Aliche, Tiffany; The One Week Budget (Learn to create your money management system in 7 days or less!); C.L.D. Financial Life Publishing, 2010; 125 pages.
The One Week Budget by Tiffany Aliche is a delightfully well-written, clear, and honest book about getting your personal finances under control. It takes a no-nonsense approach from the first chapter to drive home, firmly and continuously, that you must live within your means. Aliche provides a week-by-week program to help you understand your personal finances, reduce expenses, and start saving money toward your most important goals. If you follow the plan laid out in this book, you too can learn to manage successfully your finances.
I took Aliche's advice and tried out her step-by-step approach to getting my own personal finances under control. In order to start the process, she instructs you to divide your monthly expenses into three categories: fixed, moderately adjustable, and the easily adjustable. Although all expenditures can be modified in the long run, as beginners, we need to experience separating the long-term adjustments from the 'easy wins.'
For most of us, our rent or mortgage payments are fixed. Given enough lead time and motivation, however, we could decide to move to a cheaper address and thereby save the difference. For the ‘moderately adjustable,’ most of us can point to our cell phone plan. We could choose to reduce the amount of data we receive and save tens or perhaps even hundreds of dollars a month. Then there are our ‘easily adjustable’ expenses. How many of us could save tens of dollars a month by simply bringing our coffee in a mug from home rather than buying it at our local barista on the way to the office?
To her credit, Aliche takes the budgeting process one step further – to explain about managing your money. Her system uses several bank accounts. Your money is divided into different accounts for different purposes – one for depositing income, one for paying your expenses, one for emergencies, and one for long term savings.
Her advice reminds me of my grandmother. Before my time, she had three envelopes in her kitchen drawer that she used to manage the monthly expenses. Each week when my grandfather came home from work with his cash pay, he handed it over to my grandmother. She in turn handed back to my grandfather his pocket money for the next week, which he would have to make last until the next payday. I imagine my grandfather using his pocket money to tip a few back with his friends down at the local pub, buy pipe tobacco at the market, or perhaps, take the trolley to work on a rainy day rather than walk.
My grandmother divided the remaining cash into three lots. The first went into an envelope to pay rent at month's end, and the second into an envelope to buy groceries for the family for the next week. In the third envelope, she set aside cash for the inevitable emergencies – a doctor’s visit, or to give to a friend or relative in need.
Aliche has updated this to our modern circumstances by substituting several bank accounts for grandmother's three envelopes. In the same way that my grandmother divided the weekly pay into different lots, Aliche recommends dividing your money among the various bank accounts. After saving 10% of your salary for retirement in a 401(k) or other retirement account, you transfer money from your deposit account into the other bank accounts. One is used to pay your bills, one to meet emergencies, and one to save up for intermediate goals, such as buying a car or making a down payment on a home. In a throw-back to my grandmother’s day, Aliche also recommends giving yourself a cash allowance, much like my grandfather’s weekly pocket money. Like my grandfather, you will have to make it last until the next payday.
The book describes in simple and clear steps how you can take control of your money and manage your finances. This approach has stood the test of time - in many respects it is an updated version of what my grandparents practiced many decades ago.
My only complaint with the book is in the ‘Bonus Chapter,’ where Aliche explains how she managed to pay off her credit card debt and extract herself from very significant indebtedness. My complaint is not, however, with the manner in which she extracts herself from debt, but rather how she explains ending up in it. She borrowed $25,000 on her credit cards to invest in a business with her friend. Her friend fails to perform, and she is stuck owing $25,000 to the credit card company. She also borrowed $15,000 to buy a self-help course. After explaining what she borrowed, she then states that we know her actions were crazy.
I was disappointed that Aliche did not enlighten us as to the why. She should give us, the readers, an explanation why these actions were ill-advised. It was the borrowing which was 'crazy,' not the decision to invest or to purchase the self-help. As an alternative, she could simply state “one day, due to a series of decisions, I ended up with $40,000 in credit card debt. . .” and continue with her story how to pay off this credit card debt.
I enjoyed this book immensely. If you would like a simple explanation of how to get your finances under control and learn one system of managing them, this book should definitely be on your reading list.