There is no girdle budgeting aspect to this. I never feel deprived. Rather I buy myself and my freedom many times a day. – Penny Yunuba
In these Talking Money posts, my goal has been to spur you to openly discuss money issues. But now we need to turn to some essentially private work, done in several stages. This is where the action really begins. As you get your act together, it’s also where the fun really begins. Seriously. It’s where all of our earlier considerations come down to the bottom line. It’s the recipe where all of our ingredients become a dinner or a dessert. It’s where we get ahead of the bills.
It’s what is usually called budgeting, although holistic CPA Lu Bauer likes to give it a more positive spin, referring to it as a Spending Plan. Either way, the gold-standard guideline for this is set up in Your Money or Your Life by Joe Dominguez and Vicki Robin, for reasons I’ll discuss shortly.
If you’ve been using the tiny spiral notebook I suggested to record all of your expenditures, down to the penny, you’re getting a good picture of where your cash goes: vending machines, coffee, parking meters, breath mints . . . the whole shebang. Pull out your checkbook and your credit card statements, put all the figures together with your notebook’s, and you’ll have a decent snapshot.
(And what’s a major credit card, you ask? Any one that most stores accept, naturally.)
As you tally how some of those little items become expensive over time, you may well need to apply the emotion-related insights you now possess – to say nothing of a moment or two for prayer.
For the record, I’ve never been as religious about this step as others insist on, but then I’ve usually had a pretty clear picture of where my change was going. And I’m quite aware how easily we can be “nickel and dimed” out of our cash.
Either way, the next step is to closely examine your monthly income and spending. Break it out by categories – housing, utilities, transportation, food, clothing, and so on. Within each one, what is essential and what is discretionary? (In my old yoga circles, this was seen as “needs” versus “desires.”)
Usually, when we think of budgeting, it’s along the lines of dieting. What do I have to give up to lose weight or reduce expenses? Joe and Vicki have a nifty series of steps around this; they have us look at each purchase and then ask about our satisfaction level with it: can we enjoy as much pleasure by spending less on that item (buying a less expensive bottle of wine, for instance) or, if we spent more, would our pleasure rise correspondingly? They also introduce a concept they call “gazingus pins” – pet expenditures we indulge in, for our own pleasure; we’ll look at these and other “toys for adults” in a bit.
Joe and Vicki also reintroduce the element of time to the equation: how long did I have to work to earn what this costs? That is, money is no longer an abstract figure in the exchange. And there’s more than a flat hourly rate, as they demonstrate.
Their other major contribution to the process is their insistence on having life-mission goals that your budgeting will advance.
Their original premise, incidentally, had people work intensely for five years and then essentially retire, living on their nest-egg investment. Underlying conditions for that plan have changed, but what I found in our discussion groups was that most people – especially those with children – have other dreams and priorities. When we focus on these, rather than trying to “have it all,” some miracles occur.
That is, once you’ve determined where your income is going, you can begin to decide where you really want it to go. Here, your reflections on personal values become crucial. The more focused your life, the more likely your success in fulfilling your ambitions.
When I first sat down to run the calculations, I was skeptical. I was barely scraping by as it was, and the amount to set aside was nearly my entire income over the five-year period. As the numbers came together, though, I discovered the goal was not nearly as impossible as I’d originally deemed. By working one overtime shift each week, taking in a housemate, getting by without an automobile, reducing my spending to a bare minimum, and investing my savings shrewdly, it could be done.
As you will find, “running the numbers” is crucial. Question every expenditure. Is it necessary? Is it worth the extra cost?
How many times a week do you eat out? Why? Why not? How much are you spending?
Do you buy your lunch at work? How much is this costing? Could you pack a lunch at home beforehand? How much would you save? Why don’t you?
How much are you spending on coffee, sodas, candy, and other snacks? Could you carry a Thermos instead or buy in bulk at the grocery? How much would you save? Do the national name brands taste that much better than the knockoffs?
The lunchtime routine can easily add up. Even at $50 a week comes out to $2,500 a year. The vending machine snacks add up quickly, too. At $5 a day, that comes to another $1,250 a year without even thinking. Now look at the alternatives. Good leftovers basically cost nothing! Over a five-year period, however, this can even add up to the price of a new car. Economy model, of course.
