Iowa State University Extension

Problem:
Often people spend money and do not realize where it is going. Many persons live paycheck to paycheck. People may fall behind on bills and spend more than they make each month because they do not have a plan and don't really know where their money is going.

Response:
ISU Extension teaches a basic financial literacy session on a regular basis for an insurance company. The basics of financial management includes information on developing a budget and a spending plan. Participants actually start to develop their spending plan in class and get guidelines on how much the average person spends on food,housing, etc. As one gentleman developed his plan, he discoveed that he was spending more than 45% of his income on housing. He had gotten a divorce two years ago and had negotiated to keep the house and continue mortgage payments. He was struggling with paying monthly bills and had accumulated more than $10,000 of credit cardf debt. He also realized that he was spending much more on food at home and eating out than he had anticipated and what was recommended by USDA's Cost of Food. In fact, he did not know what he was spending on food.

Impact:
After class, this person indicated that although he had fought to keep the house after his divorce, he now realized that the mortgage was too large for his income. Before there had been 2 1/2 incomes supporting their living expenses. Now he had only one. He realized the home was much larger than he needed and he had likely fought to keep it for "emotional" reasons. He also admitted that he needed to track his spending habits for a month as was suggested in class to see what he really was spending on food and entertainment. As a result of the class he did a Power Pay program to help him understand his credit card debt and is getting control of that debt, he negotiated with several creditors to lower the interest while he is paying off the debt, and 6 weeks later he put his home up for sale. His quote to me was, " For some reason, the Basic Budgeting Class that day really hit home to me and helped me get motivated to get control of my finances. I feel like I have so much less financial stress in my life now."

Contact:
Margaret VanGinkel
Polk County Extension
10861 Douglas, Ste. B
Urbandale, IA 50322
515-727-0656
vangin@iastate.edu