This post was written by Shaun, writer of the blog Smart Family Finance. He writes to inform and educate young families about good spending habits, saving tips and intelligent career decisions.
Having adhered to the laws of frugality and spending, my family ends the month using only $80 of the $100 budgeted for family entertainment. An extra $20 now resides comfortably in the family bank account and initially, I’m elated. It’s a badge of honor and a testament to my family’s self-control and frugality. We knew it would be hard to adjust to $100, but we met the challenge and did $20 better. So, why am I so bothered by coming in under budget?
For some this feat of spending will-power is a goal worthy of aspiration. We tend to view every budget limit as a ceiling meant to be raised by lowering the floor. But for me, I feel unsettled when my family misses the budget goal, even when we’re under it.
It’s all related to SB’s conversation he had with his wife the other day, if we postpone happiness for later, what we will live for at present?
That $20, it haunts me. Not because I want to spend it, but because I don’t want to spend it. And, why don’t I want to spend it? My family meets our savings goals. Our budget is well thought out and conservative. So with an extra $20 in the bank, I can’t help wondering if my family has missed out on opportunities in the last month.
Opportunities versus Temptations
I can’t remember the last time I really did something special to treat my wife during one of our dates. I’ve never taken my daughter to a baseball game. There was that $140 bottle of wine that my family could have bought for $20; it would have made an excellent excuse to invite friends over.
For many, these are things we splurged on in the past. They brought us to the brink of disaster and we have worked hard to keep temptations in check. But, are we overcompensating?
Spending is no different than most things. We are unhealthy, when we drink too much, but drinking in and of itself is not bad. We are unhealthy when we eat too much, but eating in and of itself is essential. While overspending on entertainment is a temptation to be conquered, don’t underestimate the damage that under-spending can inflict.
A joint Harvard-Columbia study looked at how college students felt about their spending over school breaks. They found that immediately after a break, students regretted not being studious enough during their free time. They followed up with the same students one year later and found that the remorse for a more industrious school break had morphed into a more powerful regret for not having taken more opportunities for fun.
There is an old finance axiom, “a bird in the hand is worth two in the bush.” Money geeks knowingly smile at the old time value of money adage. But, it holds as much truth for spending as it does saving. My daughter will only be 2 ½ until she is 3. I can only celebrate 5 years of marriage for one year and then I’ve been married for 6.
After we’ve conquered the temptations of irresponsibility, after we have set smart savings goals, what we need most, is to learn when we’ve got a bird in hand so we aren’t always seeking the two in the bush.
Here are some suggestions to help avoid temptation, while never missing good opportunities:
Trust Your Budgeting
Approach budgeting by accepting that a budget is as much about spending what you plan to spend as it is not spending what you don’t have. If you’ve thoughtfully decided that $100 is the amount that should be spent on entertainment, then follow through. Lower the budget and start a second item to save on next year’s Disney vacation, but do not let an item in your budget unconsciously collect money for no planned use.
Set Personal and/or Family Goals
…Not just monetary ones. A budget contains numbers like income and expenses and while you may have set aside money for a gym membership, there is nowhere on the budget to account for the 13 pounds you want to lose. If you want to be a better musician, spend more time with your family and help your kids learn their alphabet this year, take note of it. This will help you to value opportunities and identify temptations. Going back to the losing 13 pounds goal – finding a great deal on a used recumbent bike is an opportunity. Meanwhile treating yourself to a caramel cappuccino every morning before work is a temptation.
Oh yeah, if you have more and more money left over after you set your goals and a budget, perhaps you need more goals; community enrichment comes to mind.
Weigh the Costs and the Benefits
The circus, which visits only once a year, costs an outrageous $30 a ticket and it will mean no more family outings for the rest of the month. How much is it worth to you and your children? If $30 a ticket brings a whole month of happy memories, then it is a wise investment. But, beware and…
Substitute When You Don’t Have the Money
Often, frugality is all about substitution tricks. Buy used, not new. Don’t vacation, stay-cation. You don’t need to experience it all, because sometimes it’s better to use your imagination. But, sometimes frugality stands in the way of seizing good opportunities.
This topic heading could easily become its own post, so I won’t go into too much argument on my point, just know I’m very much for frugality when there is a purpose (the most frugal person I’d ever read of was Ebenezer Scrooge). It is important to recognize that not everything can be substituted seamlessly. An avid stamp collector may be able to abate irrational stamp spending habits by substituting canceled stamps for mint stamps, but canceled stamps will never replace mint stamps.
If your budget, your personal goals and your spending are balanced, then be wary of substation in the face of an opportunity.
It works the other way as well, if the opportunity is not worth the cost, substitute, don’t splurge.
Trust Your Budgeting
Yes, I’ve already written this one, but it’s very important. Budgets work, because you are in a more rational mind when you write them. When you try and break your budget, it’s not hard to locate the culprit. Temptation tries to drag you beyond your budgeted needs and passing on opportunities keeps you from meeting your personal goals.
If you have a budget and follow that budget, then you are ready for the next step in your personal finance journey: never miss good opportunities to spend your money.
|SB is a husband and working as a software professional for a Fortune 100 corporation in Florida. Thanks for visiting the blog.
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