Kathy, Donavan, Tom

Kathy, Donavan, and Tom need your help. Follow them along on a financial journey, as they makes mistakes, fix them, and learn their lesson.

Their story covers the same material as FinStart’s Step-by-Step Toolkit. It’s not an evaluation or quiz, and there may be more than one correct answer.

The world of personal finance is not black and white - the right choice often depends on your circumstances. When you choose an answer, it will flash a certain color:

RED answers are wrong – you’ll never have to click these options if you recognize they’re incorrect.
GREEN means that answer is correct. So does YELLOW - but only under certain conditions. You must click both these colors to continue Kathy, Donavan, and Tom's adventure.

Budget

Great Work!

This is irregular income. Each mission may have a different number of zombie takedowns - and some missions may not result in any at all. Zombie takedown income is unpredictable at best.

This is regular income. They earn $5,000 per mission, regardless of its outcome and are employed full-time by the government.

Financial planners recommend you put about 20% of your after-tax income towards your financial goals. You’ll likely spend 50% on necessities (“must spend”). Whatever money isn’t used on “must” spend can be allocated to “fun” (or more can be added to your “goals”).

If you live downtown in an expensive city, you may be spending more on rent – increasing your “must” spend to as much as 70% of your after-tax income. Even if your “must” spend is high, it’s important to keep saving. Financial planners recommend you put about 20% of your income towards your financial goals. The rest of your budget will go towards “fun” spending.

Putting lots of money towards your financial goals is great – but a good budget doesn’t neglect “fun” spending. Make sure you have a life – but keep it within your means.

Putting money towards your financial goals may not be as glamorous as spending it all, but it pays off long term. If you spend all your money on “fun”, one day you’ll want to make a big purchase, like a car / house, or retire – and you won’t have enough money. Financial planners recommend you put about 20% of your income towards your financial goals.

This is an irregular expense. Balloon launchers tend to last a long time, if they’re kept in good condition. Replacing them, however, can put a sizable dent in the mission budget.

This is an ongoing expense. When a balloon is launched at a zombie, it explodes, and cannot be re-used. The crew needs to buy new balloons regularly before each mission.

This is an irregular expense. Donavan tries to go on vacation every five missions. Since he doesn’t go every time he gets a paycheque, he doesn’t treat it as an ongoing expense.

Borrowing money can help you if you need money in a pinch. But it’s a risky solution because you’ll have to pay the money back, and the loan will cost you money regularly until you pay it back entirely. Only take a loan if you know you have money coming in and will be able to repay the loan quickly.

While using a credit card to cover a shortfall in your budget may seem like a good idea in the short-term, it’s a very expensive way to borrow money. If you can’t pay back what you spent with your credit card within a month, you’ll be in a much worse situation than before.

If your expenses and financial goals exceed your income, consider working extra hours or picking up a part-time job. The more you earn, the more after-tax income you’ll have to budget with.

Reduce the biggest items in your "must" spend first, like rent. Move to a cheaper place or get a roommate.
Cut from your "fun" spending – but don't remove everything as you'll likely become more miserable.
Consider buying off-brand groceries / household / personal items in bulk / at discount stores / when they’re on sale .Cooking is cheaper than take-out. Alcohol / recreational drugs can make a dent in any budget. Owning a car is expensive – public transit is cheaper.
Every month, monitor your expenses by checking your transaction history (or keep track of receipts), to make sure you stay on budget.

Doing your taxes is important and not paying owed taxes is illegal, but income tax is not a financial goal. When you get paid, your employer deducts part of each paycheque as tax. When you budget, you plan your spending based on an after-tax estimate of your income.

Paying back outstanding debt should be the first financial goal you take care of. It’s hard to save money when you’re making regular loan payments.

Saving and investing are very important financial goals.

Saving is for the short-term and to keep an emergency buffer of cash that can be easily accessed.
Investing is for the long-term, like retirement.

Insurance is a financial goal. It can protect you or your property from specified loss, damage, illness, or even death. If you've insured something, like your car, house, or health / life, you won't be financially liable if something bad were to happen.

Whether or not you use insurance depends on your individual situation. In some cases, it makes sense to self insure.

For example, if you’re young and healthy, you may not need additional medical / dental insurance, and may choose to simply pay out of your own pocket if you get sick / hurt.