Spending Where You Want
One of the things I hear clients say all the time is, “We just don’t know where our money goes!” It’s easy to identify with them. It’s amazing how fast paychecks can be blown through when we have so many costs. Especially this time of the year! And we often find ourselves thinking we can’t afford what we really want to do with our money because it’s disappeared by the time we start thinking about it.
With the close of 2018 and looking forward to the new year, do you want to make some changes to how you spend your money? I have some tips for you to start 2019 with a new fresh approach to your financial life
Prioritize
Several years ago, Kaimey and I decided we wanted to be able to purchase bigger-expense items and experiences we value. And we wanted to do it without feeling guilty or thinking we couldn’t afford them in the month’s income. We also felt we needed to have a place to turn when big repair costs come or unexpected expenses catch us by surprise. We wanted to be able to say “yes” easily and freely to things we really want and need instead of yes to more take-out meals and stuff. So here’s what we did.
We identified areas that are most important to us long-term. I’ll tell you the priorities we came up with and you see if you can guess which one of us came up with each category.
House: This is for furniture, decorations, appliances…anything big-ticket to make our house a home.
Car: This is for repairs and/or new cars.
Travel: This is for vacations and weekend getaways.
Emergencies: This is for, um…emergencies. Unexpected ER visits or traveling for a funeral.
Giving: This is for all the things we care about and want to support financially.
So those five areas are our long-term priorities. They aren’t areas of our budget we spend money in every single month like food, gas, mortgage, or kids’ activities. They are non-recurring purchases. But when the opportunity comes up, we care enough about these areas that we want to be free to invest easily. So we’re willing and committed to designating a little every month to spend when the time is right.
How it Works
When I receive a paycheck each month, we first tithe to our church and save in our retirement accounts. Those are top priorities for us.
What is left after tithing and saving is spending money. (For an overview of our save, give, spend approach click here to read how we teach this to our kids.) It’s money that is meant to be spent, and we want to spend it intentionally. Sure, most of it goes toward our monthly expenses, but it’s easy to get carried away there and not think about our long-term values. So we decided to take care of those first.
I set up a savings account for each of the five categories listed above. Ally Bank has great savings accounts currently paying 2% interest. Kaimey and I decided on an amount we were comfortable designating to each category every month. The amounts don’t have to be big at all! The number isn’t what’s important, it’s being intentional.
I set up direct transfers from our checking account into each new savings account for the categories and named them house, car, travel, emergency, and give. It takes a little time in the beginning to get it squared away, but then we’re automatically designating our spending money where we want and its easy to see how much money is available in each area month-to-month.
If your income fluctuates month-to-month, you may not want to specify an amount, but maybe a percentage would work better for you. And you may need to transfer manually since the amount would be different each time.
The Fun Part
When we have an idea to take a summer trip or when we see a cool piece of furniture we’d like to buy, we don’t have to agonize over if we can afford it. Or if we hear about a great organization helping the world or a charity fundraiser, we can easily jump in with support based on what we’ve already designated to give away. If the air conditioner breaks or the car needs repair (ok, admittedly not as fun!) there is already money set aside to help and hopefully cover it.
These opportunities don’t happen every month. We don’t buy a new appliance, donate to charity, or take a vacation every month, but we’re setting aside a little regularly so that we can do it every once in awhile. And we love having the freedom to do that. It’s money that’s meant to be spent, and we enjoy spending it in these areas we value. Sure, it may mean less eating-out or not buying as expensive clothes, or not having the latest device. There are always sacrifices. And the goal is to decide what you’re willing to sacrifice in order to fund what you care about more.
If you’re playing along at home, Kaimey wants the house account as our designated shopper. I want the emergency fund because I’m ever-practical. The car account is also mine because again–my practicality, and I also like cars. (Kaimey doesn’t know any cars and doesn’t care what she drives as long as it fits her shopping items. Oh, and our kids.) And we both love the travel and giving accounts. After seeing the statements rolling in from Christmas purchases, I’m thinking we may need to add another category for Christmas to designate throughout the year.
Next time on the blog we’ll be expanding the giving topic and talking about the best strategies to give away money.
Let us know if you’d like help getting a better handle on your spending in 2019! We’d love to help your money work for what you want in life.