Still, it’s one less debt you’d be facing.
As you shape a spending plan, the first goal should be to get out of debt. Finance charges and interest are simply extra expenses that get you nowhere. They add up. The second goal should be imposing focus and limits that will keep you out of debt. The third goal should be building up your savings, which can then be converted to more lucrative investments.
The savings also become the cushion for unanticipated large expenses – the big auto repair, the leaky roof replacement, your share of the bill when your kid’s wisdom teeth have to come out. It provides the satisfaction of knowing you’re covered, rather than panicked.
The usual recommended amount of liquidity, by the way, is the figure you’d need to cover six months of joblessness. In the newspaper business, it used to be called the “go-to-hell” account – for those times when you and your boss had a big blowout. The beauty of reducing your basic expenses, incidentally, is that you can divert more of the savings into investments.
You give every cent you spend the third degree. Just because everybody else seems to be buying it is no excuse. If everybody else jumped off a roof – well, you could probably have your choice of nice, affordable high-rise apartments and high-paying jobs, but only if you didn’t follow the crowd. Ahem!
What about cable television and broadband access? Telephone, both landline and cellular? If you use air conditioning, can you find ways to use it less often? Can you wait longer in the autumn to turn on the thermostat – and ways to turn it off earlier in the springtime? Or the reverse, for the air conditioning?
What about your auto insurance? Is it time to switch agents or raise your deductible?
And so on. There are also questions about the way you pay at the cash register:
Do you prefer to purchase most items with a credit card? By check? Or with cash? Which method gives you the biggest sense of awareness of where your money’s going? Which gives you the biggest feeling of control? Do you carry a credit card only for emergencies? Or do you open your monthly statement with no idea of how much to expect? (Surprise me!) Do you ever put something “on plastic” to overcome a dry spell in your cash flow?
Hmm, I don’t think there are a lot of cash transactions at the cash register these days, are there? Are George and Abe and Tom and Alex and Andy and Ulysses and Ben facing obsolescence? I don’t think so.
As you review your spending, also look for underlying reasons you do or don’t do something. Time considerations may be keeping you from packing a lunch, and the snacks may be prompted by a need to get away from your desk or computer for a breather. Once more, you may see something other than straight dollars and cents involved.
In looking closely at our spending, what we actually want to do is bring the heads and tails side of our money back into harmony. When the heads side runs rampant, with uncontrolled spending, we soon get kicked by the tails side, when the bills come due. What happens, in effect, is that we have a tiger by the tail – if you’ll pardon the string of cliches and mixed metaphors. It ain’t pretty, all the same.
The point of getting our spending under control is simply to allow us to redirect our efforts to ends we dream of achieving.
List your top five life goals and rank them by importance.
(You may, like me, find it a little easier to list your top five ongoing life projects and list them – family, church, and so on.) As you arrange them by priority, be honest; don’t go by what others would say. Now list them by what you’re spending on each. Do they match? Do they differ? Why or why not? (It may be that some cost very little. If you’re really lucky, you may even be getting paid for some, rather than spending.)
As you review your spending, reflect on how your expenditures advance or divert your goals. Are there ways to adjust spending patterns to further them?
Regardless of your income, a spending plan is crucial in coming face-to-face with your resources. Although the spending plan is something you’ll have to do alone or with your spouse, your discussion circle can still help with some of the bigger issues. For instance, you can compare the kinds of categories you’re using. You may even wind up modifying yours in response.
