4 Steps for Intentional Spending
August 3, 2016
Things in a jumbled mess are hard to make sense of and wrap your head around. Picture a big pile of stuff in a room—laundry, books, games, shoes, tools, holiday decorations. In order to quantify, tidy, or make sense of everything in the room, you would need to pull the jumble apart. You would need to put "like with like," sort and categorize everything.
The same thing is incredibly true with money.
When your expenses—wants and needs—all blend together and you let them stay lumped together, it's incredible how much information hides in the jumble. And trying to spend differently based on that jumbled information? Nigh unto impossible!
What not to do:.
For one vacation taken a few years ago, I had $200 allocated for all expenses. It was an easy roadtrip back to Montana and the list things I needed to pay for was rather minimal.
Anyway. I had this $200 set aside in my Vacation budget category, but hadn’t been specific about how much I would be spending on various pieces of the vacation.
The Vacation Needs just kind of blended together. And when I needed or wanted to buy something on that vacation I just dipped into The Big Pot of Vacation Money.
This 100% lent itself to significant overspending my Vacation budget category. The good news is I stayed within my overall budget and didn’t have to transfer money in from other accounts.
However, I really could have spent less money on this particular vacation and been totally happy. At that time, I had other savings priorities I would rather have put it toward. It was a classic case of spending creep and I couldn't really tell you what even I spent all the extra on.
Basically I could’ve been and could be more intentional with my vacation spending. Being intentional—in advance, during the planning stages—with your money is like the main principle of budgeting I preach.
It's true whether it be for a Vacation category or for your household spending plan or your clothing spending or categories of giving. Untangle your anticipated spending—in advance.
Following are 4 general steps to getting intentional in the planning and execution stages of spending. You’ll see that #1 gets the most attention which means a) it’s important and b) I may blog more about the others later-:)
What to do:
You’ve got to put some specific labels on what you need your money to do for you. One of the things that undermines this is lumping your expenses into a single blob.
Let’s say you have $1,000 to farm out for use in the following categories before you get more money: groceries, gas, gifts, clothes, entertainment, eating out, vacation, personal care items, household cleaners, dry cleaning, etc.
If you don’t get specific about how much each of those clamoring hungry birds get, some of them get more than they probably really need. Picture robins nest with baby birds in it, all wanting the worm. That above list of expenses turns into something like this: groceriesgasgiftsclothesentertainmenteatingoutvacationpersonalcareitemshouseholdcleanersetc.
It's tough to win with nebulous.
It doesn’t work for goals.
It doesn’t work for compliments.
It doesn’t work for expectations and it definitely doesn’t work for making your money work for you.
So break that $1,000 in advance into chunks you can manage, figuratively and literally.
Groceries – $380
Gas – $100
Gifts – $50
Clothes – $80
Entertainment – $40
Eating out – $70
Vacation – $50
Personal care items – $60
Household items (cleaners, postage, etc) – $80
Dry cleaning – $20
Etc. – $70 (I do believe in having a small Random or Float category since I’ve found it tricky or unnecessary to anticipate every single thing.)
Once you have your money farmed out—on paper or in your budgeting tool—you can do some adjusting. You start to ask questions like: “I’d like to see a bit more in the Grocery category, so which categories can I cut back by $5-10?”
Then you start to shuffle money around, pulling money from one category and adding to another. The beautiful thing about this process is that money ends up where you need and want it. And it stays organized in that way until you spend or adjust it. Wonder of wonders!
With all your current money budgeted out to all the needs and wants that need covering until you get more money, and that budgeted amount of money matches your checking account balance, you are set to spend.
Before you do, refer to these category balances instead of your checking account. Why is that? Your account balance doesn't give you any information about what you planned to afford.
Spend and buy stuff according to the money allocated to your categories. And then input those expenses against those category balances so you know how much remains in that category.
Be flexible and adjust your categories in order to keep them all in the green or black or whatever color your tool uses to indicate good, positive numbers :-) When you get new money, you allocate it into your system, and rinse and repeat.
Thoughts? Does this feel doable? If so, why not? I’d love to hear your experiences or thoughts! And I’d also love to remind you: you can do this and create an incredible future for yourself.