Budgeting

​Case Study of Alana & Sharon

All of Sharon’s friends know who to turn to if they have money questions. Sharon attributes her financial savvy to the summer jobs she has held over the past four years. These jobs helped her save a few thousand dollars for college to minimize her student loans. Her friend, Alana, approaches her the summer before their Senior year of high school, confessing she has a whopping $56.47 saved for college even after working part-time jobs for the past three years! Alana asks Sharon what she could do to manage her money more effectively. Sharon’s answer is one word - budget.

Sharon asks Alana to describe her goals and current spending habits. Alana responds in the following way:

“College costs a lot more than I thought, and my parents expect me to pay for my living expenses on campus. Those are going to be around $3,000 per year! I am used to working a part-time job and going to school, but I'm not sure I can handle both anymore. Budgeting seems like a great idea, but where do I start?”

Open Ended

Alana only has $56.47 saved for college. Brainstorm possible reasons why she has only managed to save this amount.

Open Ended

What do you think Alana’s goals should be?

Open Ended

What are a few ways that Alana can get a better understanding of her spending patterns?

​Sharon develops a basic plan for Alana to track every dollar she spends over the course of a month.  Alana collects all her receipts in a shoebox and reviews them with Sharon at the end of the month:

• Coffee: 10 lattes @ $4 each

• Movies: 3 movies @ 10 each

• Food: 4 meals with friends @ $12 each; 20 snacks/energy drinks @$3 each

• Clothes: 3 trips to the mall with friends @ $30 per trip

• Car insurance: Parents make her pay $70/month toward policy in exchange for driving family car

• Gas for car: 2 fill-ups @ $35 each

• Cell phone: Parents expect her to pay $36/month toward family plan

• Shoes: 1 pair  @ $60

Alana’s reaction after completing this process is the following:

“Wait a second, Sharon! I think my boss is ripping me off! I work 15 hours a week, on average, at $11/hour. According to my receipts above, I’m spending much less per month than I’m earning, but, as we’ve already established, I’ve only got $56 saved up from 3 years of working. What gives? How do I file a complaint? How do I get my money back? Wait until I report this boss of mine! I’m putting this on Instagram !”

Open Ended

Do some quick math to compare how much Alana should be making per month and to compare it to how much she’s spending to determine why Alana’s concerned.

$11 x 15 hours per week. . .

Poll

Should Alana blast her boss on Instagram?

• Yes

• No

• No but she can talk to them about it

• YES ON ALL SOCIAL MEDIA

Once Sharon lends some clarity on Alana’s pay, she feels slightly better, but she’s still really worried about her initial problem:

“This is going to be extremely difficult for me to cut anything. I mean, I’m working hard, and think I deserve to enjoy the money that I earn. To save that $3,000 for college, I basically need to work an extra 25 hours per month. It’s my senior year of high school! I need to focus on my grades and apply to college. I am so confused!” 

Open Ended

What 2-3 options would you outline for Alana to help her achieve her goals?

Discuss with her the pros/cons of working more versus finding other ways to adjust her budget.