I’m not much into budgeting. It’s true that what I do with money technically amounts to a budgeting technique, but the idea of a traditional budget has never appealed to me. It’s more of a mindset thing.
Instead, I have a spending plan mentality. It’s a lot like a budget, and many people have told me they think that it’s a budget. But calling it a spending plan makes me feel better. My husband, with his Ph.D. in Psychology, says that what we call things, and how we think about certain concepts, can influence our behavior.
Spending Plan = Me In Charge of My Money
When I think of a budget in the more traditional terms, I think of something limiting, as well as as something that is charge of me. Oh, I want to go out to eat? Let’s consult the budget. Is there enough left in the entertainment category to go to a restaurant? I feel like the budget is in charge; I have to ask permission of the budget.
The spending plan terminology, though, makes me feel as though I am in charge of what’s happening with my money. Instead of being restricted by what’s available in certain categories, I have the feeling that I am directing my resources.
My spending plan is fairly easy to stick to. First, it involves automation. My retirement account contribution, emergency fund contribution, car payments, utility bills, and mortgage are all set up so that they are paid automatically each month. Even some of my groceries are automatically billed, since I have milk delivery from a local dairy, and organic produced delivered to my door weekly. We also pay tithing and contribute to charitable causes.
With all that automatically taken care of, the rest of the money is available for spending. I’ve directed my resources so that my needs and my future are covered. I don’t see any reason to divide up the rest of my spending into categories that I then have to stick to. If there’s a short-term goal to take care of (like new flooring for the house), I simply set up another automatic withdrawal to a high yield account until the goal is met.
Once everything essential is taken care of, we basically just spend until the money’s gone each month. We use financial software to track our spending, and I balance our account statements every month, but we don’t get worried about budget categories, and whether we are spending more on going to the movies this month than we did last month, or whether my husband bought more video games than I bought books for my Kindle.
Plan According to Priorities
Of course, this spending plan method only works in my family because our wants are fairly modest so we don’t exceed our income each month. Over the years, my husband and I have pretty much narrowed down our spending priorities so that we only use our money on the things that are most important to us.
Our spending plan works because we prioritize. We want to save enough for retirement. We want an emergency fund. The mortgage needs to be paid. We want to help others through charity and our tithes. All of this is taken care of first. They are our first priorities. However, there are plenty of things that aren’t important to us. We have a fairly modest home. For someone of our income level, a home that is less than 2,000 square feet is considered a bit “small.”
Having a big home isn’t a priority, though. As a result, the mortgage payment is less than 1/5 of our monthly income. We don’t have a 50″ TV like most of our neighbors. Those things aren’t priorities. Instead, our priorities, beyond investing in the future and taking care of our survival needs, boil down to four things:
- Extracurricular activities, like music lessons, Scouting, and sports, to help our son improve skills and help him become well-rounded.
- Action figures, which my husband likes to collect.
- Travel, which my son and I enjoy.
- Eating out a few times a month.
Those four items enrich our lives, and help us live the lifestyle we want. Before we spend money on other things, we ask ourselves whether our quality of life will improve, and whether we have to give up one of our priorities in order to make it work. If we do have to “give up” something during the month, it engenders less hostility because we didn’t have to give up anything important.
Our spending style prevents us from feeling limited by a more traditional budget. While it’s probably more psychological than anything else, for us this mentality helps us feel happier about our lifestyle and money choices.
What do you think about budgeting and spending plans?