When I officially decided that I wanted to start acting like an adult — I was about 25 at the time — I created an Excel spreadsheet to track my month-to-month spending, because that’s what grown ups do, right? Little did I know that I would come to obsess over the numbers that I had written, my own self-imposed restrictions, eventually causing me to throw my budget system out the window (otherwise known as defenestration).
The system my wife and I were working with was pretty standard. It kept track of how much money we had coming in (income), how much we had going out (bills) and then how much we could spend on gas, groceries, gifts, electronics, burritos… Seriously, every single category had a dollar sign amount attached to it. A number that couldn’t be crossed, and if it was I’d end up stressing myself out. Budget snafus also resulted in deprivation. Even though there were 20 days left in the month, we’d become hermits, because our “fun money” was already spent. Who lives like this? People who stick to their budgets do.
I’ve been harboring resentment toward the world of budgets for a while now. I don’t know when it clicked in my head, but I realized, for myself, that there had to be a better way. I didn’t want to feel unnecessary stress. I didn’t want to stay at home on the weekends. I didn’t want to be the people who had tons of money in the bank, but were too “broke” to do anything. If we budget in too much fun, we won’t have enough for groceries.
Budgeting is a stepping stone to greater things. You never really hear people say things like “I’m super rich now, because of my budget”. So then, what is the next step after budgeting? The ability to spend money at will, on whatever you want, without having to plan for it before-hand. This is the way we live our lives, and we end up having more money unspent at the end of the month than we did when we were hooked up to the budget-defibrillators. THHHHHHHMMP! You’ve spent too much money! Thankfully, we’ll never have to hear that sound again.
The first reason that our method of spending works is that there is no pre-defined “this is how much you can spend” amount. Normally, a budget will say: “Groceries – $400″, or something similar to this. This magic number has two distinct properties, even though it’s only supposed to have one: a limit to your spending in this category. The other less realized property is the notion that you can spend all of this money. When the end of the month comes, and there’s money leftover in the “Groceries” account, why wouldn’t you throw a couple extra bags of chips, and Ben and Jerry’s in the cart? In your mind this money has already been spent, so you’ll do the rational thing and spend it.
Another reason why it works is because mentally we’ve moved to a higher level of consciousness. Not exactly spiritually, but emotionally. We began consciously spending our money. You’re probably unconscious every time you spend money, and you don’t even realize it, because you have a budget or you are still at the pre-budget stage. You may not be sleeping physically, but dammit, you’re sleeping mentally. You nickel-and-dime yourself into brokeness. You buy things you don’t really need, and discard them shortly after. You overspend when you’re eating out, because you don’t realize that you have a choice not to.
Conscious spending is all about spending money on the things that actually matter to you while eliminating wasteful spending from your life. It doesn’t mean that you can’t go out to eat, or buy a new car. If those are the things that actually matter to you then that’s what you should be spending your money on. If you were to log onto your Mint account right now, could you justify every transaction that you’ve made with your debit or credit card? Are there any transactions that you’ve made recently that you didn’t really care about? Did their satisfaction not justify the expense?
If nothing else, budgeting helped us to understand where we were spending the bulk of our money. It allowed us to see the categories, and more importantly, the sub-categories where our money was going. Without budgeting, we wouldn’t have understood how much money we were actually spending on things like food, transportation, baby stuff, etc. Once we knew what we were spending our money on, we were able to sift through the categories, and make a determination about each one: How much does each category mean to us?
After targeting and eliminating wasteful categories in your budget, you can toss your budget aside, and start spending money on the things you want to spend money on. If it doesn’t work for you, and you find that you spend more money than you’d like to, go back to budgeting. It means you aren’t ready yet for a conscious spending plan, but don’t let that get you down from trying again. Occasionally, I find myself buying stuff that I don’t truly value. Having an occasional “Oops!” is okay though. Especially when you realize that you’ve made an “Oops!” and don’t just brush it off.
You’re still going to need to pay your monthly bills with your income, so here is a good way to set up your conscious spending plan: First, create a document that resembles a budget (if you already have a budget, that’s even better). You should write down your income, then subtract every monthly bill you have from it. This will give the amount that is leftover, ie “Discretionary money”. You might think that I just described a budget, but it’s actually the anti-budget. It’s a manner to describe the knowns in my financial life. I know how much I make. I know how much I spend on bills monthly. The one thing I don’t know is how much I’m going to spend.
I don’t need to know how much I’m going to spend, because that puts a cap on my spending. It’s the feeling a child gets when they want a toy that costs $6, but their mom or dad will only give them $5, because that’s how much they told little Johnny he could spend. The other reason I don’t need to know how much I’m going to spend, is because I know that I’m not going to spend all of my discretionary money. Part of conscious spending is knowing yourself and how you spend. The other part is NOT spending money like a jackass.
You don’t need to cutback on the things you like, only on the stuff that you truly find no value in. I dare you to look at the money you spend, and try to justify every single purchase. Remove this waste from your financial future, and you’ll start to see money piling up in your bank account without effort.