Getting past the budget battle

Question: My husband and I agree that we need to spend less, but when we try to budget we just argue. How can we control our spending without all the drama?

Answer: Controlling your spending is the single most important thing you can do to establish a solid financial foundation. Since budgeting doesn’t work for you, try to think in terms of planning. Budgets sometimes evoke strong negative emotions. Budgets are about making do with less or doing without. Nobody gets excited about budgets, except maybe accountants.

Plans are different. Plans help people accomplish goals that really matter to them. A plan is rooted in purpose. The more clearly people understand the purpose, the more they are motivated to follow the plan. This is why a well-crafted financial plan is so powerful. It helps people see the purpose behind their financial decisions—including focusing their financial resources on things that truly matter to them. Here are four steps that can help you be more purpose-driven as you plan your spending.

Step 1: Get together with your husband and carefully consider what matters most to you. What activities or endeavors give you feelings of happiness, satisfaction and self-worth? We call these things core values. Write down your core values and share them with each other. Look for common ground and acknowledge any differences. A well-designed spending plan will carefully and respectfully account for your different values.

Step 2: Track your spending for three months. Several tools can help you do this, including phone apps like Spending Tracker and online services like Mint.com. Tracking expenses takes effort, but the clarity you will gain is worth it.

Step 3: Sort your expenditures and into three categories.

A.  The first category is money spent on unavoidable expenses like housing, food, healthcare,         and clothing.

B.  The second category is for expenses that support your core values. For example, if travel is         one of your core values, you would include expenditures for your European vacation here. If       education is a core value, this is where you would account for periodic contributions into a       college savings account.

C.  The third category is for money spent on everything else. We call these expenses                         incidentals because they are often made without a lot of thought. We also call them                   opportunities, because this is where you will find the greatest opportunity to make the               biggest difference in your financial life. 

As you sort through your expenditures you will see that some straddle more than one category. Travel may be a core value, but that European vacation may also have some element of “opportunity.” Housing may be a necessity, but if entertaining friends is a core value, a home suited to entertaining may also be, at least in part, a core value expense.

Step 4: Establish your purpose-driven spending plan. Based on what you learned in the previous steps, you and your husband can now map out a spending plan that meets your necessities and intentionally supports your values. By carefully and respectfully categorizing expenditures, you will see more clearly where you can reduce incidental spending to better support your core values, including the desire to live within your means.

As you focus spending away from incidentals and toward your core values, you and your husband will feel empowered in your financial life to move beyond the budget battle.

      

Steven C. MerrellMBA, CFP®, AIF® is a Partner at Monterey Private Wealth, Inc., a Wealth Management Firm in Monterey.   He welcomes questions you may have concerning investments, taxes, retirement, or estate planning.  Send your questions to: Steve Merrell, 2340 Garden Road Suite 202, Monterey, CA93940 or email them to steve@montereypw.com.