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  • Posted February 25, 2019

Spending Plan vs Budget

Over the years I’ve seen people respond negatively to the word “budget”, it seems everyone “knows” they “need” one – yet very few actually have one. I think it comes from a place of not wanting to be told how to spend your money and/or fear there is no flexibility.

As a financial planner I want my clients to understand where there money is going; but I don’t want to add any stress to their lives. Adding stress leads to avoidance behaviors, meaning people are less likely to help themselves.

So what’s the option? I like the concept of a spending plan – rather than tell you what or how to spend your money, let’s show you where it’s going (judgment free). From there, we can determine if you have a surplus (money left over every paycheck), deficit (adding to your credit card or other debt) or are neutral (spending/saving exactly what you make).

If you want to spend less, regardless of why, it’s much easier to adjust the categories to see the impact(s). Housing and cars are the biggest expenses most people have, but these are not expenses that occur every month so in the scheme of things will not have a huge impact on reducing your spending (unless you’re currently in the market). You can adjust the cost of housing – heating/cooling, water & electric by adjusting your thermostat by 1 – 2 degrees (cooler in winter, warmer in summer), not watering your lawn (or use rain barrels), and replacing light bulbs with LED lights and unplugging appliances not in use (coffee pot, toaster, etc).

Some other ideas, requiring less work/thought, include getting some of your groceries from community-supported agriculture (CSA’s), co-ops, farmer’s markets or discount chains like Aldi and Lidl. Sacrifice some convenience by not purchasing consumables (toilet paper, paper towels, dish soap, etc) in grocery or big chain stores, instead check out your local Dollar General, Five Below or Dollar Store (do some price comparisons to ensure you’re actually saving money).

Consider your cell phone – do you need unlimited data? Could you sacrifice Candy Crush when you’re not in a WiFi area; and accept if there is an emergency you may have to pay the overage for data (which happens far less often than you’d think). What about cable TV? Many subscribers could do equally well with a streaming service like Hulu, Netflix or Amazon Prime – at a much lower price. Yes, you need internet to stream; but you don’t “need” to bundle cable to get the internet.

It’s conceivable you could stop spending at least $200 – $300/mth without significantly changing your lifestyle. I wouldn’t suggest making all of these changes at once, pick one or two that appeal to you and try it for at least (4) months. See what happens.