Financial enlightenment does not come from charts
I’ve always looked at websites and apps that purport to solve your financial woes and set you on the path to fiscal happiness with skepticism. It’s not that I think they’re not useful; but I think that making charts and graphs and having the ability to Tweet your receipts is, while fun, not essential to financial health, and sometimes even a distraction. I think of this association as breast self-exams are to breast cancer: useful, even recommended, but not going to save you from getting breast cancer in the first place. At best, they’re detectors, diagnostics.
That theme keeps repeating itself in my world of financial media, so I’ve been thinking deeply about it.
In a post on my financial relationship with my husband, for instance, I mentioned tracking my expenses. When he was home on leave at the end of October, he told me this was great. “Let’s sit down with your list of expenses,” he said, “and we’ll go through it. I’ll put a line through the ones I disagree with. Then we can discuss them.”
I balked. How was this going to help matters? A retrospective give-and-take over my spending would, at worst, bring up arguments over what I’d spent; at best, our discussion would give me a sense of pride over what I’d spent, hardly getting at any underlying financial issues.
Seeing all my spending through someone else’s eyes — even seeing it as percentages or pie charts — was not going to fix my financial problems.
My financial problem is that I often budget carefully, and I generally do spend sensibly, but when it comes down to a decision between buying something and not buying something, I’m making that decision only looking at the upside (whether the purchase is a wise one and frugal to boot), not at the downside (whether I’ll have money for my other obligations after I spend on this one).
I leap first and do the math later.
This is not the best way to approach financial life, at least, not in my currently limited financial situation. I’m working on it! But no matter how often I fill out my expense-tracking spreadsheet, no matter how many cool “sumif” functions I run (I could tell you, for instance, exactly how much money I spent on coffee in coffee shops as opposed to the money I spent for coffee beans and brewing equipment; how much I spent on meals and how much I spent on snacks and treats; how much I spent on babysitting for social functions and babysitting for writing), I am not getting at this core issue.
I can only get at my real problem — not through helpful lessons on budgeting tips or advanced iPhone apps — by real, hard, careful work on self-improvement.
I can only get at my real problem through psychology. Through practice.
I think the true path to financial enlightenment is something like those 10,000 prostrations I read about in someone’s memoir. I forget the details, but do the prostrations, day in and day out until you get to a big number, and you move to the next “level” of spiritual enlightenment. Doing the right thing over, and over, and over again is the only way I’m going to put my financial house in order. (Or a huge windfall might be nice!) (No! That’s not useful thinking!)
Over the past few weeks, right after having this financial epiphany and resolving to spend a bit more sensibly than I had been for the past year, I had less cash than I had planned due to some surprise bills. I found myself with about 10 days between the end of my cash and the next planned payday. What I wanted to do was to juggle, to promise to pay and to borrow from one account so I could buy (for instance) Irish Breakfast tea, and easy snacks for my kids’ lunches, and a book for my book group, and another that I discovered my name was in (I’m a “Notable” in Best American Essays!). Not to mention my usual small luxuries, like cappuccinos, salty-herby bagels and roasted vegetable cream cheese when I go to meet friends for work sessions in cafes.
But I had just had this talk with myself: I need to practice financial fidelity. So I did my best.
It’s not like I don’t know how to do this; I just don’t want to do this. I have a stocked pantry and plenty of resources. I did the frugal thing.
Instead of buying a new box of tea, I made do with the seemingly endless variety of bits of loose tea I’ve purchased over the last few years. Instead of buying easy snacks for my kids’ lunches, I got creative with the freezer and the pantry, making them meatballs, and biscuits, and healthy oatmeal cookies, and lots and lots of carrot sticks (luckily, they love carrot sticks). Instead of buying that book, I decided to get it at the library (I know! You keep telling me!). I made a stack of books the local bookstore would be likely to take in exchange for the one with my name in it. I looked for change under the couch and in the bottom of my bags to buy plain, ordinary coffee when I went out to meet friends, and ate oatmeal before I left home.
