information about advantages and disadvantage of apartment staying please visit my blog.