Finding My Spending Identity
Do you have a Spending Identity? You do, whether you know it or not. It's as real as the data on your driver's license, but if you're like most people, you've probably never given it much thought. Your Spending Identity dictates who you are as a consumer:
- Are you frugal or extravagant?
- Do you impulse shop?
- Do you clip coupons?
These are all part of your profile.
A budget, by any other name…
I'm currently reading The Money Book for Freelancers, which I'll review here soon. It's a great book with a lot of juicy info, including the concept of the Spending Identity. The authors ask you to write out a Spending Identity for yourself to get a picture of who you are and what you can spend. It's a step between learning to track your income & expenses and developing a fully realized spending plan to manage your money.
The authors fully acknowledge that their Spending Identity concept is a sneaky way to start readers budgeting. It's just a less scary word. But it also contains an important concept.
The Spending Identity is a lot less specific than a budget. Its goal isn't to get you to commit to spending $170 a week on groceries; its goal is to turn you into a person who knows about how much money you can reasonably spend when you walk out the door each day. Not your bank balance to the penny, just the overall reality of your cash flow. Are you in the Gucci tax bracket or the Gap one? Being realistic about this can save you a lot of financial headaches.
This feels like an essential skill to develop, and one I'm still shaky on. I've learned to track my spending, and I'm pretty good about sticking to my spending plan. If I'm not sure whether or not I can afford $40 for hair dye or $90 for cat flea treatments (two unusual expenses that cropped up this week), I can check the Mint app on my cell phone and get the answer in seconds.
But my core sense of what I can afford is all over the map. Sometimes I'm incredibly frugal, and other times I'm prone to impulse shopping. One week, I'll meticulously pare down our grocery list to keep it under $100; the next, I'll drop that much cash on thermal curtains or bike parts without a second thought.
My Spending Identity hasn't changed much since college: I always live right at the edge of my means, spending everything in my checking account — and a little more. I often hit the end of the month juggling grocery expenses against a financial surprise like a parking ticket or an invitation to a kid's to which I'm expected to bring a gift.
As I've grown more financially savvy, I've learned ways to fool that Spending Identity into doing the right thing. Most of my money gets swept into an ING account where I put it into automatic savings plans and pay bills. In those accounts, my savings are piling up and I'm paying off debt. In my local checking account, I'm still juggling my cash flow problems like I always have.
I learned to work around my innate personality as a spender, but I didn't really change it.
Now, I'm kind of inspired to do so. I'd like to be the kind of person who has a consistent, accurate sense of what I can spend money on, how much I can afford, and how it relates to my priorities. Not just the sense that comes from meticulous record-keeping &mdsah; what I'm looking for is better instincts.
I know about how far I can run, how often I need to eat, and how much I can write in a day. I keep records of my diet, exercise, and writing habits, but I don't need to consult them for a broad sense. I just use them to track details. Sometimes those details show me shifting trends that surprise me, but I don't look at my running log when I'm mid-run to find out if I'm tired. I just know.
I'd like to have a similar built-in sense for what I can spend, and what I'd like to spend it on. I can use the data I've collected over two years of tracking my spending to help with that. A few minutes spent journaling can also help me understand myself better:
- What do I like to spend money on?
- Where are the weak spots in my budget?
- What are my strengths as a frugal shopper?
After answering questions like these, I should be able to have a pretty clear profile for myself, with stats to reflect my superpowers and my flaws. (What's my financial kryptonite?) For the geeks out there, this might be like a character sheet for financial planning.
A license to spend
I think it's time I not only explored my Spending Identity, but created a Spending License. I love little visual reminders of my goals. I'm imagining a small card in my wallet that says, “Sierra Black, licensed to spend about $20 this week on personal fun, $150 on groceries, and up to $100 on other household expenses.” Or whatever those ballpark numbers turn out to really be.
My spending records will tell me what numbers to put on my license. Having that license should help me with the vague middle step between knowing exactly what I spend and reconciling it exactly with what I do spend. That vague step that has for me been the hardest: just knowing what I can afford, without doing all of the math while standing in line at the drugstore.