Monday, June 27, 2011

Ted's Guest Blog-Part Two: Limited Spending

Part Two: Limited Spending
Ted's here to finish his thoughts on building a budget. His current focus is the struggle that I have pinpointed as my weakness with money: not spending. I think I grasp fairly well the need to spend less, or spend wisely, but the perspective of truly limited spending is still a work in progress. I am endlessly grateful for Ted's vision and structure, as he keeps me within clear and marked guidelines. Here's hubby:

One aspect of macro budgeting is to focus on the idea of limiting spending. The one thing I see most people do is that they spend as much as they have (and occasionally a bit more). And when you don't know how much you have, you get into trouble. No one ever has enough – “if only I could earn a bit more, all would be well”. Hands up if this applies to you. The flipside of the coin is to spend less.

There are tricks to limiting your spending. For instance, we give ourselves only $400 for food and gas and clothing (which I still think is a bit high). While we'll likely spend all of it, we also won't spend more. Another trick was withdrawing cash. These function to limit our access to more cash than we've decided we need. Gail recommends paying yourself first, because then what's left is all you can spend. The most important advice I can give is that getting a great price or bargain hunting is NOT mutually exclusive with limiting spending. Go ahead and get all the great prices you can, so long as at the end of the week, you haven't spent more than $200. The only person you have to convince that you don't NEED that widget on sale this week is yourself.

Another critical component of macro budgeting is the time scale. I'm talking about planning long-term. For instance, when I found out that I'd be going overseas and making more than we had expected to make during this period, the thought wasn't about increasing the monthly budget or getting lots of toys, but about what happens when the earnings are saved up over a longer period with a specific goal in mind. But what goals can we chose from? Do we redo the kitchen, go on vacation, upgrade one of our cars to a van or SUV, buy matching iPhones 5 or pay down our mortgage?

Given these choices, we decided to split our income between the mortgage and the kitchen and these are the choices which will pay off the most. The kitchen, in 2 years when we sell (and really for the two years we live with it), is the medium term investment. The mortgage pay-down alone will give us nearly 100% return on investment over the 25 years of the mortgage. The vacation will probably happen too. Happy wife…


Anonymous said...


Lindsey said...

$400 per month for food+gas+clothing? LOL, that wouldn't feed ONE of us, let alone clothe us or gas up the van. We spend about $1200 on that stuff monthly, and I cook at home.

"Jaws of Life," no shit ;) ;)

Ally D said...

Hahaha, Linds, it's not QUITE as tight as it sounds, it's $400 semi-monthly so $800/month.

Our allowances are also separate from that, so add an additional $400/month for us to spend/save as we like. (I enjoy manicures, pedicures, coffee, and tithing.)

Jodi said...

Im just starting to use a Macro budgetting style, since we always used to live paycheque to paycheque and I mean litterally, ( there was nothing left at the end after fixed and varriable expences). With my husbands new carrer change we are finally in a position to look at the bigger picture.I am not a homeowner yet, but pay utilities and as much if not more than a mortgage each month. My 16 month goal is to save the downpayment on a house along with a cushion amount to make sure we plan for the unexpected. We use 400$ per week for varriables alone!I am now asking myself is it too much? I am however a family of five and have 6 daycare children to feed a week too.