I planned ahead for busy days, making a huge pot of beef vegetable soup and lots and lots of mashed potatoes (my CSA has me overflowing with potatoes, cabbage and carrots!). I was so proud of myself.
The thing is: This is only the smallest, most beginning step toward meeting my financial goals.
Spending time on practicing my financial philosophies instead of recording them or analyzing them or even searching for great tips and tricks on Pinterest that fit “frugality” or whatever I want to call my philosophy was great. And I think it gets to something we often forget as personal finance writers: the psychology of money is far more important than the math.
If you want to be smarter about money, you don’t necessarily have to be smarter. You don’t ever have to learn how to do one of those “sumif” functions in your spreadsheet software (though they’re totally fun); you don’t have to be able to tell me what percentage of your “vice” budget was spent on coffee, and what was spent on chocolate. You have to be able to behave the right way (right = most sensible to reach your financial goals).
Any journey in personal finance is a journey in behavioral psychology.
I’m always amazed when I listen to the personal finance shows on the radio and hear variations on the same question. Either the caller is doing fantastically well, making far more income than she is spending, and wants to know whether (for instance) to spend more money paying off a debt or saving for retirement. Or the caller is in some variation of a dire situation brought on by bad habits. I relate to the dire situation and think, “Oh! I’ll do so much better! Because I understand the behavioral psychology behind this!” and then… I try.
I am a classic do-first, think-after person. Lots of time it works out brilliantly — it’s the perfect sort of trait for a creative overachiever, and I get a lot done! But it’s not the best approach to my finances, and I’m practicing like a yogi to do the numbers before I whip out the debit card.
What is your financial practice? Have you found charts and tracking sheets more useful than I have? Are you a scion of a noble line of disciplined financial gurus? Or are you, too, in need of 9,000-some more prostrations before financial enlightenment is reached?
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There are 52 comments to "Financial enlightenment does not come from charts".
Good for you for pushing yourself to be creative! I agree, it feels good, and I’m always proud of myself when I do what I know I should do, rather than what’s convenient or familiar. It’s hard!
I couldn’t help shuddering, though, when I read this: “Let’s sit down with your list of expenses,” he said, “and we’ll go through it. I’ll put a line through the ones I disagree with. Then we can discuss them.”
Argh. Really?? I hope eventually your husband comes to see the two of you as partners solving problems and meeting goals, rather than himself as all-knowing judge and you as the person on trial.
Good Luck!
Lol, my wife and I came up with a plan like that for a couple months. We tracked our spending using excel and colorful graphs, and we went over what we each spent. This made me/us realize two things: (1) this is a great way to start arguments. Each pair of the couple should get some money for the month to spend on whatever they want and they can’t go over (and no discussion about what they spent on); (2) colorful graphs and app stuff is cool to help you see where you’re going wrong, but like she said, in the long-term, this won’t help you out. You have to help you out. The apps will only tell you where you need help. So figure that out and then dump the apps.
What frustrates me about my wife is that she buys something, then she thinks and then she returns! I keep telling her that our limited time is worth at least something – far more than she values it when she spends 2 hours deciding to buy something then spends an hour returning it.
Luckily for us, our tastes cost less than we can afford.
I was (and sometimes still am) just like you: spend first, think later. The trick I use is asking myself if the item I am buying is going to get me closer to where I want to be or is it to fill a short term need/want? Usually when I ask myself this question before buying the item, I put it back and move one. Sure there are times i ignore my trick and buy anyway because I can’t completely deprive myself of things, but it certainly helps to keep me in check.
I think that it gets easier with time. I used to track all of my spending but now I don’t have to watch so closely anymore. My spending (or lack of) has become the norm now and I no longer have to monitor myself.
We’re big trackers, and I think it helps diagnose the problems later. Not in the sense that we cross out purchases that the other disagrees with, but in the sense that we can look at past months and see what was different.
