The Budget Game

I've often found that, since the things I write about are those things which are on my mind, the things I write about are also frequently those things I'm struggling with. This is true of most of my articles here and particularly of the last one.

The truth is that I'm just not feeling very positive about things lately. Some of this is due to the change in season and upcoming changes in my life (child going to school for example). Another part to the fact that I've been a bit sleep deprived this week. But a major portion comes from the fact that writing about prosperity has caused me to concentrate more on prosperity. But instead of doing it correctly, I've been doing it all backwards. I haven't been focusing on the areas where things are good and where I want to improve. Instead I've been focusing on how much there's left to do and the areas where we have much to improve.

I'll be writing on how important focus is to prosperity soon (I think it's next on my list) but it's clear to me that just applying focus isn't enough. In order to remain positive and appreciative, it's important to focus on the right areas.

In an effort to change this incorrectly applied focus, yesterday I started reworking our family budget. This falls in the realm of my responsibility because I'm more detail oriented and better at Excel. Naturally my husband and I have frequent (if not daily) discussions about our status and what we have in various categories, but I'm the one who types in the numbers. I've been keeping an Excel spreadsheet budget for years (I recall having one at my first off-campus job back in... 1992 or so?). Much has changed, but the basic form of the budget has remained the same. The rows are various income and expenses, the columns are months or pay periods.

Despite my long experience with this, it was only recently that I discovered that the way you organize the spreadsheet can have a huge impact on how you actually do with your money. It's not just a tracking device for dollars and cents, it's a representation of your attitudes and views. You organize this sort of document based on how you see your financial world and, in reverse, reorganizing it can have an impact on that point of view and cause actual change in behavior.

For example, you've no doubt heard the mantra to "pay yourself first" but is that reflected in your budget? Do you have a line, up there with your monthly bills for "saving" where you allocate a specific amount, treating it like the electric bill? Or do you leave it at the bottom where everything else gets subtracted first and any shortfall will get yanked out of this amount?

A couple of months ago I tried a new budget based on an interesting idea I'd read about. See, we were doing ok on the paying the bills part (which is step one for most people who need a budget -- predicting your bills and getting them paid on time) and the emergency fund part (never been good at this, but we were doing ok), but not so much with the paying extra toward debt part (step three, if you listen to Ramsey). In my current budget, the extra debt part was the lowest priority, where any extra money went after everything else got bought and paid, and there was rarely anything left over. So I took a suggestion (and I can't remember which blog I gleaned this from) to first deduct all the monthly bills then divide the rest proportionally into two chunks: savings and spending. In my version of this, the paying extra toward debt part was a part of the savings area.

Well, this ended up not working at all and after a couple of months our finances were seriously affected. It did work to focus on getting more money toward debt, but the trouble was that it weighted savings and spending equally. Note, my spending category doesn't include food, transportation, or other irregular but planned for items (like a new tent when our old one proved as waterproof as a sieve). No, spending is purely for bonus extra stuff. So from this point of view spending and savings aren't equal at all. Yet by treating them as two halves of the same chunk of money, we had a hard time separating them. We didn't treat saving enough like a static bill.

So now I'm working on a different model, one where saving is it's own category and everything has a fixed and/or estimated amount except for extra spending money. That money is what's left over after all the bills and planned expenses are paid for, after savings is set aside, and after a extra goes to pay for debt. Should planned expenses jump for any reason, we reduce the other allocations in the reverse order: spending money, extra debt reduction, savings, planned expenses, and then bills. Well, except for the fact that I always try to have a little spending money set aside. Because something will come up -- it always does. I hope this will help put the focus on the right areas and help me feel better as well.