1616. Money 3: It’s a Spending Plan

Traditionally called a budget, we’re actually dealing with a spending and saving plan. Spending is the plan, budgeting is the process. Both record what money we have, expect to have, and where every last dollar is headed.

If you’re scared, too lazy, too hateful of budgeting, or just spreadsheet incompetent, I offer a painkiller. Dream you’re out of debt, have enough money for the essentials of life, and call yourself everything but ‘broke’. Keep dreaming it as you lay out a spreadsheet that you believe will deliver the painkiller. If you think you can, you can. If you think you can’t, you’re right.

You’ll learn to quit dreaming outside the limits of what’s probable. Budgeting brings spouses together by discovering the importance of everything relative to everything else. Spouses find out new things and learn to know each other better.

A satisfying spending plan does more than look after your money. The process gives you previously unknown control and wipes out depression that may plague you. Focus on what you have; your attention then stays away from crying about what you don’t have, moaning about all the ways you determine that you have too little. When updated every few days to maintain control and self-supervise your progress, the budgeting process also improves your self-image. You operate your life within a new picture of yourself. So, to act richer, gain greater control over your money through a satisfying budget process that only you can develop.

Think BIG but start slow. Streamline your monthly spending plan as you go along until it takes but a few minutes to record the consequences of the last few days. You’ll also be amazed at what you learn about yourself, your spouse, and the realities of your hopes and dreams.

These pointers may help.

• Many people think they can’t or it’s worthless to account for unpredictable amounts of income that will definitely, probably, or possibly arrive in their possession. For example, sales commission when future sales are impossible to predict. Or, child support when the father is unpredictable. There’s a way out. Do the best you can to guess, post it, and be ready to change it when reality arrives home. Allow for loose but never sloppy accounting. A SWAG* is better than giving up. (*scientific wild a** guess)
• Anticipate big expenditures, such as having to travel for the funeral of a loved one currently in the process of dying. Or, kid’s college fund for which no funds are currently available. Or, a down payment for new car or home. At least fund such things with $1 until you shuffle new or other expenditures to cover what you want to do.
• One word produces success—tradeoffs. The vagaries of life create the need to review and change priorities. When the car unexpectedly needs fixing, a few dollars may be trimmed from vacation and Christmas ‘pigeonholes’ to cover it. Or, ‘borrowed’ from savings. (One of my budget items is ‘Aimed at Savings’, which is a pool that I withhold from savings accounts and from which I borrow as needed and repay as possible.)
• Take the high road about overspending. What’s done is done. Partners, aka spouses, work together even in bad times. Don’t blame spouse or guilt yourself. Nothing good flows out of either. Look for ways to compensate, intend to do better, and move on. Keep smiling that you have all the money you do have.
• This technique helps pave the road to recovery. If you lack money for something you want, start by putting a dollar in that ‘pigeonhole’ until you find ways to add more. Every good intention helps.
• Plan to have personal budgets, that is, pocket money for each spouse. Agree on what exactly will be covered. For example, wife buys groceries, kid’s clothes, and has some ‘mad money’. Husband pays for entertainment, eating at work, and has pocket money. Each has the freedom to spend individually and without criticism by the other. If such freedom can’t be acknowledged, allocate differently.
• I suggest you budget for a pocket-money bonus for staying within budget to the spouse not responsible to manage the budget and to the budget manager for meeting the savings goals. No longer needed, but our policy included a twist that proved extremely effective. If she didn’t earn her bonus, it defaulted to me. If I didn’t meet our monthly savings goal, it defaulted to savings. When we started this surprisingly effective incentive, the bonus was large enough to incentivize both of us to stay within budget. We did until it became habitual and no longer needed.
• When a new level of income permits greater pocket money budgets, have a policy that three months must first pass. The extra time will encourage a more realistic assessment and reevaluation of relative priorities to determine the best target for the new money.
• Planning how you will spend stimulates the setting of targets and goals. It enables the husband to pursue as achievements and earn self-admiration. As the wife helps with his achievements, she earns the laurels of self-importance. If, for example, the goals and targets are for savings or cash to be used as down payments on cars and home, immediate gratification slowly morphs into deferred gratification. It painlessly slows spending.

It all builds up to this. The more deeply you get involved in basing decisions on budgetary spending, the more grateful you become for what you can do with what you have. Gratitude generates happiness.

I tried several times over the past 30 years to describe the internal details of how to create and operate a home budget. I tried again to enhance this series but failed. A budget is just too personal in both design and use. Everyone needs to do what works best for them. However, I developed one feature for our budget that greatly facilitates both our decisions and the accuracy of budget details. I’ll describe it tomorrow in post 1616.

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