We actually wrote about this on our blog today since we blew the gas budget the last two months. I went back to our gas spending and figured out that Mr. PoP was filling up his tank every 4 days instead of 5. Well, that explains the spending, but why was Mr. PoP filing up more often? That he had to figure out – and he did. Having the tracking was a useful way to frame the discussion without blaming anyone. It was just “something has changed…why?”
I agree, I have to do it and not just talk about it, or analyze it. Great tea, snack, book examples. I will try to remember them for inspiration this week when I’m faced with the desire to go against my financial plan 🙂
“Any journey in personal finance is a journey in behavioral psychology.” That, I think, is the key to it all. Thanks for sharing, Sarah.
Yes, it is. I used to think when I was in college that all folks in debt needed was a windfall and then they’d be OK after that. I was so naive that it took me until my 30’s to realize that people got into the pickles they were in (not just financial) because of their choices, or behaviors.
My sister-in-law inherited $80K when her husband’s father died. They lived in a trailer that was up on blocks, and she used to complain about how bad it looked and the shape it was in. I figured they would do some needed repairs to the trailer, put some underpinning on it, and otherwise spruce up the place. Five years later the place still looked like a dump and the money was gone. They had pissed away every cent of the money on clothing and other consumables.
Folks like that don’t think they need to change her ways. They think their problem is that they just don’t get enough money.
$80K is nothing. My father’s 3rd cousins (3 brothers in all) pissed away (in India) what would be equivalent of about $20 million. They sold lands that had been in the family for 8 or so generations (lands that were usually rented out to tenant farmers) and the money simply melted away. They have gone from being literally “owners of all you can see” to renting a 2 room apartment to have a roof over their heads!
Excellent article Sarah!
I agree the concrete examples are things we all have in our own lives. The one major problem I run into with this though is I get decision fatigue. I will try too hard saving on small things only to lose my willpower over something more *useful*, but more expensive. Just like dieting or keeping up an exercise practice.
I think tracking can be a great tool when you’re first creative a budget, or wanting to review a budget. But once a budget is in place, for me tracking is somewhat useless as well.
At the point where a budget is in place and you’re just struggling to make it work in some ways it turns into a matter of willpower. There’s still plenty of tricks that are possible to help out at that point (cash budgets, envelope systems or multiple bank account, debit cards that automatically dump money into a savings account every time you spend) but tracking is no longer one of them. In some ways at that point tracking is discouraging because it just shows how clearly you are on or off track.
Charting and tracking has, for me, been extremely valuable. When we were paying off our unsecured debt in 2007, working that debt snowball and updating the Excel spreadsheet that Mr. Sam made for me, was extremely motivating. Watching our debt numbers drop and our pay off bar chart go up from day to day, week to week, helped keep us on focus.
After we got our unsecured debt paid off, $55,500, in 2007, we turned to using the same habits by implementing yearly savings goals. And we are are still using an Excel chart to track same. And while we are almost $10,000 behind on our 2012 goals, we have saved nearly $50,000 this year which is not too bad. http://adventures-of-sam.blogspot.com/2012/11/2012-savings-goals-november-update.html
In addition to charting our savings goals, we track our spending via Quicken and we track our net worth via networthiq.com. My networthiq.com data goes back to 2003.
For us, the constant charting and tracking DO help us stay engaged with our finances since I update our goals twice a month, update our Quicken once a month and update our networth once a month.
No, I’m exactly with you! Pie charts and graphs do nothing for me. Deep down I know what has to be done-it’s just a matter of practicing it day in and day out until it becomes a habit.
In the very beginning, tracking my every expense was the only way to keep myself accountable so that I would be less likely to fall back into my old trends. I could see if I was veering off my path and correct my behavior before the week or month was over. Being able to compare month to month made me feel better about my behavior and habits towards money because I could see, high-level, what exactly was going on with my money.
Currently, I don’t update any tracker sheet – at all. Seeing the ultimate number is what keeps me on track. I feel that my behavior is solidly pointed towards save and spend sparingly. I know what I don’t want to spend money on anymore and I’m more free to make decisions on the things that matter to me.
