Spending Real Money: A Budget And A Basket
September 8, 2017
One morning last week I drove to the gym and, thinking that I didn’t have any errands to run on the way home, left my wallet at home. I didn’t worry about being without it too much because I am usually law-abiding* and did not think I would need it.
A good workout later, I decided to swing by the grocery store right across the street to get fruit and yogurt. Almost as quickly as I decided this, I remembered that I was sans wallet. No problem! I usually keep a small amount of cash in my car. I then remembered I had a BBQ later in the day for which I needed to get veggies and chips. What to do? The part of me that tries to be efficient and well-planned balked at the thought of a second grocery stop in one day. I was relieved to discover I had more money than I thought in my car and walked into Smith’s Marketplace clutching $13.
Having a finite amount of money forced me to be very discerning about what I bought. Normally, I don’t think twice about whether I buy 2 vs. 3 of items. However, on this day I had to be discerning. I could not just let my checking account absorb my poor planning or splurges. My mental addition worked and the purchases came to $12.62. This magical story concludes with me driving safely home with no incident*.
The “luxury” of overspending
This small incident really made me appreciate that I can almost always choose to overspend. It’s a luxury, not a noble one, but a luxury nonetheless, to be able to spend more than allocated thanks to plastic cards. It’s easy to sometimes overspend when you know you have plenty of money in the checking account and even easier, according to some studies, to overspend if you are using a credit card.
The important distinction about the latter is that the card is not connected to real money, but rather to future money you plan to have before the payment comes due. However, this strategy works out only for the minority. The New York Times reported in a 2016 article that “60 percent of consumers…can’t pay off what they owe each month.”
Relevant to overspending when not paying cash, the article cites one particular study. In this study of M.B.A students bidding for tickets to Boston Celtics and Red Sox games, half were told credit was accepted. The other half were told it was cash-only. The students in the credit group bid roughly double what the cash-only students bid.
Back to overspending
Even on a budget, and particularly a budget in YNAB, it is easy to cover overspending from another category without damaging the “bottom line.” The amount of money in your checking account can typically absorb some accidents. It was a game-changer in my budgeting-conversion process to have this sort of flexibility which prevented budget-resentment and failure. However, in between reminders like my $12.62 grocery trip, I can sometimes get a little soft and overspend without good reason.
It’s a little bit like a basket on a bike. If you ride to the market (quaint mental picture, right?) for your groceries, you have a practical reason to buy only what fits in your basket or bag. You likely would not buy a ginormous stuffed animal penguin since you literally have no way to get it home. The things that you stick in your grocery cart without thought or necessity are like that stuffed penguin—they do not fit in your “basket”. If you really want the penguin or the things, you just need to plan for them. And probably drive the car.
The moral of the story
The take-away for the week is to be mindful about what you buy. Stick with the list you prepared. Do at least rough mental math as if you were shopping with cash. Stay within the limits you set for yourself. Remind yourself that you had a reason for setting your limits where you did.
In addition to the benefit of staying on track with your financial goals, it just feels good to be an intentional consumer. Don’t be the wasteful spender I have been at times. I can remember spending more than $100 in one Macy’s grocery shopping trip. This was at a time in college when the gap between income and expenses was like $82 and I was on the go a lot. Not only did I way overspend my non-existent budget, but there was no way I could consume $100 worth of healthy, fresh food in the week before it went bad. So, don’t do things like that:)
In sum, spend more intentionally this week, buying only what you need. Buy only what fits in the budget or the basket. And if you buy a ginormous penguin because it fits, please send me a picture!
*I am law-abiding except for an instance last week when I did the “California Pause” at a stop-sign and received my very first moving violation. It’s a lame ticket, especially compared to other infractions which would’ve made much better ticket stories. Some of those stories may get shared someday.