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Spokane, Washington  Est. May 19, 1883
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Budget exercise can be a real eye-opener

Universal Press Syndicate

Thank you for reading. We hope you’ll stick around a while, but if you don’t, we’ll understand. You see, this article’s subject is best not mentioned in polite company. This single word — a six-letter concept, really – is considered a money expletive. Still, here goes:

Budget.

Wait! Come back! You may think that you’re beyond this topic – too financially sophisticated to bother with a budget. What do you care if you blow .07 percent of your income on refrigerator magnets?

But before you go, stop and ask yourself this: After your basic necessities are covered — food, shelter, nice shoes, companionship — what could bring greater joy to your life? A weekly massage for your chronically aching back? Art supplies, even if you have only an occasional chance to use them? A guilt-free weekend escape with your pals? A summer of sailing lessons for your entire family?

What if just a little more fiscal discipline could help you achieve one or all of these things?

One reason budgets fail is psychological. People lie about what they spend their money on — even to themselves. And if you think that this doesn’t describe you, then tell us exactly how you spent the last $100 you got from your bank. Can’t remember? Then write down how you spend your next $100.

Ta-daaa! You’re budgeting. Your budget need not be complex, unless you like it that way. Simply tracking that hundred bucks is an eye-opener for most people.

Should you become curious about where your other C-notes are going, take advantage of a generous offer from FamilyFN. The company is giving away its Quick & Easy Budget Kit for free through April 1 (go to www.freebudgetkit.com; $4.95 for shipping and handling). The kit includes a CD and a workbook and shows you how to budget – determine your inflows, determine your outflows, adjust and implement.

Budgeting brings about awareness, control, security and goal attainment. And none of those are forbidden financial words.

Get more saving and investing tips at www.fool.com/savings and www.fool.com/retirement.htm.

Ask the Fool

Q: I see that Wal-Mart hasn’t split its shares in a long time. Is that because it has too many shares outstanding already? – W.E. Stanton, Cassopolis, Mich.

A: It doesn’t typically work that way. Splits often take place when a stock’s price is deemed “too high.” They’re to some degree a psychological event, making the stock look “cheaper” and possibly attracting more investors. If stocks never split, then shares of some big companies like Coca-Cola and Microsoft would cost as much as a car or a house.

Wal-Mart does have a lot of shares – more than 4 billion. But then its revenues and profits are huge, too. In its quarter that ended in October 2004, it raked in $69 billion in revenues and netted a $2.3 billion profit. Per share, that’s $0.54. Many companies earn more or less than that per share. What really matters is how strong the firm is, how quickly it’s growing, how successfully it’s competing, and how each share’s value is increasing. Earnings per share for 2004 were $2.07, considerably higher than 1994’s $0.51. You’ll find much more interesting financial information at www.walmartstores.com.

Q: How do I determine my cost basis in a stock and my gain upon selling it? – D.B., Nashville, Tenn.

A: Imagine that you buy 100 shares of Home Surgery Kits Inc. (ticker: OUCHH) for $30 each, paying a $15 commission. Your cost basis is the purchase price ($3,000) plus the commission, or $3,015. The basis per share is $3,015 divided by 100, or $30.15. If you sell the shares for $40 each, or $4,000, subtract the $15 commission and your proceeds will be $3,985, or $39.85 per share. Your taxable capital gain will be $9.70 per share.

My dumbest investment

Thirty years ago, I purchased a home for rental income. I bought a lease form from a stationery store and filled it out myself. I located a renter and gave him the option to purchase the house for a specified dollar amount. But I neglected to indicate that the option would apply only at the end of the lease agreement. After the lease was signed, the tenant insisted on purchasing the house at the beginning of the lease, and after an unfortunate lawsuit, the judge agreed with him. Although I did not lose any money, I never realized my investment dreams. – Dee Norris, Hinsdale, Ill.

The Fool Responds: Well, at least you didn’t lose money. Real estate has made many people wealthy, but it can be more complicated and take more time than we think. Tenants can cause headaches, and property values can fall. If you’re saving for retirement, learn of sound ways to do so at Read more about real estate in “Investing in Real Estate” by Andrew James McLean and Gary W. Eldred (Wiley, $20).

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