Spend With Intention

If you are the one person I know that has “supposedly” unlimited money you can skip this post. As for everyone else, you need a plan for your money. Perhaps you have a substantial goal, like saving up enough to retire early or paying off a mortgage. Maybe you have a medium sized goal, such as saving for a vacation or a home improvement or a new car. Yes, you can buy a car with cash - we’ve done it. Or maybe you keep running out of money before you run out of month.

The first step is creating a realistic budget or, as I prefer to call it, spending plan. The word budget sounds restrictive, doesn’t it? That’s why this post is titled “Spend With Intention”. It’s not called live on a budget. I don’t allocate X dollars for this and Y dollars for something else and then eat beans when the budget runs out. Obviously if you are in major debt or your spending is out of control, then you need serious help. I recommend Dave Ramsey and his Seven Baby Steps.

There is budget software online for free but I use a plain excel spreadsheet. I set it up so the “inflows” total up, the “spending” totals up, and the two are netted to give me an ending balance.

Another thing that we do is pay everything we can with credit cards. We have rewards cards that earn us travel points. Caveat: credit cards must always be paid in full!

My method presumes that you are paying yourself first. That means 401(k) contributions, IRA contributions, deferred compensation, investments, and savings are all directly deposited.

Step 1
Start with the balance in your checking account on the first of the month. Now add in all sources of income for the month. That would be your take home pay, of course. Maybe you have rental income or child support - add that in. This is your available balance for the month. If unexpected money comes your way, like you sell something on Craigslist, add that in when you get it. The spending plan is always in flux.

Step 2
Now list your plan for spending that money. Start with the biggies and work your way down: mortgage or rent, auto loans and insurance, student loans, daycare, food, utilities, cell phone, groceries, eating out, clothing, donations and gifts, doctor copays and prescriptions. List everything!

Step 3
Some of the items are fixed. Those are easy. Some vary; for those, enter what you spent last month (utilities) or an average over the last three months (eating out). If you have no clue what you spend, then you have to read my remedial post “Tracking Your Spending”. (coming soon😉)

Step 4
If at this point your ending balance is in the positive, good for you! If it’s in the negative, that is Ok, because you are going to go back to Step 2 and start adjusting those variable items down until you are in the positive by at least $1. Ideally you will have a little (or big) surplus.

Step 5
Update as you spend. The spending plan is a moving, living thing. If you planned to spend $100 on clothes and you spend $38, put it in the plan. Now the plan has 2 lines: one that says Macy’s $38 and one that says Clothing $62. It still balances. Let’s say instead of $38 you spend $138. Now you have one line. It says Macy’s $138. Are you still in the positive? Awesome. Did that purchase put you in the negative? Then you need to adjust another expense category down.

I am a numbers girl so this is actually fun for me. I like to keep two months going at once, because everything that goes on the credit card in this month becomes a bill to be paid next month! I keep the past months as references.

Remember that spending with intention will help you to achieve your financial goals - whatever they may be!