These two questions are asked all the time in households and financial planner offices, and I imagine they will continue to be asked forever. A recent survey completed by GOBankingRates showed that Americans are setting goals to handle their money better, at least as often as other big goals like losing weight and living a happier, healthier life. This is understandable at the top of the year, during “resolution season.” But what happens when it’s March and spring break is around the corner, and kids need new cleats, and your barbeque doesn’t work, and this is the year you decided to redesign the garden, and get a new puppy? It becomes harder to save when “wants” become “needs” and all of the disposable income goes out the door.
When I hear that people want to spend less, what they are really saying is that they wish they had more money left over. They know somewhere, in the back of their minds, that they should save more. I fear that most people my age (I fall smack in the middle of the Gen X age range) don’t have any idea how big their retirement and college planning goals should be, but their gut tells them they need to save something. And if they’re not at least saving something, they must be spending too much. “Can we spend the same and also save more?” is really the question, but we can all agree that is not an option on a fixed budget. The answer to spending less and saving more is not found in limiting the number of times you go out to dinner. While I do tend to suggest this to many of my client families once I see their spending patterns, this is just fixing one symptom. Instead of a quick fix, individuals and families need a cure.
That’s the reason I designed the MONEY budget system. MONEY is a framework for individuals and families to be able to make a financial decision. Here is a brief outline of the elements:
M = Make Money - We all make money, and our income will structure our budget.
O = Obligations - What are you required to pay each month or year? Can this be changed?
N = Needs - What do you need to survive and function at a basic level?
E= Experiences - Life is about experiences, so we want you to enjoy them. To some extent.
Y = Why Are You Spending This Money? - This may be self-explanatory, but it is a great place for self-reflection. It is also likely a place to find the funds for your longer term goals.
For more detail on each part of the MONEY budget system, visit our MONEY Budget page.