The Spending Plan Mentality

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?


The Spending Plan Mentality — 18 Comments

  1. I would agree that it sounds like a budget to me. It’s pretty much what I look to accomplish with our budget. I don’t view budgeting as limiting, but freeing me to make the choices I want. It requires discipline and working towards goals that we’ve set. It allows me to see what we have allocated and spend it however I want. I can either spend it all or hold some of it back if I know something is coming up in the next month or two. That said, I don’t think it really matters what it’s called…it comes down to being disciplined with your finances, which definitely looks like where you’re at.

    • I’m really big into thinking about what keeps you motivated, and what makes you feel like you are really accomplishing what you want. Calling it a budget just makes me shudder 🙂 And that could have something to do with the way may family grew up, with my parents always stressing about money and appearing (to me) to be slaves to The Budget. But you’re right that it has to be about discipline, and being in charge of your money.

  2. I guess you have to find what works for you personally. Everyone is different so you have to find something that you are not only comfortable with but something you can stick to long term. I like having things allocated and when it runs out it just runs out. It makes me more conscious about what I am spending money on.

    • I agree that you need to find what works for you. The joys of PERSONAL finance. I love, too, that you mention being conscious about what you’re spending money on. You really do need to pay attention to where your money is going, and why.

  3. It doesn’t matter if you call it a spending plan or a budget, as long as it works for you. I do the same thing every month, create a budget based on what I need to spend money on and the amount of money I have to save. Then, whatever is left of my monthly income, I feel free to spend on the things I want, which I believe is necessary to relieve us of the stress we get from our daily grind to earn money.

  4. Miranda, I am so glad you think this and have structured your financial life in this way. I published couple of months ago an article about teaching our kids the wrong thing: mostly we teach them how to save but the trick is to teach them how to spend (which is pretty much what you are saying).

    Yeah, my PhD is in sociology and I also think that the way we call thngs matters immensely. For instance, I did call our debt ‘negative wealth’ and got many negative comments and jokes. I am joking now – calling it that (which happens to be technically correct as well) made me loose my fear of it and pay off very large anounts very fast. And feel good about it :).

  5. I think that what you are doing is great. And really, if the end result is good then that is all that matters. We dont stick to an extreme budget anymore like we used to…but we are still doing great. We just aren’t able to track as closely anymore. There are only so many hours in the day, you know?!?!?!

  6. I would characterize my money management as more of a spending plan that an actual budget. It works for me! Part of my structure is payroll dedcution for retirement savings (403B, IRA and Roth IRA). We live on what is left and still have some savings.

  7. I have a budget. I know exacty what I am bringing in for the month and what is coming out of each check. Now more than ever, I need to plan. I think your Spending Plan sounds less like a budget and more like you said, a method. I like it! I wish I could do it. Maybe someday I can when I have more wiggle room. For now, I cannot even think about going Over Budget as I have no credit.

  8. We call it our budget, but I guess we operate it like our spending plan. I also like to automate pretty much everything, spend on what we plan to spend on, and divide up extra between accounts for certain purposes like vacations, fun money, home and auto maintence, etc. That way, when we do spend extra on something in a certain month, we can draw that out of the appropriate account and not touch our emergency fund…

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