One of the hardest thing for anybody to do is budget. This isn’t just a problem with prisoners, but society in general. We have in our mindset about buying things when we want them and not when we can afford them. Financial guru, Dave Ramsey, has put together his “baby steps” to show everyday Americans (and foreigners) how to get out of debt, be prepared for a crisis and invest in your future.
Recently, I took the time to go back over the last 9 1/2 years of my income and recorded everything my family and friends had sent me, as well as my payroll from the BOP. One thing Dave recommends is investing in good growth mutual funds. He says diversifying by putting a quarter in growth mutual funds, a quarter in aggressive growth mutual funds, a quarter in growth and income mutual funds and a quarter in international growth mutual funds. Each of these should meet or beat the average 5-year return of the S&P 500 and preferably the 10-year return.
Anyway, going back to my story, I decided to play around and figured out if I took each of those deposits and invested them instead, I would now have…are you ready for this?…OVER $175,000!!! Now, granted, I am more fortunate than many individuals and have a good source of outside income. But, I have played around with just my payroll deposits as well and even that came out to about $30,000!
Now this post isn’t about investing, it’s about budgeting. Every person needs to sit down every month and plan their budget. You should have a zero-based budget meaning every dollar needs to be assigned something. You take your income and subtract your expenses and it should equal zero when you are done. If not, put more in savings or pay more on your fine and so forth. As a prisoner, we are very limited to what our expenses are. Some of the examples include: commissary, SPO, FRP payments, TRULINCS, telephone withdrawals, pre-release (savings) accounts, medical co-pays and there may be a few others. But, for the most part, it’s easy to keep track of.
By starting to plan now, you will be in the mindset to keep this trend going upon your release. While it is impossible to know what you will be making at a job when you get out, the rule I have is find the minimum wage for your state, multiply it by 2,080 (full time hours in a year) and multiply it by 0.8. This gives you an estimate on how much your take home pay will be for the year after taxes. Finally divide that by 12 and you will have your monthly net pay (after tax pay). The good thing about this is that if you can plan to live on minimum wage, anything else is a bonus!
I’m not saying you will get a minimum wage job, in fact, you will probably make a lot more as most former prisoners end up doing some type of manufacturing work that ranges from $12-$18 per hour. So that is a good way to start.
In our next post, I will go into more detail about how to figure out percentages, rent and/or mortgage payments and so forth. However, I will not be posting on Tuesday due to the Labor Day holiday on Monday. I am starting a new job and am training for it and so I don’t want to guarantee I’ll post when I may not be able to. Hopefully, after next week, I’ll get a feel for the job and be able to tell you if I will be able to continue the twice weekly posts that I would like.