Enroute is having money worries! Saving for a house has seen us put away a respectable stash, but now we’re soon to leave our jobs, leave the country and start taking some very big chances…… and that means we’re nervously facing the fact that our savings are likely to take a kicking over the rest of 2014. There are tough times ahead, we’re a little anxious, but we know it’s time to make some hard decisions.
So we spent lots of money and bought a camera!
When we were young, Kin and I both had our own special ways of being terrible with money. In our defence, please note that we’ve always paid our rent and bills and never had our phones cut off. But once these essentials were out of the way, our spending habits were atrocious.
Bad Spending – Gem-Style
My dreadful money method was to meticulously plan where absolutely every dollar should go and to deny myself pretty much anything I wanted, pretty much all of the time. This allowed me to accumulate some savings… which were then decimated at intervals when the rigid discipline became too much and I went temporarily buy-crazy.
Result? Despite the constant threat of nest-egg annihilation, I never seemed to obtain anything I wanted. (Buy-crazy shopping is not well-considered shopping.)
Bad Spending – Kin-Style
Kin, on the other hand, would frantically spend anything he earned or received as quickly as possible. Unfortunately, he never thought very hard about what to spend it on, so his money would just evaporate, leaving him with nothing between pays.
Result? No savings mean a person has very little money at a time; and that means that Kin never got much that he wanted either! To make things worse, he also ran up some emergency debt (although not very much, thankfully; one of the good things about being in a low income bracket in your twenties is no-one wants to lend you money!)
So. Neither of us had much money (although I had slightly more than Kin) and neither of us were able to have nice things (although Kin had slightly more than me). Day to day, life was okay, but we were both just treading water; neither of us were ever in a position to improve things for ourselves.
Then, one day, we met, we moved in together and we combined our finances. And we combined our opposing ideas on how to manage those finances. And together, we developed our most important household rule:
Budget Luxuries FIRST
This isn’t the disaster it sounds like! The key words here are different for each of us, but the rule helps us both.
For me, the keywords are “Luxuries FIRST”. I like a good fait accompli and am happy to simply sit on money I don’t yet have a purpose for, so I will stick to a spending plan, even if it means having to scrape every last coin out of the couch, make scratch meals out of pantry scraps and home-grown vegetables and wash the dishes with soap. Because of that, it’s actually quite easy for me to sacrifice after the fact, especially since I already have my lovely indulgences to make me happy!
For Kin, who could happily get through the lot, the keywords are “Budget FIRST”. This means that before he spends any money in a pay period he has to think about what he actually wants, not just this month, but in the short and long term future. Actually setting aside physical containers to hold money for different purposes can be helpful for this sort of person. For example, you might have one envelope with money for restaurant meals, another with money for a new mattress, and so on. Doing things this way means that there is no large pool of cash for you to draw from to dilute the sacrifice; every time you spend, you will have to decide which area is going to take the hit. Watching your holiday, bicycle or pretty dress dribble away a few dollars at a time is a wonderful way to focus your attention on unnecessary spending.
If you don’t like keeping cash in the house, having separate bank accounts for your different kinds of spending can work (this guy has a lot to say on that topic, if you can avoid the advertising) but you really need to stay on top of fees and taxation.
But please remember: We budget luxuries first out of our household SPENDING money. We do NOT prioritise them over our rent, bills or savings. If you or your partner just flat-out can’t be trusted right now, this would be a terrible idea for you (you need to think about more basic goals, like these or these). There are also a lot of low-cost ways to obtain your pleasures, and I’m looking forward to talking about them later on!
Where do you fit luxury into your life? Where are you prepared to sacrifice and where do you indulge?
Happy (frugal) hedonism!