Where does it all go?
You think you've got a leaky wallet? You're not alone. Uncle Sam makes it easy for us to track our income. (Gee, thanks.) But when it comes to monitoring the flow of after-tax, "disposable" dollars, we're on our own. Sometimes we score. Sometimes we flounder. We followed a family during some of the money-burning activities of daily life, and we asked a financial planner to take a look - and to distill 10 lessons all consumers can use.Skip to next paragraph
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To understand Howard and Kathy Powell's life, just take a ride with them in their minivan.
Today they're rolling down a quiet street in Attleboro, Mass., a town near the Rhode Island border. Five-year-old Spenser squeals in the back seat as ants crawl out of sticky soda cans he's watching over. (He keeps the money when the cans are recycled.)
Next, he torments his sister Kelcee, making her seat fall back while Kathy (in the middle of a discussion about gas prices) periodically whips around and shouts "Spense, you settle down!" She then orders him to stop thwacking his sister on the head.
All this to the tune of the Back Street Boys.
The chaos is typical of many families. The Powells are an American family to the core, from Kelcee's impromptu Britney Spears concerts in the living room to her gymnastics classes on Thursdays. And being an American family means spending money. Lots of it.
It's shelled out at Fuzziwig's Candy Factory, peeled off for braided hair and fake tattoos at a summer street fair, and dumped into IRAs. But still, like millions of Americans, the Powells can't figure out where it goes.
"I was always complaining, 'Where is my money going?' " says Kathy, a chatty, high-energy mom who recently finished a two-term reign as president of the local Parent Teacher Organization.
So she bought "Debt-Proof Living" (Broadman & Holman, 1999), about streamlining finances. She also subscribes to Cheapskate Monthly, an online newsletter that suggests people keep track of their expenses for three months.
What she found stunned her.
Between buying orange juice and bagels in the morning, and trips to Burger King after gymnastics, she was spending more than $300 a month on fast food. She got into an expensive regime without realizing it. (see tip 1).
"It freaked me out. It was just constant," she says, digging into a Wendy's lunch and keeping an eye on Spenser who has been putting ice cubes down Kelcee's shirt. "It was just constant."
Constant expenditure is a given in the Powell house. The biggest hit used to be childcare. But when it became clear that they were paying $13,300 a year for child care a few years back, Kathy went from working 35 hours a week to a fraction of that so she could watch the kids. Still, during the school year, they pay about $100 a week for after-school care (tip 2).
That's a tiny fraction of what it costs to raise a child. According to US government figures, parents making more than $56,000 annually will spend an estimated $160,000 raising a child born in 1999 to the age of 17.
With statistics like these looming over the Powells, Kathy is "always trying to find a way to cut corners," she says.
Her job definitely helps out. A life-long love of retail - and employee discounts at the mall where she works - keeps her happily employed at an Eddie Bauer outlet store two days a week. She recently bought a queen-size duvet at the mall for $12. Original price: $199 (tip 3).
"That's why I keep this job," she says. She also has two other jobs for extra income: Two days a week she works as an office manager for $15 an hour, and dog walking brings in $60 a week. The extra income isn't spent frivolously.