Tricotomania and more

I mentioned that my self-image of myself as someone who is not good with money needs to be reevaluated in the current circumstances. I was thinking about blogging about this topic anyway, so here goes.

I’ve never been really poor by the way. And I have no idea how I would manage on too little money to meet basic needs, which I know some people have to do on a regular basis. This isn’t about that circumstance, but about those who earn enough (or even more than most) but might get into horrible debt anyway or feel like they don’t have the money to get the things they want.

I hate most money management advice. I don’t like budget forms. I have no desire to write down what I spend every last penny on and then work out ways not to spend those pennies. And I honestly find it hard to believe that doing so is really necessary to having a handle on your financial situation and living on what you earn.

Every couple of years, usually motivated by some crisis or anxiety about money, we sit down and list all of our regular expenditures and make some plans. When our situation was out of hand (crazy overdraft and the like), we agreed a short-term really tight budget that would allow us to pay that debt down. For out of pocket expenditures (including groceries), we worked with cash and when the cash for the week ran out, so did the expenditures. You can’t live on really tight for ever but you can usually do it for a while to ease things up a bit.

And for us, living on cash was crucial. Because with debit cards and credit cards it is just too easy to lose track of what you’ve spent. And to do that successfully you have to have a really precise idea of how much you have to spend and how much you’ve already spent this week/month, and … well my inability to log every single expenditure and use a budget probably tells you that isn’t me.

Envelopes of cash work. Even when you don’t need to reign things in to pay off some debt. If you frittered it away on something at the beginning of the week, you just stop frittering at the end. And you buy groceries at the beginning of the week. When things are tight, there isn’t much in the envelope. When you are flush, there is more. You get to decide depending on the circumstances.

Our lives are no longer really in that place so more recently the anxiety that drove the writing down of the regular expenses and figuring out how much we had to play with was a strong feeling that we should have lots of extra to give to charity, save, etc. And that it was unethical to fritter that away on expenditures that we could not recall. I figure that when you earn about double the median household income*, it is irresponsible to spend it all on who-knows-what and complain about how you can’t afford stuff you want.

Finding this article made a huge difference to me at that point.

The problem is the word budget is restrictive. Similar to the word diet, the word budget conjures up all sorts of schemes to deprive yourself of what you really want. In this context, managing your money becomes a chore, a thankless job, an unrewarding task. Very few people can succeed with budgets, and those that do rarely feel enthusiastic about it. After all, who wants to go on a spending diet?

Instead of working hard to pay your bills and stay within your budget, you can develop a plan for creating the lifestyle you really want — a Lifestyle Plan. Imagine your dream job/career, schedule, and personal life. A Lifestyle Plan includes deciding how you want to live while you are on your way to making your dream a reality.

Wow. Yes. Exactly. (Read the rest. It isn’t that long.)

This approach turns the whole thing around. It isn’t about how to save money in a bunch of different categories. It is about what you value and directing your money towards those priorities. Of course that might mean changes. And it might mean a reality check on where you are in relation to your dream and not spending ahead of your ability to pay for it. But it isn’t fundamentally about how much you can not spend.

For example, we probably spend more than average on food. And if we don’t it is only because we grow so much of our own veg. Our food expenditure is high because we prioritize buying organic, buying local, and buying from small, locally owned shops.  We like food and buy high quality stuff, including cheese and chocolate (where the good stuff is expensive). Our aim is to go into big supermarkets as infrequently as possible. I’d love to get down to never. I don’t look at the sales. I don’t clip coupons. We don’t buy most of the mass market brands that show up in sales and coupons anyway.

Some of the things we do in pursuit of those food values cost less. We buy a whole lamb from a local farmer, for example, and put it in the freezer. I’m pretty sure that’s cheaper than buying individual cuts each week. We bought chickens from her, too, and though they might not be cheaper than whatever factory farmed chickens are going for in the big supermarkets, they are cheaper than the organic chicken we used to buy from the local butcher (who we still buy other meat from).

Recently my mom asked whether it was really cheaper to can tomatoes in the summer now that tasty tomatoes are available in the supermarket in the winter. I was stunned by the question. It never occurred to me that I canned to save money. I can local tomatoes in the summer so that we have local tomatoes in the winter. Even shipping them from Leamington (heart of the Ontario tomato industry) seems like an awfully long way. And shipping them from California is really nuts.

I’m not saying everyone should do what I do. What I’m saying is that our values are about local, sustainable economies. And that we can afford to spend more to support that. So we do.

And “afford” is always relative. It is all about priorities. We have a 27″ TV. And basic cable. We have one car. We have no gaming systems but we have 3 computers. I spent $2000 on a sewing machine (I think; it was a few years ago) and some equally crazy amount of money on a purpose built table to put it in so that I didn’t end up with a sore back when I was sewing (having it on the kitchen table is too high). Mat once spent $500 on a second-hand bike and we spend money having someone service our bikes every spring (and his in the fall, too). We buy quite a few books. Mat occasionally goes on a CD binge. We hardly own any movies. We don’t go out for dinner much, but when we do, we go to nice restaurants.

The things we value, we find the money to get. The things we don’t value, we can’t afford. And if that isn’t true for you, then you need to do something about your budget. Rearrange things. Find a way to earn more money, something. But if you can afford the things you value without going into unmanageable debt (and I don’t subscribe to the view that mortgages are in an of themselves a bad thing), you are doing just fine.

A year or so ago, I was feeling like there were things we value that we weren’t putting money towards. Saving for Tigger’s post-secondary education, for example. Saving for our next car so we don’t have to borrow for something that loses value almost as soon as you drive it off the lot. And giving money away to organizations doing work that we value.

I looked at things and set up mechanisms to make sure we did those things. Opened a bunch of savings accounts and set up regular transfers into them (I love ING Direct for this.). I opened and RESP and set up a regular automatic deposit. I used online tools, including Canada Helps, to set up regular monthly donations to charities we wanted to support.

Some of those things will stay in our budget even when we adjust for new expenses with the move. Like the education. But we will cut back on others. Not forever. But for now. And we’ll spend some of those savings on things we need now.

A lifestyle plan seems to be a more fluid thing. We need to reassess from time to time and make sure things are working the way we want them to. But we aren’t focused on all the stuff we can get nor on how thrifty we can be. We are focused on how we want to live. The money is just the means to do it.

* I find it helpful to compare our household income to the median income, which means that 50% of the population earn more than this and 50% earn less. In Canada, you can find this information here (for other related information see this page). In the US, here. And in the UK, here. (that UK site wins the prize for least user friendly, btw.)