Finance Globe

U.S. financial and economic topics from several finance writers.
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NDYL, Part 3: To Err is Human; to Budget, Divine

Budgeting is actually pretty simple. Just use the math you learned in elementary school and don’t spend more than you have. Really, it’s not brain surgery. It just feels like it sometimes. Add an uncooperative spouse into the equation and you might feel like volunteering to get a lobotomy.

Hello again, budgeting allies! How are you all doing? Got your SMART goals in place? Budgets nailed down? Have you been hanging on the edge of your seats waiting to hear about mine?

You’re probably wondering if we managed to get ourselves on an all cash budgeting system. The answer is yes and no. We tried it, rather, a modified version of it, and what a difference it made! Throughout this entire past month, for the first time ever, we weren’t living paycheck to paycheck. ScreEEEeeeeech! That’s the sound of brakes squealing as I careen perilously over the cliff of defeat after getting blindsided by the bombshell my husband has thrown at me. Yes folks, your momma was right; if it sounds too good to be true it is.

At the end of last month, floating on a cloud of optimism for our financial future, I’d just about finished writing this column and had every intention of posting it at the promised time. Then it happened. The event that made me doubt everything I’d written. The tantrum. Not an unusual occurrence these days, given the age of our youngest child (17 months). But this time it was my husband, Mr. F. (allegedly a full-grown adult), loudly demanding I give back his debit card and absolutely not taking no for an answer. So, it’s back to the drawing board for us.

Please understand, I’m not saying the cash only system can’t work. If you’ve considered giving it a try I strongly encourage you to go for it. I still believe it’s the solution for us because our situation is essentially a function of swiping ourselves to death. A debit card overdose, if you will. Perhaps I should have titled this post, “Help! My Man’s Addicted to His Debit Card.” His reaction to 4 weeks without plastic reminded me of what you see in the movies when a junkie goes through withdrawal. So, the take-home message is the cash system works, but only if both halves of a couple believe in it. I love my husband dearly; but right now, single people, I envy you and your freedom to budget your money however you wish.

Enough crying over spilled milk. Time to move on. While it’s impossible to hide my extreme disappointment, I cannot give up--not now, and certainly not in front of all of you. Ahh, accountability. I promised you money saving tips, so money saving tips I shall provide. Below you’ll find a collection of budget-savvy steps that got us moving in the right direction. I’m talking pre-tantrum, of course. Time will tell if Mr. F. having plastic in his pocket again will land us right back where we started.

Distinguish wants from needs and prioritize before spending. Take care of bills and essential needs first. Duh. Shameful as it is to acknowledge our tendency to ignore such wisdom, I’ll bet I’m not the only one who’s left the bank on a Friday thinking, “Yay, it’s payday! We can spend money again.” Then, with Monday comes the reality check like a roundhouse kick to the noggin, “Oops, we spent too much money on takeout, beer and movies this weekend; now how the heck are we going to pay the electric bill?”

Nowadays our mantra is “Is it a need or a want? If it’s a need, how urgent is it?” After bills are paid and bellies satiated we attend to minor needs, starting with the highest priority items. If there’s anything left, we can think about treating ourselves to a little something. Or, better yet, save it. Wow Mom, I get it now! All those years, making me wait to eat dessert last; you were teaching me about delaying gratification and putting needs before wants.

Simplify expense tracking with multiple bank accounts. This paradoxical sounding system, known as “bucket budgeting,” has really worked for us. If the thought of spreadsheets and combing through mountains of receipts to track and categorize every single penny spent gives you a migraine (like it does me) it should work for you too. With the bucket system you only need to sort your spending into 2 or 3 categories (aka, “buckets”), so the intimidation factor is gone.

For now, we have two checking accounts (later we’ll probably open a savings account too). One is designated the “main” account, into which we deposit the bulk of our earnings, less a designated amount of discretionary cash. Our regular bill payments come out of this account.The other is our “spending” account, into which we transfer a limited amount to pay for groceries, gas and other essentials, making sure to leave ample funds in the main account for covering that week’s bills plus a small amount to save for a rainy day or to cover unusual but necessary expenses. We try to treat the spending limit as sacred and avoid “borrowing” from the main account. Thereby freeing ourselves from the stressful reality check described above; there’s always enough (and then some) to cover our bills. So, you see, all of you who’ve been afraid to get on a budget because it seems too confining, it can actually be rather liberating.

