Category: Saving Money

Do you ever hear about somebody doing something awesome, or even see a friend doing a new cool thing, and get a little jealous? But quickly your jealousy might turn into something else – a feeling of motivation. “If they can do it, I can do it!”

You see someone lose a bunch of weight – they are looking good and feeling better. They tell you they are eating a little less, a little healthier, and they started jogging. “Good for them!”, you think… “I wish I could do that”… “I CAN do that!” So what then? You go to the Finish Line or maybe just Amazon, and you pick up a beautiful new white pair of running shoes. It takes you awhile to pick them out. You want the best ones, after all. You settle on the brand name shoes, the ones with the new technology that will make it feel like you are running on a cloud. While you’re at it, get the nice running shorts with the moisture wicking lining, and the matching shirt with the little pocket for your iPhone.

Or maybe your friend has a blog, and she picked up photography. She has a really nice camera and it takes gorgeous crystal clear pictures. You always wanted to get more into photography. Your camera is pretty old, and the battery might not hold a charge as long as it used to. You’re really inspired by her instagram page – you immediately begin the search for a camera that has a million times better zoom than your old crappy one. They’ve got ones with different lenses you can swap out, and they’re pretty expensive but this is an investment in yourself.

Or maybe you just hear about a new book that’s really good. You’ve got Amazon Prime, it can be here tomorrow.

Or skis. Or a calligraphy set. Or the chef quality knives.

But then it’s already six months later. You went running a few times. The new camera is really complicated, and the photos are mostly blurry. It’s hard. It’s frustrating. You’ve got a pile of books you’ve never even cracked open. And the knives did not make you into a professional in the kitchen. You cut yourself and put them away.

Why?

Why do we do this?

We buy the thing, thinking it will change who we are, what we are capable of. And when we buy the thing – before it even arrives, before we ever use it once – we feel really good. It seems like we’re moving in the right direction.

It feels like progress. But it’s not.

Progress would be putting on your old crappy tennis shoes and walking every day for a week. That would be progress.

Progress would be starting your own blog and taking amateur photos with your iPhone. Experimenting, playing around. 

Progress would be going to the library, and actually reading the book you bring home.

When you buy the thing and try to jump into perfection, you are moving, but you are not actually going forward. It feels good in the moment, but you aren’t making progress. You are preparing to make progress.

Preparing for the progress is really safe. You are not vulnerable when you are shopping on Amazon. You are vulnerable when you are out jogging and out of breath. You are vulnerable when you show a blurry photo to a friend who struggles with a compliment. You are vulnerable when you are trying out a new healthy recipe and it doesn’t work out like you thought it would.

That doesn’t feel good. 

But you can’t make progress without the vulnerability of failure.

That’s where the rewards live. All the good stuff comes from the action – not the motion. You’ve got to actually go do the thing to improve, or to get anything good out of it. I know, it’s scary. But do you want to be good, or do you want to feel good (for a minute)?

To live your best life, you have to take action, not just the easy motion. You’ve got to swim laps, you can’t just tread water. As my friend Zach put it, buying gym clothes is easy. Lifting weights is hard.

And there’s good news. All this real progress doesn’t cost a thing. You don’t need to buy anything to take a real step forward. You will save money by actually using the things you already have, and you’ll feel great in the process.

You already have everything you need to start. 

Go.

I have a theory about why talking about money is mostly taboo in our society. I feel like it’s kind of like sex, or religion. It’s a very personal issue. How much money we make, and what we spend it on, is highly variable from person to person and sometimes even our self-worth and identity is tied up in it.

Asking the question “What do you do?” helps us to suss out the status of an individual we are just meeting. It would be extremely impolite to ask upon introductions “How much money do you make?” but essentially that is the signal we are searching for.

We also attempt to signal our value by the outward facing purchases we make – the cars we drive, our neighborhood, and our clothes and fashion choices. Most people assume that if you drive a luxury car or carry a Gucci bag, that you are worth a lot of money.

But most of our money choices are hidden. How much we donate to charitable institutions, or how much we save in our retirement funds. These choices make a much larger impact to our bottom line but are completely obscured from the view of bystanders.

There is also a lot of shame tied up in money. People are embarrassed about how much credit card debt they have, or how much they spend feeding bad habits each month. Opening up your income and spending to other people is very vulnerable. And most likely, you do not have the same values and priorities as anyone else. Some people choose professions that are not highly compensated but which they are passionate about. Some people go to McDonald’s everyday. Some people are subscribed to massive multiplayer online role-playing games (like World of Warcraft). Are any of these choices wrong? Of course not. These are just personal priorities.

Personal finance is extremely personal. No one can decide what your spending priorities are but you yourself. I can examine your spending and tell you that you need to cut back, and I can even suggest areas where you can trim. But the decisions are yours to make. If you most highly value travel and I suggest cutting your vacationing expenses, that won’t make sense to you, and you probably wouldn’t stick to that budget anyway. But maybe you are spending a lot more on restaurants than you’d like. If pricey meals aren’t what you value, cut back on restaurant spending and you might not even feel it. This is a cut that will work for you and that you can stick to.

An example: we have a happy, healthy dog. He’s our best buddy. Keeping him happy and healthy is a very high priority for us. However, he’s also extremely fluffy. Keeping him expertly groomed according to his breed was not high on our list, yet out of habit we were spending $80 every six weeks or so to do just that. Now, we couldn’t just let him poof out and eventually get dreadlocks. But one month, instead we shelled out $70 for pet clippers and did it ourselves in the backyard. I’ll be totally honest here. This was a learning experience. The dog looked kind of ridiculous that first time. But each month, we got better and better. We learned to bribe him into holding still with lots of peanut butter. We learned which size to use for his body and which for his ears and little mustache.

