First off guys, I want to apologize for my laziness. I started this blog a little over a year ago and it has grown to over 800 subscribers. So I know that I am doing something right. I have been enjoying my new job, but there is a LOT of responsibility that goes with it and because of that my time is limited now. With that being said, while I had wished to go back to posting twice a week, it seems I will really only have time to do it just once. In addition to my job, with the help of a friend of mine, I teach classes twice a week, volunteer in the law library and am helping plan our annual health fair. I also am taking a college correspondence course (which I am behind on as well), so my time is spread pretty thin. With that being said, I will have a short post this coming Friday and after that, I will TRY my best to post every Friday. That seems to be my slowest day (so far), so we’ll see how that goes. Now to continue our post on budgeting for prisoners.
Once you are released from prison, you (and anybody else) can put expenses into approximately eleven categories. This can be rearranged however you please. I again take these numbers from Dave Ramsey and his “Total Money Makeover”/”Financial Peace University” books. The first is charitable giving. Dave is a very spiritual person and believes that everyone should tithe between 10-15% of their gross pay and give to the church, charity or whatever. Not everyone believes this, but that is a good percentage if you are interested in doing this. After tithing, he recommends putting 5-10% in some type of savings account.
Most savings accounts presently are drawing very little interest. But, the purpose of a savings account is not to make money, but keep it safe. Most banks are FDIC insured and so your money is protected up to a certain amount, which I believe is $250,000. However, a more lucrative option is opening up a money market account with a mutual fund company. I personally use Fidelity and have nothing but good things to say about it. You earn a slightly higher interest rate, but not by much. The downside is these are not FDIC insured, but truthfully, I doubt Fidelity is going under anytime soon.
After savings is housing, which accounts for 25-35%. This will be your biggest expense. You should strive to pay no more than 25% of your take home pay towards rent. However, I know this is rather hard to do. To determine how much you can afford to pay for rent or on a house payment, take your gross pay (before taxes) and multiply that by 0.8. This gives you your approximate net pay (after taxes). Then multiply that number by 0.25. If this is based on your monthly pay, that is the recommended amount to pay for rent. If it is based on annual pay, divide it by 12. You can replace the 0.25 with 0.35 to give you an approximate range that you can afford.
Next are utilities. These include electricity, water, trash, sewer, gas, telephone, and to some extent television and/or internet. The last two are considered by some to be utilities, but it is a gray area still because you can survive without these. A good percentage for all utilities is 5-10%. If you are seeing utilities taking up more than 10% of your take home pay, you should look at it and find ways to lower these expenses, such as getting a programmable thermostat, cutting out television or the internet and checking for water leaks.
Food is another big amount of your budget. This should be between 5-15%. The USDA offers several “food plans” that estimate the cost of food based on your family size and ages. You can research this to determine which of the four food plans is optimal for you and base your budget on that. It can range from barely $100 a month to over $1,000 depending on if you have several children under 18 you are responsible for.
Transportation takes up 10-15% and will include the cost for fuel and/or public transportation, auto maintenance, etc. Clothing is 2-7% and when you are first released from prison may be higher, but can be lowered eventually. Remember, you should budget EVERY SINGLE MONTH. After clothing is medical and health, which is 5-10%. This can include co-pays, medical insurance, prescription drugs and so forth. While the Affordable Care Act (Obamacare) may not be popular with everyone, it does allow you to obtain health insurance for the time being.
The next two items are personal and recreation. Both of these are 5-10% and could really be combined at 10-20% possibly. These includes entertainment such as movies, concerts, etc. It also includes video games, music purchases and so forth. Finally, if you have any debt, you should put 5-10% of your pay towards it.
With the exception of the debt payment, the expenses are listed in order of which you should pay them. Your basic expenses are shelter, food, transportation and clothing. So these four things should REALLY be taken care of (along with the utilities for your shelter).
In prison, you can still budget too. The BOP uses the same item descriptions across the board. For your income, you have an Inmate Pay or a Unicor pay most likely and some expenses could include Phone Withdrawal, Sales, Trulincs, Outside Savings, FRP Payments and so forth. So even while in prison, you can still practice budgeting.
It’s not a fun thing to do, but its a responsible thing to do. Since I came in nine and a half years ago, I am now debt free (including my FRP and fine payments), have an outstanding credit history and now own five mutual funds and have saved nearly $4,000 for my release. In closing, I highly recommend reading the “Total Money Makeover” by Dave Ramsey if you are able to. It will REALLY open your eyes.