I set aside a ‘guilt-free’ fund in which I get to spend all of its contents or none at all at any moment. I love it! That fund alone keeps me in check when I’ve had a bad day or I’ve got the itch.
At the end of the day, it’s the big number that I’m intent on making…bigger. It’s all about checking yourself before you wreck yourself.
I couldn’t figure out why we weren’t meeting our finacial goals and finally decided to do some real detailed tracking at one point and it really showed where we were spending money, and in unanticipated ways. It lead to an understanding, and some eye opening, of where we could and should cut back, but also what we felt was important to us. Eventually we went to a less stringent system, but you have to see where the money is flowing before you can decide to increase, restrict, or dam the flow.
I will also call foul on your spouse for thinking too military and acting as if he’s an inspector general looking over the books for inappropriate funding lines. You aren’t the subserviant command. As others have said, this can become nothing but a blame game and argument generator if not done in the right mindset. The point is to see all expenses, his included both where he is at and when he is at home, and determine if there are areas you both want to and can agree to adjust. Not an easy thing to do in your current situation though, so best of luck to both of you.
Finally, it is always about the action. You can plan to your hearts content, but until you follow through with action, the plans are worthless. That’s often why people who forge ahead with imperfect planning adjusting as they go get by, while pure planners never get off the ground. Better to be struggling at consistently building an emergency fund than to not have anything in it at all. Two steps forward and one step back will still get you there.
“Pure planners never get off the ground”
Yep. That’s me. I have to resist inertia constantly.
When I start to feel lifestyle inflation creeping in I take a hard look at my income and why I feel so liberated to consume and then decide how much more I can put towards my savings and debt pay-off. I pay myself first, pay my bills second, then put as much as I can towards my student loan debt as I can till it hurts!
Well written article. I agree with Dave Ramsey,who says finance is only 20% money. The rest lies in actions and your mindset. And, yes,yes,yes!! Always budget a little fun money. Like a little treat keeps you from blowing your healthy food plan, a little pocket money keeps you from blowing the budget.
Congrats on the nod from Best American Essays–that is very cool.
I find charts and graphs a waste of time and energy. This was one of the problems I had with GRS and JD – – He charted and graphed us to death with his micro-managed written breakdowns of how much it cost him to make a pizza at home vs. buying one or how many string beans he got out of his garden per seed. On paper, he was “earning” $5 an hour by doing something himself but it was never revealed where that actually $5 bill was going to appear from. And there never seemed to be any enjoyment in doing any of this!
My monthly/quarterly statements from my various assets and credit card statements are all I need to keep track of how I’m doing.
I run a small side business and at least twice a year I tally up each client’s payments and my business expenses to see where that’s going (and to prep for the accountant at the end of the year).
How can we show the world that being “thoughtful” with our money and time is worthwhile when all they can see is how straight-jacketed so many have become?
I have been charting my spending and finances for close to a decade now and I love it. I love seeing where I came from and where we are going. My spending has increased exponentially with getting married, buying a house, and having children but my husband and I look at the charts regularly to make sure we are on the same pages. I do track spending but in larger categories. I use my credit card statements to tell me where most of it has gone and divy it into categories that I have tracked consistently. My husband and I set goals together and discuss major spenditures as well as small ones if they get out of hand.
I think the author should sit down with her husband and discuss the spending that he doesn’t like, although I hope that they can do this peacefully. My husband and I do this regularly and it’s helpful to us for our spending/saving mentality. If we don’t discuss regularly we end up spending in ways the other disagrees with. That being said, we are both “allowed” to spend money as adults so long as we have enough to meet our goals. He actually has a beer making supplies account that helps us.
So many couples just don’t talk about it.
I’m the same way. I’ve been tracking for ages and honestly kind of love it. I don’t find it a chore at all, and the process supports my larger goals. But that’s very much in line with my personality type, and I can certainly see how it wouldn’t be the case for others.
I think I’m a bit confused about deciding whether or not you can buy something. If you have a monthly budget and every single dollar is accounted for……you have your answer.