Spread out payments more evenly. As recovering spendaholics and procrastinators we had a bad habit of waiting to pay bills on or even—gasp!--after their due dates. The resulting problem, other than the obvious (late fees), was that some weeks we’d end up owing more than we could afford. For example, one week we had an unusually high electric bill due in the same week as our car insurance (which had just gone up), water and cable bills. Paying all those bills on their due date would have left us no money for groceries. Then I realized, we don’t have to pay bills only on their due dates. Again, duh (like I said, budgeting is simple). We could negotiate different due dates, or even pay them before they were due. Have you ever heard of any company complaining about getting paid too early? Me neither.

Thus, we’ve shifted all our payments around so that we can plan on roughly the same amount going out toward bills each week. We treat recurring bills as a fixed expense, designating the same amount each week to cover them, regardless of how much is actually needed. That way, after bill payments go out in any given week, if there’s still some money left, it can go toward subsequent bills. Clear as mud? Perhaps a simple sample budget (try saying that 5 times super fast) will help.

Let’s pretend the sum total of your monthly bills comes to $400--see, we really are pretending here--which consist of a $125 electric bill, a $75 phone bill, an $80 cable bill, $20 for water, $60 for insurance and a $40 credit card payment. In a typical month (4 weeks) that would average out to $100/week. You could map out a payment schedule like this:

Week of Starting balance Budgeted amount (deposit) Bill paid Bill paid Ending balance
9/8 $0 $100 $80
(cable)
$20
(water)
$0
9/15 $0 $100 $60 (insurance) $40
(credit card)
$0
9/22 $0 $100 $75
(phone)
  $25
9/29 $25 $100 $125
(electric)
  $0



Got it? If so, proceed to the next paragraph. If not, proceed anyway and see me after class (leave me a comment below).

Automate recurring bill payments. It should come as no surprise that another issue keeping us in a financial hole was late fees. Setting up automatic payments eliminated that pesky and altogether unnecessary expense. Automating payments ensures all bills get paid on time, which can also help our credit score.

Overestimate expenses and underestimate income. If you’re wondering how we automate payments for expenses that fluctuate, such as utilities, here’s your answer. Let’s take, for example, our electric bill, which can vary wildly from month to month. We based our automatic payment amount on the highest of the past three month’s bills. Obviously, in some months we’ll end up overpaying. In that case, we’ll receive credit toward a future bill, which will come in handy for those months when our furnace has to work extra hard. So far, nobody from the electric company has complained--or shouted “hey, you guyyyyys!” (sorry, I couldn’t resist; I really am an 80’s nerd). It’s a real win-win situation. We’ve also overestimated how much we’ll need for variable living expenses such as food because, well, the alternative is no picnic (literally).

Do I really need to elaborate on underestimating income? It only applies to those of us with variable incomes, and it’s basically just another way of saying “don’t count your chickens before they hatch.”

Set aside a small amount of cash every week for “emergencies.” This is for those instances when we can’t help being human. Like, when we blow our grocery budget at the “Buy 5, Save $5” sale (a very dirty trick perpetrated by my local grocery chain, I might add) and somehow forget to buy milk.


Yes, budgeting is fairly simple, but that does not mean it’s easy. Missteps will happen for most of us because establishing a budget involves changes in habits. We’re only human after all, and there’s this thing family therapists call “homeostasis” that gets in the way. That is, the tendency of family members to prefer things stay the same no matter how dysfunctional and therefore resist change even when that change is in the family’s best interest. Therein lies the explanation for my husband’s behavior. How naive of me to think overcoming his debit card jones would require anything less than a miracle!

Mr. F. has agreed to continue using only cash for his discretionary spending and the debit card only for true emergencies or purchases we’ve planned together. However, I’m now wise enough to know I need to brace myself for a relapse. Should he break said agreement, I’ll have to be ready with a contingency plan. Lord, help me!

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Sunday, 20 October 2019

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