Money, Saving, Holes in Pockets, etc.

I must profess my love for spreadsheets. Also for on-line banking, balancing the checkbook, creating budgets, and on and on. I eat it up. So when I read Debt-Proof Your Marriage and learned about all kinds of money management techniques I could hardly wait to turn them into spreadsheets and plug in our numbers.

It has been eye opening! We have had a budget for years, or at least I thought we did. What we actually had was a list of expenses and income which wasn't taken very seriously. When we "needed" something I would just buy it whether we had the money or not. We have a handy little crutch called a home equity loan. I would basically buy whatever I wanted using the credit card and pay the credit card in full every month. So I thought I was doing everything right because we didn't carry over any credit card debt.

But sometimes (probably most of the time) in order to pay the credit card I would have to borrow from our home equity account until Mike's next paycheck. Most of the time (or sometimes) when he got paid I could pay back what I had borrowed from our equity line, but not always. Even when I was paying it back we were basically living one paycheck behind all the time in a never-ending cycle.

As long as I paid our credit cards in full though, I convinced myself we were doing fine and not in debt. After I read that book it really brought some things to light for me. (I had also just read The Duggars: 20 and Counting! and it was very inspiring in many ways, but one specific thing is that they have no debt, not even mortgage debt.)

Mike does not really like to read so I summarized the book for him and we committed to stop using our credit card and our home equity line, period. That completely opened my eyes to what true needs are.

Prior to stopping our credit use cold turkey, when I would make a trip to Sam's Club I would pass the black olives and think, "Oh, that's a good price and we need black olives." I would throw them in the cart and there went $7. Well, that's great, we would use them, but a few more purchases like that would seriously throw my grocery budget out of whack when I really only "needed" one can of black olives that week which would last until the next paycheck when I could afford more black olives.

Even toilet paper is not truly a need unless you are out, but I would buy it just because I was there whether or not we were running low.

Now I am much more strict about only buying what is on my list and not buying things until we are out (unless there is room in the budget and I won't have to borrow from our future paycheck).

We have been through several different money management systems in our almost twelve years of marriage. For a while we were using our debit cards for everything so we could track all of our spending, but we would still pull out the credit card if it was a big purchase or we knew we were close to running out of funds in our checking account.

Then we went to a cash only (or cash mostly) budgeting system and that worked somewhat successfully for a while, but there were so many things we couldn't use cash for (bills for one thing and it is very inconvenient to buy gas with cash when you have kids with you) so we gradually fell away from it. The best thing that came out of the cash system was Mike getting a specific amount of cash out for himself with each paycheck. That saved us some fights because I knew exactly how much he would be taking out each pay period and I didn't have to see all the individual charges he made and get upset when I judged some of his purchases as wasteful. I never kept cash out for myself because I just spent all the money that was left.

Once we stopped using credit it took us about two months of watching our spending very closely in order to pay the credit card bill we already had without using our equity line and we did not spend a dime that was not absolutely necessary during that time. I am happy to say our spending plan is now working for us and we are living on 80% of our income (giving 10% and saving 10%).

As part of our spending plan we both get the same amount of cash out each pay period and we call it "discretionary money." (It's just semantics, I like the sound of "discretionary money" better than "allowance.") I got my first discretionary money last Friday and it is so exciting! I spent all the money I wanted before, but I always felt guilty for it. Now I know I have a set amount that I can spend or save in any way I choose and I don't have to feel one bit guilty about it.

I have only spent $5 so far, but I have been tempted many times to use it for Chick-fil-A lunches for me and the boys, but I know I would probably regret spending it all on food! So I decided instead to track a list of "wants" and it is has gotten so big that if I buy all of it at full price it will take me a year of saving. I have things on my list I want to buy for the boys (a battery operated ride-in jeep, Croclings, books), things for the house (pots and pans, a new vacuum, re-tile our fireplace), and things for me (Photoshop Elements, bedroom makeover, new purse).

The old me would have looked at almost every single item on the list and seen it as an immediate need (really, I am a pro at justifying: I would have thought the ride-on jeep was a need because the boys won't be little forever so we "need" it now. My sad little, 3-wheeled vacuum seems like a "need" as I'm fighting to push it around the house, but I'm not desperate enough to go into debt over it). The new me is going to save, prioritize, and look for the right opportunity to make those purchases.

The other crucial part of this money management system is a Freedom Fund. We save (novel idea!) for irregular expenses (car insurance, Christmas and birthday gifts, vehicle and house maintenance, vacation, etc.). I tallied up and estimated (on the high-end) all of those type expenses from the past year and divided it by twelve months then added it all up and save that each month. There is more to it than that, but it is detailed in the book.

Here is my spreadsheet for our monthly spending plan. If you like it and want to use it, but need help tweaking it to fit your finances, or have any questions let me know. I'd love to try to figure it out with you. Monthly Spending Plan Spreadsheet