If your “book” budget is blown (or whatever category it would fall into), then you can’t afford the book.
Wouldn’t that take a whole lot of exhaustion out of the daily decision making?
I find it fairly simple to look at my montly budget and see what is left.
I pretty much never run short.
I tried that recently. I think it depends on what you need to budget for and how much you have that’s not a fixed expense. Once I took out all the fixed expenses, what was left, when divided into the other intermittent expense categories, didn’t enough to do anything with in any category. Taking it out and putting it into little envelopes to save so I could, say, pay for auto repairs the next month if I had to have them done this month didn’t work out so well. 🙂
I think it’s worth looking at your decision-making process. If you’re not using the numbers to make your decision, there’s not much point in tracking and budgeting. So use another technique instead: put a picture of your savings goal in front of your credit card in your wallet, or withdraw a set amount of cash for the week instead of using plastic. But don’t spend a lot of energy generating numbers that aren’t even part of your decision-making process.
I happen to track, and I check the budget for certain categories before I even shop. Other categories, like groceries, we just use an upper limit – if we’ve spent a lot one month, I postpone shopping and make less favorite, more creative meals with what we have around the house.
Like other folks are saying, tracking is useful when you’re starting out and don’t have a lot of money compared to expenses. It’s less useful when you know what you’re doing or your income is already greater than your expenditure.
Liz Pulliam Weston used to have a great article up on MSN money about when you no longer need a budget. Basically it boils down to the income-outflow gap (and automation).
If you’re not happy with how your spending relates to your earnings, then perhaps it is time to try things, even if they’re unpleasant. If you are happy, then you don’t need to bother unless you get a kick out of it.
That’a girl, Sarah! Best article on GRS in a long while!
Making do with what you already have can actually be great fun. I’ve probably put too high an allotment of my income toward savings/investments and occasionally find out–“Uh, oh! It’s going to be tight this week!” But it’s sort of become like a game. There’s always stuff in the freezer I should use up, so I’m not going to starve. I can raid my change jar for coffee money. When I do make it through those tight 4 or 5 days without having hit an ATM to withdraw money it’s a real sense of accomplishment! Naysayers argue that this is just kicking the expense can down the road, but it’s really not.
It’s weird, you know. If money’s tight and you can’t afford something and have to put it off, some people feel this is denying oneself and negative. But if I feel I can’t afford something, put off purchasing, make do, and wait a few days/weeks until I can, I feel so incredibly positive and happy that I actually did it! It’s a genuine reward instead of instant gratification.
Great article, keep it up! 🙂
(Oh, and I love tracking because it’s really fun to compare my expenses against previous months/years. By tweaking (phone, cable, grocery stores, trips to restaurants/pubs, etc.) here and there I find out that my expenditures are down $200-300 on average per month from last year. …Woot!! It’ll be tough, but I’d like to see if next year I can beat this year’s low scores!)
I think it all depends on what works for individual people/couples/families. Some people like visuals and find apps and other tools to be motivating. Some don’t. Nothing wrong with questioning the effectiveness of your methods and doing what works for you, IMHO. Everyone has different learning styles.
I use a spreadsheet to track the “big stuff” — expenses, savings, investments, etc — and I find it motivating to see how my net worth increases every month. But tracking every item of my spending? Using charts? I always feel like they’re things I “should” be doing, but I think Sarah’s right — it’s our day-to-day habits that make the difference. Phew!
I often agonize over tiny purchases so that we can make big purchases when necessary. It’s kind of frustrating, though, to debate which loaf of bread is the better choice, but when I can buy what I need later, it’s helpful!
What is your financial practice?
We don’t track, we do a budget for each month that takes into account changes, like a 5 week month or travel.
We do cash allowances for my husband and me for our pocket money/eating out and cash for groceries. I budget a fixed amount for a cushion to cover unexpected items. We have been very successful with this system.
We also keep a sense of humor about things and are flexible and sensible. I don’t want us to turn into one of those people on Extreme Cheapskates. 🙂
Have you found charts and tracking sheets more useful than I have?