Penny Yunuba, who used Joe and Vicki’s plan to achieve her own financial independence, pointed me to a Mennonite accounting model in which the first 10 percent goes straight to the church, as does anything that’s left over; since the Mennonites rely heavily, and in the past totally, on a lay ministry, this model encourages additional contributions for educational assistance, care of the elderly and orphans, disaster relief, missions work, and similar forms of community nurture. Some people might consider a basic modification that would keep the first 10 percent for the church and place whatever’s left over in a “donations and gifts” category. Others might put the first 10 percent straight into donations and gifts. Penny’s own form divides Clothing into “necessary” and “feel better” columns, and her Recreation cluster has “eating out,” “vacations,” “movies-videos,” “other”. Other quirks can be instructive: she places “vitamins” under Health, rather than Food – possibly because she buys hers at a pharmacy or health food store, rather than the grocery. At the top of her page are two quotes from George Fox, one of the early Quaker leaders: “Walk in the Truth and the love of it up to God,” and “Wear it as long as thou canst,” which supposedly was the advice he gave William Penn about a ceremonial sword. Penny’s application, of course, is to getting maximum use of the clothing itself.
Group discussion of the various categories can unearth successful strategies. Under “Savings and Investments,” someone may mention how effective she’s found having a percentage of her paycheck deposited directly into her credit union savings account each week. “The best part is, you never even miss it,” she’ll assert. “Food” may lead to a local co-op or farmers’ market, where freshness becomes an advantage. “Clothing” may lead you to a consignment shop filled with barely used designer labels at bargain prices.
Gaining control over your expenditures is crucial. Be realistic. If your spending plan fails to fit your reality or if you fail to stick to your guidelines, then the bills and debt will still control your life, rather than the other way around. Paradoxically, self-imposed limits can be liberating. Zen Buddhist teachers can explain how strict discipline can lead to freedom. So can the old Quaker.
But remember, living within your spending plan does not have to be ascetic or Spartan. Ask yourself about your favorite “toy for adults” – the category that accords you a special delight, such as art supplies, computer goodies, camping gear, books or recordings, chocolate; then plan a little something extra accordingly. In fact, try this in your discussion group:
Around the circle, have each participant confess his or her favorite “gazingus pin” or “toy for adults.”
I’ve found this exercise always stimulates lively, joyous sharing. Theater tickets? Dining out? Travel? An addition to a collection? One fine cup of coffee? Presents to slide under the doors of senior citizen housing neighbors? This exercise demonstrates the positive energy money releases when kept in the Light.
To be honest, Lu Bauer and I differed in our interpretation of Joe and Vicki’s “gazingus pins.” I see them as permission for some simple self-indulgence, admitting the passions that give our lives pleasure and depth. Lu, on the other hand, wondered if they might be addictions we need to avoid. What do you say?
I might also add:
Name one “status item” in your possession.
Perhaps it would be a clue to what you most value.
At one point, wondering whether food ought to be part of these money discussions, I asked Lu what she thought. In reply, she pointed out that the first question raised by many couples who came to her in financial straits was whether they’d have to change how they ate. (Maybe we’re back to the “tails” side of money all over again!) Not whether they’d have to sell the house or move to cheaper rentals, or even get cheaper wheels. The food on the table becomes the defining characteristic of our economic condition.
Well, why not? One of the things many scholars love about the New Testament is that food is always present. Jesus does some of his biggest miracles and delivers some of his most powerful messages when food’s in the picture. Changes wine into water. Multiplies bread and fish. It all goes with Feasting and Fasting, which we touch on in the Religion to the Rescue post of May 21. But maybe food says just as much now when we consider our spending – and our eating – literally, “consumption.”
For that matter, look back at the slang terms for money and how many of them have food connotations. “Smackers,” “clams,” “dough,” “folding lettuce,” “hardtack,” “mint,” “peanuts,” “cookies,” ”sugar,” “candy, “small potatoes,” “the mother’s milk of politics,” each with a different association.
* * *
In my case, running the numbers had some unanticipated consequences. While it led me to decide not to hunker down to amass that nest egg, I realized I had been living like a student long enough. I resolved it was time to upgrade my wardrobe and furnishings, however modestly. The decision also allowed a decent stereo and switching over to CDs, in addition to my beloved vinyl albums. (All of this, of course, puts the awareness in a historic context.) I even subscribed to the symphony season and finally bought a pair of cross-country skis. Keeping the car meant I could remain active in Quaker meeting and get out to New England contradances in neighboring villages. But I also initiated a direct-deposit savings plan at the credit union, which soon freed me from many of my old financial worries. I wasn’t necessarily spending more; I was just enjoying it more. Crucially, I now felt empowered in my spending decisions, rather than victimized by forces beyond my control.
