Finding Your Financial Blind Spots
Every month, you spend money you don't need to. No matter how good your budget is, or how closely you track your spending, something slips through the net.
J.D.'s post last week about casting stones at our friends' financial choices struck a chord with me. His friend is struggling financially, and yet he's just bought new iPhones for his whole family. It's obvious to J.D. that this is a bad financial move, yet his friend seems oblivious to it.
He's trying to get his act together, but even in the midst of that effort he can't see that his spending choices are perpetuating his problems. He has huge financial blind spots, areas of his personal finances that are just invisible to him.
We all do.
My own blind spots
When my family was in financial trouble, it felt like we were living as simply as we possibly could. There was no money for luxuries. We couldn't even cover the basic necessities some months, and we were sinking into debt.
Looking back, though, it's easy to see how some of the “necessities” we paid for then weren't really needed at all. Did we have to have a daily newspaper subscription? Two cars? How essential were the swim lessons and music classes our kids were enrolled in? In the midst of that crisis, I spent many nights poring over our budget, trying to find things to cut. Yet somehow I was blind to excesses that now seem so obvious to me.
I assume that I'm still doing the same thing today. I've cut the newspaper subscription, and a lot of other major expenses. Our household finances are no longer sinking fast. But we're still living on a pretty tight budget, and I'd like to be in a more secure position than we're in.
When I look at the budget each month, it looks so tight to me. We've dropped all the extra classes. We canceled all our subscriptions. I've slashed our grocery budget in half. What's left for me to cut?
The simple truth is: I don't know. Five years from now, I'll look back on my life today and the waste will stand out like weeds in a garden, but right now I can't see it.
Finding your blind spots
How can you identify the excesses in your own budget? Here are a few bits of advice:
- Knowledge is power. I've said it before but it still bears repeating: Track your spending. When you don't know what you're spending your money on, you can't know if those dollars are well-spent or wasted. Use some system, whether it's sophisticated software or the back of an envelope, to track every cent that comes into or goes out of your household.
- Ask yourself. As you review your spending, ask yourself a few simple questions about your purchases and expenses. Did I need this? Did I even want it? Did I use it? Was it worth the time and money I put into it? A few careful passes with these questions in mind should help you ditch a lot of the dead weight in your budget.
- Ask someone else. Ultimately, you won't be able to see into all of your blind spots; you'll need someone else to help you look at your financial picture if you want to see it clearly. You can hire a financial advisor to do this. If you work for a university or large company, your HR department may even be able to connect you with free financial counseling. If you'd rather take the amateur approach, find a friend who is sensitive and smart, and ask them to go over your expenses for the past few months with you.
Finding the extra expenses in your budget can be painful. Those blind spots are there for a reason. You probably don't want to know, on some level, that you're overspending. The places where I still break my budget are entirely emotional ones: I spend too much on my kids, because I like doing nice things for them. I spend too much when I'm sick, or tired, or anxious. I spend too much on dates with my husband, because we get so little time together.
This is why a trusted friend or financial advisor can be such a great weapon against emotion-driven budget busters. Sometimes, we all need someone to very gently and calmly explain that we just can't afford the new car, or the family vacation, or the sexy boots. That wanting something badly enough doesn't mean we're entitled to it, and now isn't the time to take on a new debt.
Once you've cast a light into a wasteful corner of your spending life, do what you can to curb that expense. Cancel the subscription, stop buying the morning latte, take up running around your neighborhood instead of going to the gym.
But accept that you have more blind spots. Do the best you can, knowing that five years from now you will in all likelihood look back on your present life and think, “Really? I spent all that money on that? It seemed so important at the time. What was I thinking?”