While we were killing our credit card debt it was useful to watch our progress in this way, now not so much. The cash allowance is key to this. It’s ours to spend how we choose so there aren’t any other unknowns in the budget.
Are you a scion of a noble line of disciplined financial gurus? Or are you, too, in need of 9,000-some more prostrations before financial enlightenment is reached?
I take what suits me from a lot of authors (Hunt, Ramsey, Orman, and Bach) but no one fits me 100%. An example is that I’m not opposed to having a small car payment for a short period of time. I place a high value on safe and reliable transportation and I prefer to keep my funds in a savings account. In the case of a car, and with such low interest rates on used cars, I see credit as a helpful tool to obtaining ownership of a big ticket item that is extraordinarily useful to me.
On the prostrations, again try the set amount in cash for your spending money. Then enjoy your book and bagel or don’t. In a short period of time you will quickly prioritize what things are truly worth the money to you.
I think there’s a bunch of problems here that’s hard to separate.
There’s the couple’s relationship,. Then there’s Sarah’s own approach to spending.
And there’s the issue of the usefulness of charts, which marginally touches on Sarah’s own approach to spending– but charts are not the meat of it.
To me, this is the most interesting issue here:
The reason that doesn’t work (and likely creates friction in the joint decision-making) is because it approaches a purchase as a purely moral decision, not an economic one, and ignores the basic fact of scarcity and the need for tradeoffs.
In other words, financial enlightenment in this case seems to me not a religious or moral question, but a technical one– i.e., is the appropriate mental model being applied to this set of facts? Sure, there is a moral aspect to all, but virtue is not sufficient here.
To me, the Balanced Money Formula does a great job of sorting out and simplifying the tradeoff process. Before we adopted it, my wife and I used to waste time and energy with every single little purchase. “Do you really need that lipstick today?” I’d ask her. “Do we really have to buy organic meat?” she’d ask me, as we struggled to pay the utilities.
When all your tradeoffs are in competition, even buying a piece of gum can be a high-stakes, blood-pressure-elevating transaction, because it’s competing with basic survival.
If you separate needs, wants and savings, the bagel does not compete with the rent, it only competes with the book. Your kids get fed regardless because the choice is between feeding them with basic groceries or feeding them with luxury items– and you can decide to buy the book and make the snacks yourself, or take the afternoon off to read the book you bought last month and just buy the quick snacks. Low-stakes choices.
Needs vs. needs, wants vs. wants, saving choice vs. saving choice, and the high stress of line item veto will go away of its own. Spreadsheets will become irrelevant and/or just fun.
Seriously, tradeoffs are more easy to handle if they are pre-sorted between the 3 large BMF categories. A lot more. Please try it. Please please please. Try it.
Big yes to the part about trade offs! I used to look at every purchase as an obstacle to paying off my student loan, saving for a home down payment, etc. Then I automated more of my financial goals and gave myself an allowance — automatically transfered to a savings account that was not accounted for in my net worth.
I still debate about what to do with my fun money, but at least I know my other goals are taken care of.
I read the post this morning and was taken aback by the optional eschewing of budgeting principals considering the relative ease of today’s tracking options. Only thought: 50-30-20 is desperately needed here. And knew–just knew–Nerdo would jump in and say it –since I am not skilled in the art of eloquence or written diplomacy. Ha! I racked my brain in trying to figure out how to convey the fact that all of this psychological over-thought–well, it does little more than have you soul searching like a damn hippie (don’t get me wrong, I love OLD hippies) and boasting a thespian deliverance, masquerading as a pocket-book mid-life crisis. I prefer, and am envious of, your expressive comradery, Nerdo–as always.
50-30-20 only works if you make enough, and can have a low enough cost of living, that you only need 50% of your income for the basics, though. It’s a nice idea for people with enough to spare but some of us are in times of life where we can’t spare 50% for savings and discretionary spending. Of course increasing your income is a good strategy but that isn’t usually a fix that you can make instantly, whereas expenses never seem to end.