Reviewing my goals and values, I realized what I wanted most from financial independence was time to pursue my literary projects. I decided to take the eight-hour overtime shift I would have needed to fund the nest egg, and instead “give” it to myself for a shift of personal writing. No need to feel any guilt that I wasn’t using it for public service or catching up on other demands. One day out of seven wasn’t a full workweek, but it would be enough for now. My “dedicated laborious quest” could still move forward, rather than be placed on hold.
* * *
This points to two other kinds of budgets to consider: one for our time, and another for our giving.
Fundraising consultant and author Tracy Gary notes, “Somebody giving $1,000 to $2,000 a year can give away $100,000 in a lifetime. Your money and your time can make a huge difference in your community.” Her advice is to develop a giving plan that reflects your values and vision, instead of writing checks in response to every appeal you get in the mail.
One Friend, for instance, rarely gives to causes where the recipients earn significantly more than he does. He looks at the work he does, without compensation, and what he earns at the office, and figures maybe they should be giving to advance his free endeavors. It’s just a guideline that leads him to contribute, all the same, to some very efficient organizations.
Budgeting for time, meanwhile, includes family and friends, recreation, participation in valued activities, even “simmering” abed in the morning and evening.
If a giving plan returns us to religious concepts such as Tzedakah and tithing, and budgeting our time revisits the ideals of Sabbath, margins, and feasting, our spending brings us back to the counsel of Plainness, simplicity, frugality, and stewardship. How we spend our dollars, then, can be seen as planting seeds that will become blades and then harvest. Did you expect your spending would become a spiritual practice? Here’s where your values take root and bear fruit or grain.
Ask yourself: Just how much of my income stream is for me alone?
What are your top five charitable donations? How do they express your values? Would you like to increase your level of giving?
Do you prefer to concentrate your giving on a few causes or scatter it among many? Do you respond more to local appeals or to national and international groups? Do you divide your giving between “big” donations and amounts for face-to-face requests?
Do you support your causes in other ways, such as serving on a board, spending time at the office, or working with clients?
Where do you volunteer? And why? Do you also benefit in this giving?
* * *
Before I leave you with an impression that I have my own fiscal house in order, let me confess, I don’t. At least, not to the degree I desire. This is an ongoing project, and our situations are constantly evolving. In my case, I got married, with two daughters thrown into the bargain. All of the money considerations I’d worked through were instantly turned upside down; my orderly ways were buffeted by chaos, and yet all the previous money exercises served well. We were able to afford a house in a rising market (just in time, as it turned out), and then make some major, unexpected repairs and renovations. It’s an old house, which is a whole other money story, somewhat akin to buying a boat (a hole in the water into which you pour endless amounts of money) – but it’s ours. As I wrote this, one kid had just finished college; the other was about to start. All on a modest income. It feels pretty jerry-rigged, to be honest, but I’m keeping my sanity, most of the time. Not to say the negative emotions don’t kick in, when least expected, or that it’s always an easy ride. At least now I have a strong mirror to remind me more often than I’d like when I’m forgetting these lessons.
As my wife has also observed, the successful ones are single or childless couples. Kids throw everything into chaos. Just consider the time budgeting:
How many hours do you spend “chauffeuring” kids from one activity to another? How often do you drop what you’re doing to meet their needs and demands? Are there ways to simplify this? How many of their expenses are unbudgeted? How many are emergencies?
It’s not just the kids, either. If you’ve kept a small time-use notebook, you can now look for ways to consolidate and economize. For instance:
How often each week do you shop for food? Could you go less? Do you stick to a shopping list? Or do you set an amount, and stop when you reach it? How long does it take you to get to the store and back?
When I was employed “on the road,” I found that getting off the interstate highway to make a phone call took 15 minutes, rather than the five I would have answered. (This was back before cell phones hit the market.) If you’re running on a tight schedule, a miscalculation like this can snowball through the rest of the day. Again, it’s important to look honestly, rather than continue with pollyannaish bungling.
When you find yourself wondering “where the time went,” was this a result of inefficiency doing required tasks? Or was it a consequence of being fully engrossed in an activity you value?