This saved a substantial amount of money over the years. And only required the $70 investment in clippers and a bit more time every month or two. (honestly not a lot more time than making appointments, dropping him off and picking him back up from the groomer though)

Now some of you are like “yeah but I don’t have a dog, so that doesn’t apply to me” and I’m here to say THAT’S ENTIRE POINT OF THIS ARTICLE. Personal finance is personal. Maybe you do have a dog or three and they are beautiful purebred show dogs and you would never dream of cutting back on their spa time. Perfectly fine, you do you. Not here to judge. But check your spending – because there is probably something in your budget (or lack thereof) that doesn’t belong there.

What could you give up? What will the budget police have to pry out of your cold dead hands?

I use a budget. In general, I know how much money I’ve got coming in and going out each month. However, I’ve noticed many of the people in my life do not use a budget, and in fact, really dislike the word budget itself. It has a lot of negative connotations, apparently. I’ve heard many objections to budgeting, things like “it sounds so restrictive”, or “I just want to have fun without worrying about money all the time”, or even “its too complicated for me”.

So, let’s reframe the whole thing. I’m going to call it a Spending Plan. I’m going to encourage you to create a plan for your money, just like you would have a plan if you were building a house, planning a wedding, or tackling any large project. A Spending Plan is not restrictive AT ALL. The boundaries are only your imagination, your values, and your income (which let’s be honest, your income is limited whether you are writing it down or not).

Far from being restricting, I find a Spending Plan to actually bring me much greater freedom and peace of mind! I’ve never had to second guess a purchase – the money was there, it was in my plan. I don’t feel guilty for buying something crazy expensive or impractical – you see, it was in the budget. The vacation is much sweeter when you save up for it in advance, and when you come home with no lingering debt your memories are not tinged with guilt or worry.

A weird side effect of budgeting, at least at the beginning, is especially noticeable if you are in a partnership. When you are making a household budget, you actually have to communicate about things. Negotiate. Compromise. Talk about what’s important to you. A lot may come to light. He thinks HBO is vital. She may want a $200 line item for restaurants. He’s got no interest in curbing his addiction to new video games.

You also get to DREAM together. This is where things get fun. What are your hopes and plans for the future? What does your ideal life look like? Do you want to take an exotic vacation next year? That can go in the budget! Did you always want a vintage tea set, or to ride in a hot air balloon? What’s IMPORTANT to you? What do you value? These questions are huge, and money is really tied up in them. A lot of dreams cannot be reality without a bit of planning and some money. Do you want to have or adopt a child? I hear those little suckers are expensive.

So, for the practicalities. A spending plan is literally telling your money where to go, in advance. It’s a plan for spending your money. If you do not have a plan, you certainly will spend money, but it may not be on the things that you most value. A spending plan in its simplest form is your income and expenses. At the top of a spreadsheet or piece of paper, you list your income, and along the side you list all your anticipated expenses. You subtract all those expenses from the income at the top, and the bottom number should be zero. If it’s less than zero – you’ve got some decisions to make. If it’s more than zero, add more expenses until it is zero.

Now, your income is all the money you’ve got coming in, your salary, child support payments, things of that nature. Your expenses can be things that are fixed, like rent, or categories that fluctuate, like groceries or electricity. Expenses will also be needs (groceries) and wants (restaurants or entertainment). Expenses also include short-term savings like car repairs, long-term retirement savings, and donations to charity.

Now sometimes, when the line items in the “want” category are all added up, there’s less money in the “coming in” than the “going out”. In this case, priorities have to be set. What’s more important, Netflix or the cable package? Can you spend a bit less on clothes each month, and a bit more on food? Let me say that your plan will be different than anyone else’s, and let me also say that each month, your plan may change. You’re not going to get it perfect at first. It will evolve as you learn what you can drop without feeling pinched, and what you don’t want to sacrifice. If you write down all your expenses and the total income cannot cover them, at least you are aware of that. Awareness is the first step toward making a change, and you should be very proud of yourself for taking this huge leap forward.

The important part is just to write it down, to align your spending with your values, and to put your gold where your heart is. It feels really good.

Now that we have a plan for our money, I NEVER worry about money. I know that we are making decisions that align our most closely held values with our spending.

There are lots of tips for budgeting that I don’t have time for here (got a question? put it in the comments!) but one big hint: put a line item in the budget for cash to blow. That sounds crazy, and maybe it is. But hey, you’re probably going to blow a bit of money here and there, so may as well write it down. It has lots of advantages – you each get a little “free money” with no questions asked. No judgement in a partner’s eyes that you went to Starbucks twice this week. And it keeps things on an even playing field, you each get equal amounts of blow money (money to blow, not money for blow) so everything is fair, and no arguments that she got to spend more this month, no tallying up purchases to prove the other is a spendthrift. If one of you wants to save your money over a few months to purchase something big, go for it. If one of you has a vice that the other doesn’t want included in the budget (cigarettes?) it goes into this category. It’s like a pressure release valve for money arguments.

I do provide financial coaching, so if you have specific questions about setting up a Spending Plan or you are running into problems, shoot me an email or drop a comment below.

How do you feel about Budgets – love them, hate them? Set up your own, and let me know how it goes!