SPED 664Consultants:

Nathan Rowe, Rita Holter, Sarah Streyle

In this stage a representative of an organization contacts a consultant for the purpose of exploring the possibility of initiating a consulting relationship.

  We have set up a class for the surrounding

community for couples who are in debt and need to create a workable budget in order to live within their means. We will be using 1 of those couples as our example.

Consultants: Nathan Rowe; Rita Holter, Sarah Streyle Consultees: Mr. and Mrs. Smith • 2 children• Dog• 4 bedroom house (own, mortgaged)• 2 cars (1 car loan)• Enjoy going to their in-laws cabin where they jet ski, tube,

and fish • Own 2 jet skis Mr. Smith works as a machinist and Mrs. Smith is a school

teacher. They had a combined income of $ 80,000, but Mr. Smith’s hours have recently been cut so their income has been reduced to $ 75,000.

• In our scenario, we would have an informal contract in which the consultees agree that if they take our advice, they will be responsible for the outcome of that advice.

• In our case this would simply be when the class meets once a week.

• In this phase the consultant builds trust and a relationship with the consultee(s). This can include: Introducing ourselves, learning names, and telling a personal story about our own budgeting troubles that we’ve had in the past and what techniques we used to create a good working budget. This phase should also include a confidentiality statement saying that whatever is talked about in the class will not be kept confidential.

Smiths’ Monthly Fixed Expenses:• House Payment: $1700• Home Equity Loan: 350• Electricity: 200• Propane gas: 100• Car Loan: 550• Car Insurance: 200• Jet Ski Payment: 200• Jet Ski Insurance: 50• Garbage, Water, Sewer 100• Mrs. Smith’s School Loan: 200• Life Insurance: 100• Cell Phone: 75• Cable/Internet: 150

– (inc. premium channels and high speed internet)• Health Insurance: 100• Credit Card: (minimum) 40• YMCA membership: 50

• Monthly Fixed Expenses Total: $4,165

Smith’s variable payments: average last 6 months

• Entertainment Dining out, movies, etc.): $300• Gas for cars: ($200 to cabin) 600• Groceries: 450• Car Repairs: 100• Misc: 200• Couple’s Gold League: 200

• Total Average Monthly Variable Expenses: $1850

Smith family Gross income $75,000Income Taxes - 12,000

Take home pay/year $63,000 Take home pay/Monthly $5250.00 Total Monthly Expenses $6,015.00 Monthly Shortage -$ 765.00

• The Smiths need to commit to attending weekly class.

• Agree on one budget option/sign contract.

• Agree to be honest with consultants.• Confidentiality will be honored by

consultants.

Option #1: • Sell Jet Ski’s $200.00• Jet Ski gas 100.00• Jet Ski Insurance 50.00• Remove Movie Channels 65.00• Cancel YMCA membership 50.00• Cancel Golf League 200.00• Keep golf course membership 0.00• Eat out only once a week 100.00• Sell off jet ski & pay off credit card 40.00• Monthly Savings $805.00

Option #2:• Rent out extra bedroom $750.00• Increase in Utility bill -50.00• Remove Movie Channels +65.00• Drop YMCA membership +50.00Monthly Savings $815.00

Option #3:• Refinance home at 5% interest rate and consolidate monthly debt (credit card, student loan, jet skis, home equity loan, & car loan). Go from a 15 year mortgage to a 30 year mortgage. $665.00• Lower car insurance to liability 100.00• Savings account 50.00• Extra Money 50.00Monthly Savings $865.00

 • Consultants will review all three

options with the Smiths. • Smiths select an option. The Smith’s chose

to sign a contract using Option 3. Although they did not like the idea of implementing a 30 year mortgage, they felt that this was the option that allowed them the highest success rate. Option 3 allows them to continue their lifestyle while reducing their monthly spending.

• Smith sign contract with each other and the Consultants. Contract will include behavioral agreement that Smith’s will not use credit cards or exceed allowed monthly variable budget.

• Smith’s will electronically transfer $50.00 into savings account each month to build an emergency fund.

 To control variable spending, the Smith family opted to divide

up variable budget dollars into envelopes broken down into weekly spending.

 Entertainment: $ 75.00/per weekGas $150.00/per weekGroceries $112.50/per weekMisc. $ 50.00/per weekGolf League $ 50.00/per week

Total variable spending allowance: $437.50/per week (4 Weeks = $ 1750.00)

• Variable Weekly Spending: $1,750.00• Consolidated Mortgage Loan: 2,475.00• Electricity: 200.00• Propane gas 100.00• Jet Ski insurance 50.00• Water, sewer, garbage 100.00• Life insurance 100.00• Cell Phone 75.00• Cable/internet 150.00• Health insurance 100.00• Savings 50.00• YMCA 50.00 • Extra Money 50.00• Total $5,250.00

• The Smiths attended the weekly meetings for six weeks. Each week the Smiths brought a detailed log of their expenditures. At the end of the six weeks, the Smiths found that they were able to stay on budget but needed more money for groceries as they were not eating out as frequently. They cancelled their movie channels which gave them an extra $65.00 each month in their grocery budget.

• Upon completion of the class, the Smiths completed a survey. The survey showed that their satisfaction rated very high. The Smiths were able to achieve their financial goals of staying within their monthly budget.

In our example, disengagement will not be a surprise to the Smiths.  This was a 6 week class and will no longer be meeting after that time.  The survey given earlier will be used to evaluate how we, as consultants, did throughout the process.  We will mail a follow-up evaluation to be completed 1 month after the class ends to “check in” with the couples to see if they are continuing to remain on budget.