Are there ways to put blocks of time to multiple activities? (I hate the term “multi-tasking” – too often it’s an excuse for inattention.) But folding laundry while watching a television show might be a positive example.
For me, listening to books on CD, an opera, or even the Sox game on my long commute permits me to engage in something I probably wouldn’t get to at home, given the activities awaiting me there. Sometimes I prefer to use the drive as “simmering” time, to collect my thoughts or observe the passing seasons. It’s my choice. Allowing a little longer for the travel leaves me feeling richer. I can stop off somewhere or explore a side road, to see how it connects. My commute is best when I’m not just rushing through on my way to somewhere else, but rather more fully right where I am.
The idea of degrees of satisfaction can also come into play here. With a family, I have less control over our aggregate consumption. You think I’m going to tell my mother-in-law to use less electricity in her adjacent apartment? For that matter, you think the kids listen when I urge them to turn off the lights when they leave a room or that they don’t need to have every bulb in the house blazing when they’re home alone at night? Even I’m learning. Other values and emotional needs come into play in these considerations.
What I do sense is zones of control. I don’t try to micromanage the grocery budget or garden expenses or Saturday morning yard sales – my wife does quite well there, thank you. I couldn’t oversee my elder daughter’s expenditures during her semester in Italy, either. When educational opportunities popped up for our younger daughter, we tried to accommodate. None of this means we have to be extravagant or tolerate waste. But it does mean allowing flexibility, to seize the moment while we’re altogether. These days, when it comes to our household spending plan, we generally work within guidelines, and readjust as needed.
It works for us because my wife is frugal – in many ways, more than I am, though I see myself as more tight-fisted. She, too, has run the numbers in Your Money or Your Life. That’s not to say we don’t have differences. I prefer to have more in our savings. I’d also prefer to dine out more often; she, on the other hand, thinks that when you do eat out, you should go for the whole works – appetizer through desert, while I’d argue that’s overdoing it. You get the picture; it’s a normal marriage, though hardly typical.
Yes, I’ve wound up usually brown-bagging my lunch, thanks to my wife’s and kids’ attention. (The time element reappears.) And my “leftovers” have some of my coworkers drooling. (Even my younger one is an excellent cook. Although I developed some fine kitchen skills during my years of being single, I’m merrily the least accomplished chef in this household.)
No wonder many of the money-discussion participants were so skeptical when it came to considering financial independence. Life with children is a complicated affair – and highly unpredictable. Like marriage itself, it’s an act of faith, a commitment to an unknown future. How do you plan for the unexpected? In this case, maybe it’s more a matter of preparing than planning, per se. Making course corrections as you steer toward a desired destination. Yes, priorities are essential. Otherwise, you just float around in circles – and wonder where all the money and time went.
There are useful solutions. I think that’s one of the reasons it’s important to talk about money. It also explains the enduring popularity of the Hints From Heloise newspaper column.
When my wife led a workshop on Feasting and Fasting, our friend Randy remarked how much his family had saved by purchasing a used freezer. When they cooked in quantity, they would freeze extra portions. They purchased large quantities of items on sale, or preserved much from the garden. Soon afterward, we bought a freezer of our own, had an electrical line put in to power it, and continue the thrifty practices he mentioned.
Now, on a snowy day in January, when Rachel goes to the freezer to pull out a plastic bag of our own tomatoes she reduced to a soup and then serves it to us at our table, I’m the richest man on earth. Hallelujah.
Doesn’t sound like pinching pennies, either, does it?
Suggested further reading
- Joseph R. Dominguez and Vicki Robin’s Your Money or Your Life (Penguin, 1992), contains a nuts-and-bolts approach to budgeting and planning – or, as they put it, to achieving the American Dream on a shoestring. His Transforming Your Relationship With Money and Achieving Financial Independence (1986), an amplified version, with audio cassettes and a workbook, is available from the New Road Map Foundation, Post Office Box 15981, Seattle 98115. Their system of bringing satisfaction indicators and even pleasurable spending categories to the personal budgeting ledger remains revolutionary and extraordinarily helpful.