Edit: I mixed up the numbers for what is what, but I do think that in a general sense, figuring out your own working formula helps a lot. I don’t follow the BMF because my “needs” at a basic level are more like 60%, and I don’t make it to 20% savings in part because I prioritize charity. But decision making is easier because I’ve established “ceilings” for each category, and it only gets confusing or difficult if the categories blur (e.g. with work-related expenses that I don’t get reimbursed for – is that a “want” or a “need”?).
Well you certainly understand the underlying issues that relate to money problems and personal finance. I totally agree that its the “behavioral psychology” that needs to be sparked in someone for them to really make conscious progress in their money management skills. Really cool post and very important for people to understand!
First of all, I want to say that I LOVE that I don’t agree with this article. I don’t disagree with it in a bad way; just in a difference-of-opinion way. If I agree with every article of a personal finance blog, that means I am not exposing myself to enough different opinions from my own and I am stunting my own financial knowledge and growth, which is why the other blogs I frequent are managed by bloggers with very different religious and political backgrounds from my own. Sarah, I really enjoyed this article. Especially the ways that you found to utilize the food in the house that you already had, when you came up short for the month. Scavenging can be really fun sometimes, right?!
For me, the Excel charts and tracking spending was what got me out of debt. I love numbers; I love Excel; I love games– So making my net worth number go up each month got my head into the psychologically financial place that it needed to be. I still think about my Excel chart– which I continue to update every day– when I am deciding between buying groceries and eating out.
Buying groceries will bump my “needs” percentage up on the spreadsheet. Going to a restaurant will bump my “wants” percentage up. Gaaaah Okay, I’ll cook.
I think the big point you are making is to use whatever tools that promote your financial health, and I definitely agree. For me, it’s the charts– With all the bells and whistles.
This is why we need tricks — I’m convinced that the more you practice these things, the easier they become, and once you realize you are just borrowing from your future self (who, I have on good authority, would be PISSED at you!) you’re better able to “make do” with what you have.
Na, I disagree with you. It would have been a perfect way to learn more, discussing your expenses with your husband.
I agree with some points of this article. I love seeing the progress on paper, have a budget plan and do a quarterly evaluation of our finances, and track interest bearing accounts to see when they will be paid off by using different programs like “whatsthecost”. It even tells you after an account is paid off and how much to apply of that to another bill.I HAVE to see it on paper because it helps me. But this doesn’t always work for everyone.
Papers and charts don’t work for my husband. He is a “give it to me vocally” guy but isn’t afraid to work, even volunteers for extra work at his job and does side jobs. So I tell him ” This is the amount you have to make every month and if you make more than that, we will have more for retirement and fun fund”. It works for us because we have the same goals and because he is vocal, we get our plans out in the open.
However, at least one person has to be the paper person to keep the other grounded or it won’t work.
Agree with El Nerdo as (almost) always. I don’t pay much attention to my various categories of spending although I do have an app with my bank that does all that tracking for me – complete with pie charts and everything. I only care that I stay under $x,xxx of spending on average per month and don’t care what I spend it on. Generally, you should only have to look at your fixed (needs) expenses maybe once a year or so and make changes accordingly.
Here’s one thing that tracking *can* give you – a tally of all these things that come up as “surprises” – that sent your budget into a tailspin. Most people (including me) when figuring out their monthly amounts, tend to just consider best case scenarios and put no fudge factor into their numbers. The other thing to consider is that if surprise bills are coming up continually and pulling you off track, maybe you just aren’t earning enough.
I tried replying to this earlier but the server ate my answer (“too fast!” it said).
Anyway, yes, of course tracking is important, especially when things don’t fit correctly, but that doesn’t mean we need to track every time we buy a pencil or put 25 cents on a meter. It’s the big expenses where things make a difference.
Just the other day I had saved $900 for car repairs, and when I get to the shop– surprise!– ended up paying $1400. This was legit and not a scam, real problem with real evidence I just didn’t know was there (engine sensors, yadda yadda). So I had to dip into the emergency fund and get it all fixed up (Ramsey lied! Murphy visits regularly!).
The takeaway from the experience is that I need to budget more for future car repairs (it’s an old truck, but well worth the expense), and maybe start saving for a future purchase, which increases my needs budget.
Since I don’t want to cut into other needs, I must earn more– but at least I know. Working on it!
But the point is, yeah, budgeting is an art not a science, and we don’t have to be 100% precise to be on safe ground and avoid undue stress. “Close enough for all practical purposes” does the trick, and we course-correct as we go.
I think than rather than charts and tracking you just need to make limits. A statement in a recent article said that those who carry ATM cards with them spend 25% more than those who leave it at home. See how much you would save by just limiting carrying the card. Take out a set amount on payday, divide it up into envelopes and do not go over the limit. Done
Sarah,
I have to say that you are really hitting your stride. Another great article with ‘just enough’ personal information to make it relevant. First off – nice to see you and your husband starting from a place of – we’ll talk about what we don’t agree on, rather than just starting with arguing about what ‘should be spent on’. But I wanted to say that I totally get your – only moral compass is consulted – method of spending.
Only thing is, it won’t get you ahead. I very much followed that philosophy all the way into a big chunk of credit card debt. Now, I track everything pretty closely – and yea – a $400 restaurant month (when I’ve budgeted $150) means I need to buckle down and pay more attention next month.
Great article, this is where i struggle most as well. Even if i’mu tracking expensesdaily daily, i still need to be able to say no to myself consistently to reach my goals. Thanks for sharing!
Disagree with El Nerdo (tho i do like ur articles)… in your case, the Balanced Money Formula works great. It may occur to u that others of us have tried it with less success. To my mind nearly every want becomes a need, and i tend to do fuzzy mental math and not really know where my money’s going. By tracking it with something like PearBudget (free version) i know the big picture and the details and can see where i’m bleeding money. I resisted doing this forever, but a number of my more successful friends use it and i tried it and like it. It’s easy and takes 3 min a day. Different strokes for different folks.
Hey Bob,
Haven’t ever heard of Pear budget but it sounds interesting. I’ll take a look.
I have to disagree with you though that with the BMF “every want becomes a need.” The system doesn’t work like that, there is a very clear definition of what is what, and there is no gaming the system.
Usually it’s the people who rely on hearsay and haven’t read the book that confuse those things. “Needs and wants” in the BMF are technical terms, not mere dictionary words. Once you read and understand the book, the distinction is crystal-clear.
Disagree with me if you must, tweak the percentages if they don’t work for you, but the BMF is as strong a PF tool as it gets.
I love charts etc. however I wanted to chime in on the coversation with your husband. Perhaps if it was reframed as “this is how much money we have, what are our goals and how do we want to spend it” it would be more effective. Getting those higher stakes needs taken care of means the other purchases work as long they fall within the amount they should.
I am not into charts or graphs either, but I seriously started tracking our expenses in January of this year and it has made a HUGE difference for us.
We too use to spend first and think later. Actually many times we never gave our spending a second thought. We always just figured we would catch up with our credit card bills eventually. But eventually never came.
Now we have reduced our spending to just what is necessary, along with the occasional treat. Each month we get better because we are tracking it.
There’s a book coming out by Luna Jaffe called “wild money” that helps you look at the variety of sides to your relationship with money because it’s not all just about spending.
Also, I recently finished “The Money Book for Freelancers. . . ” and it has been really helpful in setting how to spend money with a variable income.
The two books have really helped me.
I think it’s important to find a system that works for you, and also to remember that if you mess up every now and then its OK to say.. “ok now I will keep chugging along” sometimes its easy when you mess up to just give up completely. That’s what works for me.
I also like to write down my exact net income for the next few paychecks and subtract my known expenses from it in advance so I know what I will have left over, and then put it in places accordingly. It’s almost like using a spreadsheet but I like to use sticky notes and stick them to my computer (where I spend the most time) so I know whats already spent)